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E-governance: Huge opportunity for Indian IT - Views on News from Equitymaster
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  • Aug 19, 2009

    E-governance: Huge opportunity for Indian IT

    E-governance is not a new concept in India. Governments after governments have promised reforms in this regards. The latest in the list was the National e-Governance Plan (NeGP 2003-2007) with the total allocated funds of around Rs 230 bn aimed at creating right governance and institutional mechanisms, through a number of Mission Mode Projects (MMPs) at the central government level, and also at state and integrated levels in the span of 2006-2010. The progress of NeGP is debatable, but this article is not about that.

    This article is not a critique on the dismal state of e-governance in India, but about the potential opportunities that lie ahead for the Indian IT companies in this area.

    E-governance status-quo
    The current picture of e-governance in India is not very encouraging on account of poor transparency, accountability and lack of public-participation in decision making. This is aggravated by the government's lack of focus in implementing public-private partnership. Poor infrastructure and internet connectivity further impede the growth. There is a tremendous gap between conceptualisation and actual implementation.

    Quite evidently, India fell 26 notches to 113th position as compared to 87th in 2005, in the United Nations 2008 E-governance readiness Index. Though the government has increased budget allocation to e-governance in the last couple of years, yet annual IT spending in the public sector is abysmally low at around US$ 1.29 per capita, while even countries like New Zealand and Australia spend US$ 200 per capita.

    But on the positive side, there has been some momentum on this front in the past few years. The government seems to be adopting technology and escalating its IT spending aiming to achieve transparent, efficient, faster and cost-effective processes.

    Under the NeGP, around 27 MMPs were planned, comprising of projects like automation of the income-tax department, employment exchanges and municipalities, e-Passport Seva Project, MCA21 Project for corporate affairs, online registration of land/property, vehicle, service tax payers and many more. Out of these only MCA21 has been completed where the government partnered with TCS. The E-passport Seva project, worth around Rs 10 bn is also being implemented by TCS on the Build-Own-Operate-Transfer (BOOT) model. The E-Biz project is being implemented end-to-end (right from designing to implementation, maintenance and expansion over next 10 years) by Infosys on the BOOT model. All these projects present a sea of opportunity for the big and small players of Indian IT industry.

    Opportunities for Indian IT companies
    In order to appraise the opportunity that lies in the arena of e-governance in India, let us take a look at some facts.

    • According to Springboard Study, Indian government's IT spending was estimated to grow by 19.6% YoY, from US$ 1.4 bn in 2005 to US$ 2.9 bn in 2009. The budgetary allocation to e-governance this year stands at around Rs 230 bn or US$ 4.7 bn, which is surely a good sign.

    • At IT spending per capita standing at US$ 1.29 and Internet penetration of just around 7.1% of the population, the present is quite disheartening but, this also presents a tremendous potential for e-governance to grow exponentially.

    • According to a Nasscom study, out of the total IT spending by the Indian government, around 60% accounts for hardware expenses, 23% for IT services and 17% for software. This 40% of the government's IT expenditure pie is a good opportunity for the Indian IT companies which are increasingly focusing on the domestic demand as the Western markets are wrestling with recession. Expenditure on hardware is set to decline, with more business going to companies providing remote infrastructure and cloud-computing.

    • Out of the 1 Lakh common service centers (CSCs) that were planned to be constructed; around 40,000 are already operational, with rest still to be done. This provides a lot of opportunities to small and medium sized IT companies in the remote infrastructure management and BPO domain.

    • This year's union budget allocated Rs 1.2 bn to Unique Identification Authority of India (UIDAI) to be established to provide a national identification number to each Indian citizen which will aid the functioning of all the above initiatives. A huge opportunity lies for the Indian IT biggies like TCS, Infosys and Wipro which are scouting for this pie.

    Threats and challenges
    All said and done, we are talking about the Indian government which is too good at planning but not so good at implementing. The age-old casualness, lack of urgency, lack of focus and administrative bottleneck remain as some of the obstacles. Not to say, huge breakthroughs have to be made in areas of Internet connectivity, power supply, civil infrastructure as well as IT infrastructure and skilled IT trainers and professionals to reach out to the poorest of the poor. The e-governance initiatives might not show immediate results, and patience is required from all the stakeholders.

    To conclude, the future of e-governance in India is bright, and so are the prospects for Indian IT Industry eyeing this market. The biggest hurdle is not technology but change management. Indian IT companies, realising this fact while building their services around the government sector, are focusing not only on ready-to-deploy solutions but also on training, workshops, and promotion and awareness campaigns. On the face of it, the opportunity looks huge and the task Herculean. Only time will tell how this unfolds.



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