Economic impact analysis of software industry: a firm level analysis

Abstract

In the past decade the growth of IT/ITES sector has been at a very rapid pace. Not only has this helped the growth of the companies but also has created an environment where significant portion of the education youth of the country are employed. The industry has created an impact not only in terms of its own economic growth but has had a considerable effect on other parts of the economy. The impact of the industry can be analyzed in multiple ways, but the input-output analysis provides one of the best ways to analyze the impact as it takes into account the inter-relationship between each of the industries. NASSCOM-CRISIL 2007 Report on the IT/ITES linkage to employment and output quantifies this impact which until then was thought of in very qualitative terms. This study takes this approach further and uses the same methodology and analysis factors to compute the economic impact at a Firm level using Honeywell Technology Solutions as an example. Honeywell Technology Solution set up in 1994 has evolved over the last 14 years from a small offshore captive software testing center to the largest Honeywell Engineering and Technology center now responsible for bringing many cutting edge technologies to the market. Direct benefits include the foreign exchange earnings of over USD $250 million dollars a year, employment of around 5000 employees in India of whom 90% are engineers and technologists. In 2007 the firm created a direct demand of Rs 127 Crores of domestic demand (Salaries, Taxes and Imports excluded). This demand created a total Output Impact of Rs 249.6 Crores in the economy and a total additional employment output of 9894 jobs. In addition the firm s employees consume domestic products and services worth Rs 286 Crores and this creates an output impact of Rs 596.34 Crores and total additional employment of 27,076 jobs in the economy. For every job in the firm a total of 6.4 jobs are created in the economy. In addition to the economic growth the firm also focuses on its social responsibility and through its unique Home Town solutions program it encourages its employees to participate in social and community level activities for the upliftment of the needy. The firm by being the first to set up a training and development center in the Southern Town of Madurai also has clearly set a tone of its intention to help build equitable regional development.