Changing Economy

Many feel that India as an economy has by passed the industrial stage and has moved directly from an agrarian to a service economy. In the last 25 years or so, the contribution of agriculture to India’s GDP has reduced from 39 percent to 20 percent. During the same period, contribution of the manufacturing sector has moved from 24 percent to 20 percent, whereas the contribution from the services sector has increased from 37 percent to 60 percent. Employment patterns, too, show similar trend. The percentage of people employed in agriculture has come down from 64 percent to 54 percent. Simultaneously, the percentage of people employed in manufacturing has gone up from 15 percent to 19 percent and in service sector from 20 percent to 27 percent. If this trend continues, by 2020 our employment pattern should be around 44 percent in agriculture, 21 percent in manufacturing and 35 percent in service sectors.

By the start of the 1970s a new age, the information age was gaining momentum. Technological advancements were eliminating many low skilled, blue collar jobs. Moreover, the information wave was transforming society from its manufacturing focus to one of service. People were increasingly moving from jobs on the production floor to clerical, technical, and professional jobs. Job growth in the past 20 years has been in low skilled service (such as fast food employees, clerks, and home health aides) and knowledge work. This latter group includes professionals such as registered nurse, accountants, teachers, lawyers, and engineers. It also includes technologists – people who work with their hands and with theoretical knowledge – commonly referred to as information technologists. Computer programmers, software designers, and systems analysts are examples of jobs in this category.

Knowledge workers: Workers whose jobs are designed around the acquisition and application of information.

Knowledge workers as a group currently make up about one third of the US workforce – individuals in jobs that are designed around the acquisition and application of information. The Indian IT and ITES industry employs more than a million people, according to the 2005 NASSCOM – McKinsey report. India also contributes 28 percent to the total talent pool of knowledge workers in the world. This has helped it to capture 65 percent of the information technology business and 46 percent of the ITES market worldwide.

The most powerful technological innovation to influence business in the past decade gas been the rise of the dot com business. Through the use of the Internet, the impact of dot.coms is unlike anything seen in the past century. Just as railroads, automobile and computers each created entire new markets and industries, the Internet is doing the same. It is completely changing the “rules of business” We’ll come back to this phenomenon shortly.

These waves influence society and affect how we do business. International, markets, technological improvements, e-commerce, changes in workforce composition, and the like are giving rise to new organizational issues.

Changing Economy

Old Economy

1) National borders limit competition
2) Technology reinforces rigid hierarchies and limits access to information
3) Job opportunities are for blue collar industrial workers.
4) Population is relatively homogeneous
5) Business is estranged from its environment
6) Economy is driven by large corporations
7) Customers get what business chooses to give them.

New Economy

1) National borders are nearly meaningless in defining an organization’s operating boundaries
2) Technology changes in the way information is created, stored, used, and shared have made it more accessible.
3) Job opportunities are for knowledge workers
4) Population is characterized by cultural diversity
5) Business accepts its social responsibilities
6) Economy is driven by small entrepreneurial firms.
7) Customer needs drive business.