Estimating technical efficiencies of Indian IT companies for setting improvement targets for inefficient companies: An empirical analysis with workers' effort as key input.

Abstract

The Information Technology (IT) industry of India has proved its capabilities in delivering both on- and off-shore services to clients globally over the years. However, the technological advances and innovations taking place at the global level not only present a whole new range of growth prospects, but also challenges for this highly competitive industry. Moreover, the IT sector of India also witnessed the economic recession in 2008, which had an adverse impact on the prospects of this industry. In this scenario, it is imperative for Indian IT companies not only to maintain their focus on increasing their technical efficiencies, but also to deal with the increased competition emanating from the Asia Pacific region. This study aimed to estimate the relative efficiency of the top 18 selected Indian IT software service companies in order to determine benchmarks, output slacks and target settings. Data envelopment analysis has been used for achieving the stated objective. The paper found mixed trends in efficiency. The top five IT companies exhibited higher efficiency as compared to the rest of the selected IT companies. Tata Consultancy Services, HCL Technologies Ltd. and Tech Mahindra Ltd. are more efficient while Infosys Ltd. and Mphasis have lower efficiency. The inefficient companies have to increase their workers' productivity to become more efficient, and have to catch-up and follow the best practices of the benchmark company HCL.