Indian IT Industry and Business

Opportunities Overview
2010

Presented By:
Prof. Oscar J. D’Souza
Agenda
 Key Statistics
 Trends in Global IT Spending
 Trends in Indian S/w and Services Exports
 SWOT Analysis
 Geographical Markets
 Vertical Markets
 Key Service Lines
 BPO
 Domestic Hardware and Packaged Software
 The Road Ahead
Strategic Trends 2009-2010
 NASSCOM target of $60 billion in IT-BPO
exports,and $73-75 billion,in overall s/w and
services,by 2011
 India excellently positioned
 US,UK, dominant markets
 Outsourcing-primary growth driver
 India-destination of choice
 Strategic Outsourcing primary growth engine
 Delivery Models mature
 Multi-shore outsourcing model-India leads
Global Trends YE 2009 [2008]

 Global tech spending $1.5 trillion in YE 2009,[1.6 trillion]

to exceed $2 trillion by 2010.
 IT spending decline of 3.3%[growth of 3.3%.]
 BPO grew at 2.4% [7.3%]
 IT-BPO services account for 701 billion [ 701 billion].
 Global Sourcing spends reach $92-96 billion [$89-93
billion], to reach $ 110-120 billion in 2010.
 Engineering and R&D $1100 billion [1030 billion]
 Increasing maturity of customers and vendors
 Global sourcing consistently out-pacing IT Services.
 Service providers pushing for a total outsourcing solution.
Key Statistics for the Indian IT
Industry 2009-2010 (2008-2009)
 Indian IT Market $ 73.1 billion
[ $69.4 billion]
 Growth of 5.4% [11.8%]
 Share of GDP 6.1% [5.8%]
 S/w and Services Exports: $ 49.7 billion
[$47.3 billion] , Growth of 5.5% [15.6%]
 Domestic IT Market INR 1088 billion [$24.3
billion], Growth of 8.5%[5.1%]
Indian IT Software & Services
Exports 2009-2010 (2008-2009)
 Exports account for 68.5% [66%] of total revenues
 S/w and Services Exports: $49.7 billion[$47.3
billion], Growth of 5.5% [15.6%]
 IT Services $ 27.3 billion [$25.8 billion], growth
of 5.8% [16.4% ]
 BPO fastest growing export segment $12.4 billion,
[$11.7 billion], growth of 5.9% [17.4% ]
 Engg. Design and Product Development, $10
billion [$9.6billion], growth of 4.2% [15.7%]
Key Statistics for the Indian IT
Industry 2009-2010 (2008-2009)
 Direct employment : 2.3 million (2.2million]
 Indirect Employment : 8.2 million[8 million]
 Increase in Employment 90,000 [226,000]
 BFSI and Hi-Tech/Telecom, Manufacturing,
Retail, are the largest verticals
Trends in Global IT Spending-
2009

 Increased focus on RoI.

 Increased offshore spending
 Strategic Outsourcing
 Delivery Models
 Centralized decision making
 Multi-shore outsourcing model
Global IT Spending CY 2009 [2008]

 IT Services : $589b [$591b]

 BPO : $112b [$110b]
 Packaged S/w : $307b [$304b]
 Subtotal----------- : $1008b [$1005b]
 Hardware : $550 b [$600b]
Total -------------------$1558b [$1605]
Global IT Services Spending
CY 2009 [2008]
 IT SERVICES $589 billion [$557 billion]

 IT Outsourcing $235 billion [ $211 billion ]

 Project Based Systems $204 billion [$196 billion ]

 Support & Training $150billion [$149 billion]

Global IT Services Spending
CY 2009-IT Outsourcing Services
 IT OUTSOURCING
IS Outsourcing
Network & desktop Outsourcing
Application Management
Hosted Application Management
Hosting infrastructure Services
Global IT Services Spending
CY 2007--Project based Services
 IT OUTSOURCING-Project-based
Services
IT Consulting
Systems Integration
Network Consulting & Integration
Custom Application Development
Remote Infrastructure Management
Global IT Services Spending
CY 2009- Support & Training
 IT OUTSOURCING-Support & Training
H/w deployment & Support
S/w deployment & Support
IT Education & Training
Increased focus on RoI (2000-
2009)
 US companies overspent by up to $250 billion from
1994-2001.
 Maximization on RoI for existing investments
 IT investments are increasingly being linked with
performance parameters,like
efficiency,profitability,market share and customer
satisfaction.
 Emphasis on Implementation and integration of
existing applications
 Focus on Maintenance and Application enhancement
India’s Value Proposition 2009
 Abundant and Growing Talent Pool
 Cost Advantage
 Emphasis on Quality & Information Security
 Rapid growth in key Business Infrastructure
 Enabling Business Policy & Regulatory
Environment
 Enhanced value delivery
India’s Value Proposition 2009
New Themes
 Diversification
 Specialization
 Transformation
 Innovation
 ICT for Inclusive Growth
Strategic Outsourcing
 Focus on long term strategic outsourcing
 High value orders
 Vendor Consolidation
 ABN Amro $1.9b to IBM,250m to TCS, Satyam
 Bharti Airtel $1 billion to IBM
 BT $I billion to Tech Mahindra
 Bank of China $100 million to TCS
 GM $300 million to Wipro
Delivery Models 2008-2009
 Software Exports delivery model is increasingly
biased in favour of Offshore development
70% Offshore, 30% Onsite.
 In 2001 the ratio was 44:56.
 Offshore billing rates are 30%-35% of Onsite
billing rates,vary from $10-45 per hour
 Offshore revenues are lower than onsite revenues
for the same quantity of work
 Profitability is higher for offshore work
Centralized Decision Making
(2000-2009)
 Decisions are being increasingly made at
the Senior management level rather than at
the CFO/CEO
 Increased sales cycle time
 RoI to be proved
Trends in Indian S/W and
Services Exports 2008-2009
 Share in Global IT spending
 Geographical Spread
 Share of MNC’s
 Verticals
 Moving up the Value Chain
Share in Global IT Spending
2009-2010
 Increase in Global Market share from 1.0 % in 2004 to
2.1 %, in 2006-2007,to 3.8% in 2007-2008 4.7% in 2009-
2010
 USA is India’s largest market with a share in India’s
exports of 62% [60%] .
 UK is India’s second largest market with a share in India’s
exports of 18% [19%].
 Heavy dependence on just two markets-in fact two
countries,USA and UK.
 India’s software exports to the USA and UK alone was 80%
[79% ]
IT Exports –Key Partners 2009-
2010 [2008-2009] ($ billion)
 USA 62% [60%]

 UK 18% [19%]

 Continental Europe 12% [13%]

 APAC 8% [8%]

 RoW [2 %]
Geographical Spread
 The traditional markets are the USA and UK
 Diversification into other English speaking
markets like Australia,Asia Pacific,Canada
 Diversification into non-English speaking
countries like Germany,France,Japan,Italy
 Cultural and Language challenges
Verticals Strategy for IT Software
Services and BPO 2009-2010
 Important verticals are : Banking,Financial
Services, Insurance(BFSI) $20.1 billion
 Hi-Tech/Telecom $10.1 billion
 Manufacturing $7.9 billion
 Retail $4.7 billion
 Healthcare $2.1 billion
 Others $4.9 billion
Verticals Market Drivers for IT Software
Services and BPO
 Financial Services : Regulatory,Security,CRM,
Reduce Costs , Risk Mitigation ,Web support
 Telecom: IP services,WAP,SMS,Application
Integration,,Billing,DW,CRM
 Manufacturing : ERP,SCM,CRM,PDM,BI,SME
 Retailing : ERP,SCM,CRM,BI,
 Utilities : Billing,Load Balancing,Asset Mgt.
 Healthcare:Patient Record&Mgt,Claims Mgt.
 Travel/Transportation/Logistics :Baggage
Handling,Ticketing,Travel websites,Cargo Security,Warehousing
 Government : On-line bills payment,Passports,Land
Records,Registration,e-Governance,Project Monitoring
Moving up the Value Chain
 Over 80% of the IT services exports comes from
two service lines : Development and Maintenance
of Customized software applications
 The two service lines account for less than 10% of
the global IT services spending
 Other major IT Service lines include: Systems
Integration(18%), Packaged Software installation
and Support(13%),IT Outsourcing(18%) of global IT
spending.
SWOT Analysis- India
 Strengths:
 World class provider of software and services
 Reputed for Quality and prompt delivery
 Excellent project management skills
 Large pool of talented professionals
 Excellent value for money(Low Cost High Quality)
 Excellent track record
 Strong Governmental support
Weaknesses
 Most Indian software companies are small in size which
restricts their ability to obtain large projects
 Most large Indian software companies have been assessed at
the SEI-CMM Levels 4 and 5,however the ability of the medium
and small companies to deliver consistently is in doubt.
 Focus has been mainly on only two Service lines.Barriers to
going up the Value chain exist.
 Focus has been on limited verticals
 Heavy dependence on the US and UK markets
 Lack of Industry specific knowledge
Opportunities
 NASSCOM-McKinsey report forecasts Indian IT
services exports at $60billion,by 2010,from $12.2
($9.8)billion in 2003-2004.
 Exponential growth in BPO projects
 Other high value add service lines opening
up,including software products development
 New verticals
 New Geographical markets
 Increased Domestic spending
Threats
 Lack of Strategic Planning
 Lack of reliable Infrastructure
 Language and Cultural issues
 Growth of competitive markets like China
 Government barriers- BPO tax ?
 Lack of Brand image
 IP and Fraud
Key Service Lines
 Software and Services
 Custom Application development and maintenance
Application Outsourcing
 Packaged s/w support
 BPO
 R&D Services
 Embedded Software
 Product development and design
BPO Drivers

 Globalization
 Economic Liberalization
 Use of English as Business language
 Digitization of Business Processes
 Telecom liberalization
 Skills shortages in developed countries
 Large pool of professionals in India
 Low Cost High Quality
 Innovation
Benefits of BPO
 Reduced Costs, More Value
 Comparable or Improved Service Levels
 Better time matching
 New business opportunity
 Customer focus on core competencies
 Large talent pool
 Right-shore model
BPO Service Types
 CRM Voice
based-Marketing,call centres and on-line technical support
(Amazon, Daksh)
 BPO Back
office -Accounting,Inventory management,HR,Credit
appraisals,Loan Processing,Airline reservations and Loyalty
programs(GE and American Express)
 Content development Engineering
services,computer assisted Animation,Geographic Information
systems, e-learning(Pentafour,Bechtel)
Evolution of ITeS-BPO
The Evolution of Offshore ITES/BPO

complex banking transactions

Process
Business Process

human resources

finance and accounting

of Business

claims processing
plexity of

technical support, collections

Complexity

2008
data entry, call centers
Com

2003

Time
Tim e to
to Offshore
Offshore Maturity of
of Business Process
Process

Source: neoIT

Copy right © 2003 neoI T® | A ll Rights Res erved.

BPO Country specific
capabilities
BPO Country-specific Capabilities

Source: neoIT

7 …a look into what buyers are evaluating today.

Copy right © 2003 neoI T® | A ll Rights Res erved.
 IT-BPO Industry in India US$ billions

80 7.00%

70 6.00%

60
5.00%

50
4.00%
40
3.00%
30

2.00%
20

10 1.00%

0 0.00%
FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Total Exports&Domestic Domestic Market BPO Exports IT-BPO Exports % of GDP

Domestic IT-BPO Market 2010[2009]

 Domestic IT-BPO market INR 1088 billion[INR 1,113

billion], growth 8.5%[20%]
 Domestic H/w Revenues INR 426 billion [INR 413
billion], growth 3%.
 IT Services INR 423billion [INR378 billion], growth
12%.
 S/w Products INR 131 billion [INR 123 billion],
growth 6%.
 BPO INR 108 billion [INR 89 billion] ,growth 22%
The Road Ahead---2011
 Dramatic increase in offshore services by
existing customers
 New Customers will relocate work to India
 Further penetration in existing service
lines
 Penetration in New service lines
 IT service exports slated to reach $60
billion by 2011
The Road Ahead---2020
 IT Services & BPO exports $175 billion
 6% of GDP,28% of annual exports.
 30 million urban employed-direct &
indirect (6million direct,24 million indirect]
 Gender Equality-Women 50% of workforce
 Infrastructure development:8-10 satellite
townships in Tier I,10-15 in Tier II.
 Domestic Market $ 50 billion