IT/ITeS Industry

Submitted to
G.V.Sandeep
Cygnus Business Consulting and Research Pvt Ltd.

Submitted By
Karan Arora (09ESHYD018)
Mordwaj Pal (09ESHYD022)
Phaneesh Mashetty (09ESHYD029)
Saurabh Vyas (09ESHYD036)
 Agenda
• Industry overview
• IT/ITeS sector: Value Chain
• Industry Segments
– IT services
– KPO
– Engineering services outsourcing
• Major Players and Competition
• Porter’s 5-forces
• Technology
• Growth Drivers
• Issues & Concerns
• Outlook
 Industry overview
• The total revenues for the Indian IT industry were estimated to touch US$
71.7 billion in 2008-09.
• The Indian IT industry has been growing at a compound annual growth
rate (CAGR) of 27 per cent for the last five years.
• Contribution of IT industry to India’s gross domestic product (GDP) has
grown from 1.2 per cent in 1997-08 to an estimated 5.8 per cent in 2008-
09.
• The total revenues from export were expected to reach US$ 47.3 billion in
2008-09.
• The total exports have been growing at a CAGR of 28.7 per cent over the
last five years.
• During this period 2008-2009, direct and indirect employment was
expected to reach 2.23 million and eight million, respectively.
• Domestic market revenues were expected to touch US$ 24.3 billion in
2008-09.
• Domestic market revenues have been growing at a CAGR of 24 per cent
for the last five years.
Source: NASSCOM
IT/ITeS sector: Evolution

Source: IT: Industry profile, July 2009, CRIS INFAC

Value Chain
 Industry Segments
• Services
– BPO
– Consulting
– Infrastructure
– Engineering & Industrial Services
– Application Development & Maintenance
– Enterprises Services

• Products
 Industry Segments - Domain
• BFSI
• Telecom
• Manufacturing
• Retail & Distribution
• Hi-Tech
• Life Sciences and Health Care
• Transportation
• Energy & Utilities
• Media & Entertainment
• E- Governance
 Industry Segments – Region wise
• North America
• Ibero America
• UK
• Continental Europe
• India
• Asia Pacific
• Middle East & Africa
 IT services
• The Indian IT services market grew by 23 per cent between 2005-06 and
2008-09 and the revenues are estimated at nearly US$ 8.3 billion in 2008-
09.
• The banking, financial services and insurance (BFSI) vertical continues to
account for the largest share of IT/ITeS services at 41 per cent.
• Hi-Tech/ telecom vertical accounts for the second-largest share of the pie
at 20 per cent.
• Other verticals such as manufacturing, retail, media and healthcare are
rapidly gaining pace.
• Domestic IT-ITeS market revenues have been growing at a CAGR of 23 per
cent between 2005-2006 and 2008-09 and were expected to reach US$
24.3 billion in 2008-09.
• Domestic IT-BPO revenues grew by 24 per cent in and were expected to
touch US$ 2 billion in 2008-09.
• Hardware accounted for about 49 per cent of the total domestic IT-BPO
spends in 2008-09.
Source: IT: Industry profile, July 2009, CRIS INFAC
 IT services - Segments
IT services export revenues
(2008-2009 Estimates) US$ bn
Project oriented 12.9

• IT consulting 0.65

• Systems integration 0.75

• Custom application development 11.12

• Network consulting and integration 0.32

IT Outsourcing 11.02

• Application management 7.21

• Infrastructure management 3.80

Support and training 1.96

Total 25.88

Source: IT: Industry profile, July 2009, CRIS INFAC

 Knowledge Process Outsourcing (KPO)
• The genesis of KPO followed BPO
services in India, however KPO is now
growing at a rapid pace with MNCs
setting up third party captive units for
data analytics, data modeling, etc.
• CRISIL estimates that the Indian KPO
export market constitutes about eight
percent of Indian ITeS revenues and
employs nearly three percent of the
work force
• Growth drivers for this business include
high productivity of Indian resources
and growing adoption of KPO by Small
and Medium Enterprises (SMEs).
• Opportunities span across several
service offerings: legal process
outsourcing (LPO), financial and market
Sources: Global Offshore Outsourcing Summit, EY-IACC, 2006.
research and engineering services ITeS: Industry profile, April 2009, CRIS INFAC
outsourcing, which are considered fast
moving service offerings.
 Engineering services outsourcing
• Global engineering services spend estimated at US$ 750 billion
which is expected to increase to more than US$1 trillion by 2020
• India’s share is about US$ 4.9 billion of the US$ 12.8 billion
outsourced services in 2008-09; India is estimated to garner a share
of about US$ 50 billion by 2020
• Range of services include engineering and designing solutions
across diverse industry verticals like telecommunications,
automotive, construction, aerospace, utilities and industrial design
• Labour cost arbitrage in this sector is about 60 per cent of the US
counterparts
• Bechtel, General Motors, Ford, John Deere, Caterpillar, Silicon
Automation Systems, John Brown Engineering are a few global
giants that have set up their engineering services divisions in India

Source:Global Offshore Outsourcing Summit, EY-IACC, 2006.

Major Players and Competition
Company Sales Turnover (Rs. cr.) • Herfindahl Index:
TCS 22,404.00

Infosys 20,264.00 HI = 1771

• It can be said that the
Wipro 20,987.30

HCL Tech 4,675.09

Oracle Financ 2,212.62

industry is operating in
Mphasis 3,405.02

Mahindra Satyam 8,137.28

competitive environment
Tech Mahindra 4,357.76

Financial Tech 334.32

Patni Computer 1,751.33

MindTree 1,561.00

Polaris 1171.34

Sonata 243
Porter’s 5-forces
 Technology
• Infrastructure
– Data Centers – CISCO
– Data Connectivity
• Ericsson, Nokia-Siemens, Alcatel-Lucent
• Optical, Microwave etc
• Ethernet, SDH etc
• Hardware
– Servers – Intel and AMD
• Product
– ERP & CRM – SAP, Oracle, BAN etc
– OS – Linux, Unix, Microsoft etc
– Databases – Oracle, Sybase etc
– Programming Languages – Java, C++ etc
• Grid Computing
 Established IT/ITeS SEZs in India

Source: "Formal approvals granted SEZs as on 15 January 2009", SEZ India website, www.sezindia.nic.in, accessed 20 September 2009
 Growth Drivers
• Availability of Large Human Resources
• Indian Education System
• Quality Manpower
• Government Policies
• Cost of Labor and resources
• Long term profitability
 Issues and Concerns
• Need for Management expertise
– Presently only 30000 professionals; needed 2.5L (Source: NASSCOM)
– Ex. Employees and expatriates: -Management experience and niche skills

• Top IT companies have used Economies of Scale and Scope to the full
extent
• Industry revenues- majorly Export Led
– Need to penetrate in domestic market
– Create more awareness for SMBs
– Exchange Rate Fluctuations
• Open Source Software is eating the revenues
• Talent Pool
– Need for Proper Background Check
– Bias towards service business
• Lack of funding, esp. in early phase: key limitation for entrepreneurs
– Source of funds: VC, PE firms, HNIs
 Outlook
• Software products CAGR of 44% for past 3 years.
• Software products: Global Potential by 2015
• Financial & Accounting: USD 30.3bn
• BI: USD 15bn
• Storage: USD 26.2
• Security: USD 17.3bn
• ERM: USD 59.8bn
• Telecom: USD 33.1bn
• Gaming: USD 25bn
• Search engine : USD 60.4bn
• Other: Retail, Mobile application
• KPMG report: 31 emerging global destinations
• Ahmedabad
• Jaipur
• Nagpur

Sources: NASSCOM Newsline April 2009

NASSCOM Software product Study
 Outlook
• Extend Global recognition: key challenge
– Focused branding and trade development
• Need for Academic and Industry collaboration is large
• Need to establish presence higher up in the value chain.
• 2-Tyre City growth and distribution of IT companies
across cities spread out within the state.
• Industry Consolidation through M&As
• Growth of Domestic Industry
– UID Project throws up lot of opportunities in e-Governance
Thank You