Agenda

 Value Chain & Structure

 Industry Segment

 Competition

 Growth Drivers

 Advantage India

 Budget Impact

 Issues & Concerns

 Regulations

 Outlook
 Value Chain & Structure
Industry Overview

Industry Value Chain

Structure of the Industry

 Overview
GDP contribution is 5.5 % for FY08

Total IT Services constituted to $ 31 billion in 2008

US remained the top Importer from India with 61.40 % in 08

BFSI captured the highest market segment with 36% share in 08

0.6 million employed in 07 and expected to grow by 20% in 08

TCS leading the chart with revenues of $ 4.56 billion and growth @ 41% in
FY08
 ITSS At a Glance
Exports - $23.1 billion (08)
Domestic - $ 7.9 billion (08)
Revenue - $ 31.0 billion
(08) Source: NASSCOM

Contribution to GDP of ITSS

was 5.4% in FY07 & grew to
5.5% in FY08.

Source: NASSCOM
 Growing ITSS
Growing @ 32 % in 08 from
30% in 05

Source: NASSCOM

ITSS currently employs

around 0.65 million people

Source: NASSCOM
 VALUE-CHAIN
FOOD
TIE UP INTERIORS
AND
EMPLOYEES, WITH
BEVERAGES
SOFTWARE COLLEGES
CATERING
ENGINEER etc.
CLIENT

FINANCING
TRANSPORTATION VENDORS REAL
OF
SERVICES ESTATE
PROJECT
IT sector moving up Value Chain…
Present
Position
HUB of global I.T.
Service offerings

Services

R&D , KPO

BPO and Large

Projects
Testing & Entry
Level Projects
Off-Shoring of Back
End Work
Source: NASSCOM

Low Sector Competencies High

Structure of IT industry

$ billion (2007-08)
Structure of ITSS….

Source: NASSCOM
Custom Application Development a major contributor

Source: NASSCOM

Structure of IT Services Sector

BFSI Giving a Boost to IT Services
M a nufacturingRevenue By
Verticals (2008)
13%
M edia Publishing &
R etail %
8 Entertainment %4

Construction
H i/Tech
Utilities 4%
Telecom 20
%
Other 21
%
O thers13%

B FSI 38
%

Source : N A SSC O M

Hi/Tech Telecom follows BFSI

 % Growth in various segments of ITSS
BFSI : 39.3 %
Telecom : 26.71 %
Manufacturing : 52.7 %
Retail : 38.3 %
Media : 3.2 %
Construction : 15 %
Healthcare : 9.46 %
Airlines : 112.6 %
Others : -26.5 %

• Airlines registering 3 digit growth figures due

to low base(revenues)

• BFSI doing pretty well as per its contribution

Source: NASSCOM
Market Competition Increasing Day By DaY

Porter’s Five Force Model

Herfindahl Index

Top Exporting Countries of IT Services

 (HIGH)
Threats Of New
Entrants
•Easy to Enter
•Availability of Finance
•Ease in Resource
Availability

(Very High)
(HIGH) Rivalry Among Existing (LOW)
Bargaining Power Firms Bargaining Power
Of Buyers • Cut Throat Competition Of Supplier
• Govt. • Large and Small Players of the • Telephone Equipment
• Large Corporate • Computer
• Emerging market • Infrastructure
Companies • Prefect Competitive market • IT companies
• House Hold environment • Catering and Others

(NO)
Threats Of
Substitute
Products
EXTENT OF MARKET
COMPETITION….
Herfindahl Index

TCS
W ip r o
Perfectly 6 .1
1 1 .1 In f o y s
2 1 .3 4 .9 2 .4
Competitive Sa ty am
Environment 7 .7 2 .3 H CL

1 .7 T e c h M ah
2 3 .8
2 5 .2 1 .3 I-F le x
M-P h asis
HI=1850 (2008) P a tn i
Top Exporters of IT Services(2008)

Source: NASSCOM
Companies Moving To Tier II/ Tier III Cities
Leaders CHALLENGERS FOLLOWERS ASPIRANTS

Bangalore Ahmadabad Aurangabad Allahabad

Chennai Bhubaneshwar Bhopal Dehradun
Hyderabad Chandigarh Goa Durgapur
Kolkata Coimbatore Gwalior Gangtok
Mumbai Indore Hubli Guwahati
NCR Jaipur Kanpur Ludhiana
Pune Kochi Mysore Patna
Lucknow Nashik Raipur
Madurai Pondicherry Ranchi
Mangalore Salem Shimla
Nagpur Surat Siliguri
Thiruvananthapuram Vijaywada Srinagar
Tiruchirapalli Varanasi
Vadodara
Visakhapatnam Source: NASSCOM
Growth Drivers Moving The Way Ahead
Increase in Global Services Spend

Emerging Countries – Demand & Supply Centers

Evolving Nature of Outsourcing Contracts

Increasing Presence across the Globe

Mergers & Acquisition

Increase in pool of Talented Human Resources

 ADVANTAGE INDIA
Breadth of Service Offering:
- Evolved from low end service development to high end
integrated solution
- Covers a wide spectrum across multiple verticals

Quality of Processes:
- Host highest number of ISO Certified Cos.

Cost Advantage:
- Cost of an engineer is 20% - 40% compare to EU
- Avg. offshore billing rate of $ 20-35 per hour; about 50-70%

lower than EU
 Contd…
Ease of Scalability:
- 6,75,000 graduates/ year out of which 4,00,000 are engineers
- Over 50,000 MBA graduates per year
- Global 24/7 delivery capability

Infrastructure:
- Establishment of STPI and SEZs
- High quality telecom Infra and Support Services
 WINNERS
SECTOR  EDUCOMP
OUTLOOOK BARTRONICS
(NATURAL)

BUDGET
PREVIOUS NEW IMPACT
PROVISION
Brings domestic
software packages at
EXCISE DUTY ON par with global
PACKAGED packages.
8% 12% Negative: cranes
SOFTWARE RAISE
software
Service tax Bottom line of many
domestic IT players to
introduced on IT
services NIL 12% be hit.
Negative: Rolta, TCS,
Infosys
Smart cards for To start in Chandigarh and
Haryana on pilot basis; will
food grain delivery
NA NA improve efficiency of govt.
schemes
Positive: Bartronics
 Issues & Concerns for growing IT Industry
Appreciation of Rupee

Global recession in demand of Software Services

High attrition rate

Fake Resumes

Decreasing Operating Margins

Tough Competition from rest of BRIC Nations

 Regulations Benefitting Software Services
 Establishment of EOU/ STP/ EHTP/ SEZ to encourage Exports of Software
Services

 Also to encourage Duty Free domestics of Services

 Beneficiary of ESOP/ ESOS to be taxed only at the time of sale as capital gains

 FBT is introduced as an ‘additional Income tax’ Payable by an employer @

30%

 Contribution to Superannuation Fund up to Rs 1 Lakh/employee exempted from

FBT.

 Information Technology Software are exempted from Custom Duty under

amendment in custom duty act
• Tapping new segments – Asia Pacific, Middle East, Europe

• Continuation of Govt. soaps in near future

• Demand for E-Governance Products

• Increasing demand from Domestic market

• ITSS Net Export expected to grow $ 60 Billion by 2010

THANK YOU