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Economics Case Study v1.0

Economics Case Study v1.0

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An Economic Overview of the IT sector

VIVEKANAND EDUCATION SOCIETY’S INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

AN ECONOMIC OVERVIEW OF THE IT SECTOR

Submitted To: Prof. Vaishali Hanchate
Sumeet Lal Lionell Misquitta Shirish Paranjpe Marsha Pherwani Vishal Rohra Pooja Tekchandani 71 76 87 93 102 114

Submitted By:

1

2010 2 .An Economic Overview of the IT sector November 27.

II. i. Introduction Evolution of IT Introduction to Information Technology Industry scenario in India India with respect to the Indian IT-BPO sector India with respect to the Indian IT-BPO sector 1 3 3 3 5 6 6 7 7 7 8 8 9 10 10 iii.An Economic Overview of the IT sector Table of Contents AN ECONOMIC OVERVIEW OF THE IT SECTOR I. A. VII. India with respect to Outsourcing v. Domestic markets vi. ii. IV. Investments Major Companies in the IT sector Challenges Faced Government Initiatives Bibliography Bibliography 3 . V. VI. III. India with respect to the personal computer market iv.

Evolution of IT A. "statistical data" • Technology: ○ Definition: the practical application of science to commerce or industry A logical definition of Information Technology would then mean a practical means of processing data and drawing conclusions and drawing conclusion of statistical data by using technology. Information is derived from data. Introduction to Information Technology Information Technology comprises of two words Information and Technology. Introduction This report contains an overview of the IT sector based on the following points: • • • • • Evolution of IT IT scenario in India Major companies in the IT sector Problems faced in IT sector Government initiatives taken to improve the growth.An Economic Overview of the IT sector I. which when processed and summarized according to specific requirements becomes information. Right from the mainstream products to ancillary services that aid the business. the IT influence has grown tremendously since the 1990’s. A closer examination of these two keywords reveals two definitions. I. Data consists of raw facts and figures. Information Technology today has infiltrated every field today so much so that it is impossible today to have any business that does not have an IT influence to it. • Information: ○ Definition: data: a collection of facts from which conclusions may be drawn. Management consists mainly of three levels: 4 .

The lower management will require hardcore stats and figures corresponding to specific function to make micro processes work while the top management would require summarized data to make strategic decisions.An Economic Overview of the IT sector • • • Top management Middle management Lower management Each of these levels of management will require different information. Hence we can say that information for one level of management would be data for another level 5 .

According to a research report published by National Association of Software and Service Companies (NASSCOM).htm .816 makes use of the internet.1 billion of revenues.845.966. This shows IT’s penetration of 6. the scope of growth of the IT sector has been for the last 10 years. the Indian IT-BPO sector has become the country’s premier growth engine.9% among the Indian population. accounting for 57 per cent of total exports. 81 million people out of a population of 1.1 billion people use the internet. crossing significant milestones in terms of revenue growth. This shows a penetration of 28. i.’ the sector is estimated to aggregate revenues of US$ 88. phenomenal.70% of the total population.80% whereas the usage of internet in India has increased by a whopping 1520%.1 billion in FY2011. 6 . India with respect to the Indian IT-BPO sector Over the past decade.514. with the IT software and services sector (excluding hardware) accounting for US$ 76. and aggregating export revenues of US$ 33.609. However since 2000 the usage of internet in the world has increased by 444.960) a population of 1.com/stats.internetworldstats. and will be. Industry scenario in India To understand the IT industry scenario in India one must first understand the IT scenario in the world. • • • • • The Indian information technology (IT) industry has played a key role in putting India on the global map and is now envisioned to become a US$ 225 billion industry by 2020. The inference one can draw from this is that even though the current penetration is very small. The report estimates export revenues to gross US$ 59 billion in FY2011 and contribute 26 per cent as its share in total Indian exports (merchandise plus services). IT Services segment was the fastest growing segment. ‘IT-BPO Sector in India: Strategic Review 2011. • According to statistics published on http://www. Compared to the respective statistic of India. employing around 2 million employees. Within exports. in addition to becoming the global brand ambassador for India.7 per cent over FY2010. growing by 22. out of the total population of the world (6.An Economic Overview of the IT sector I. employment generation and value creation.5 billion.

ii. up from the current seven per cent. according to a report titled 'Internet's New bn'. by the Boston Consulting Group (BCG).5 lakh desktop PC units were sold in the fourth quarter last calendar year. BCG said Internet penetration rate in India is expected to reach 19 per cent by 2015. research firm IDC revealed.3 per cent market share. increasingly competitive Indian organisations. Strong economic growth.2 per cent of the market. India with respect to the Indian IT-BPO sector The data centre services market in the country is forecast to grow at a compound annual growth rate (CAGR) of 22. Sarma. Hewlett Packard emerged the top company in India. HP regained market leadership after two quarters with a 17. The country has 10. Nearly 25 lakh personal computers were shipped to Indian consumers. The IDC India report stated that the overall India data centre services market in 2009 was estimated at US$ 1. "We will have 100 million broadband subscribers by 2014. enhanced focus by the government and emergence of business models that help provide IT to new customer segments are the key drivers for increased technology adoption in India. leading in both notebook and desktop categories. iv.2 billion by the end of 2011.S. iii. taking the pole position from Dell Inc that got 14." J. rapid advancement in technology infrastructure. Chairman. Telecom Regulatory Authority of India (TRAI) said at the fifth India Digital Summit 2010 organized by the Internet and Mobile Association of India. TRAI said on December 7. according to research firm IDC India's report published in March 2010. a 14 per cent increase over 2009. India with respect to the personal computer market India's personal computer market grew 30 per cent in 2010 — the highest since 2007. Around 14.29 million subscribers now. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people.35 billion in FY2011. pushing up the overall sales by 26 per cent. 2010 that it was targeting a 10-fold increase in broadband subscribers to 100 million by 2014. India will see its number of internet users triple to 237 million by 2015.An Economic Overview of the IT sector NASSCOM said that the domestic IT-BPO revenues excluding hardware are expected to grow at almost 16 per cent to reach US$ 17.7 per cent between 2009 and 2011. India with respect to Outsourcing India is a preferred destination for companies looking to offshore their IT and back-office functions.39 billion. to touch close to US$ 2. Some big deals in the outsourcing space include: 7 . from 81 million registered in September 2010.

for implementing its multimodal transport management system and business intelligent tool across Jacobson locations globally. The total investments of EMC Corporation. the computer software and hardware sector received cumulative foreign direct investment (FDI) of US$ 10. a Mumbai-based business process outsourcing (BPO) provider. has announced a five-year outsourcing partnership with Barclaycard. Vertex. which offers software solutions for the logistics and transportation industry. Patni Computer Systems has secured outsourcing engagements from the Scandinavian insurance company Codan Group and the UK-based Serco Learning. has announced a joint venture with Shell Transource to address the domestic BPO market. a global customer management outsourcing (CMO) and business process outsourcing (BPO) company. will touch US$ 2 billion (over US$ 2. according to the Department of Industrial Policy and Promotion.8 billion. Domestic markets Domestic BPO segment is expected to grow by 16. Information technology (IT) services and solutions provider Patni Computer Systems has signed a five-year contract worth over US$ 32. an IT company. Firstsource Solutions. plans to invest around US$ 50 million in its global development centre in Chennai. • • • • • i. Patni will provide a range of support services to 2e2's end-user clients and in-house support services. new customer segments. in addition to adoption from emerging verticals. fueled by replacement of in-house software applications to standardized products from large organizations and innovative start-ups. driven by demand from voice based services.An Economic Overview of the IT sector • Four Soft Ltd. 8 . ii.01 billion) by 2014. Vertex will own over 70 per cent in the joint venture.601 million. Investments Between April 2000 and December 2010. Syntel. and value based transformational outsourcing platforms. the UK-based credit card and consumer lending business of Barclays PLC. with Shell Transource holding the rest. has signed a large contract with Jacobson Companies. Tata Consultancy Services Ltd (TCS) has announced the launch of its first BPO centre in the Philippines.09 million with UK-based IT services provider 2e2. Indian software product segment is estimated to grow by 14 per cent to reach US$ 3.9 per cent in FY2011. This is also the firm's first BPO centre in the South-East Asian region. a leading global player of information infrastructure solutions in India.46 billion. to reach US$ 2.

9 . The experts are however of the opinion that there are certain things that need to be done in order to make sure that India can maintain its status as one of the leading information technology destinations of the world. Cognizant will invest more than US$ 500 million till 2014 to expand its campuses to add over 8 million square feet to house over 55. Challenges Faced At present there are a number of challenges that are facing the information technology industry of India. Kaspersky Lab. Major Companies in the IT sector Indian Tier 1 companies in IT sector are as follows: • • • • Tata Consultancy Services Infosys Technologies Ltd Wipro Technologies Ltd Tech-Mahindra Ltd. On the back of 40 per cent revenue growth. Pune. Other players in the Indian IT sector • IBM • HCL • Patni • Polaris • Cisco • KPIT Cummins • i-Flex Solutions • Cognizant • Mphasis I. I.An Economic Overview of the IT sector Russian IT security software provider. One of the major challenges for the Indian information technology industry was to keep maintaining its excellent performance standards.000 employees. The first step that needs to be taken is to create an environment for innovation that could be carried for a long time. The innovation needs to be done in three areas that are connected to the information technology industry of India such as business models. Coimbatore and Kolkata. It will create additional software development and training facilities in regions designated as special economic zones in Chennai. will be investing US$ 2 million in its India operations at Hyderabad during 2011.

One of the most important crises facing the Indian information technology industry concerns the human resources aspect. also needs to be qualitative rather than just being quantitative. A bill has been passed in the state of New Jersey that allows only the citizens or legal non-Americans to be given contracts. Connecticut. The Indian information technology industry also needs to co-ordinate with the academic circles as well as other industries in India for better performance and improved productivity.through sectors reforms that encourage IT acceptance. which includes the New Pension System (NPS) and the Goods and Services Tax (GST) The government set up the National Taskforce on Information Technology and Software Development with the objective of framing a long term National IT Policy for the country. 10 . and the Unique Identifi cation Development Authority of India (UIDAI) programme that creates large scale IT infrastructure and promotes corporate participation. II. National eGovernance Programmes (NeGP) . The information technology professionals who aim at working in the country are also likely to be hindered by the legislation as a significant amount of these professionals have been going to work in the USA for a long time. The government has implemented the Information Technology Act. Wisconsin and Maryland.An Economic Overview of the IT sector ecosystems and knowledge. The skill level of the information technology professionals is one area that needs improvement and presents a considerable amount of challenge before the Indian information technology industry. The experts are of the opinion that the business process outsourcing service providers in India need to change their operations to a way that is more oriented to the knowledge process outsourcing. The government has constituted the Technical Advisory Group for Unique Projects (TAGUP) under the chairmanship of Nandan Nilekani. This legislation has also affected some other states like Missouri. Government Initiatives Government sector is a key catalyst for increased IT adoption. These states are also supposed to be considering these laws and their implementation. This is supposed to have an adverse effect on the outsourcing that is the source upon which the information technology industry of India thrives. which provides a legal framework to facilitate electronic commerce and electronic transactions. The problems with outsourcing in countries like the United States of America are posing problems for the Indian information technology industry as well. The Group would develop IT infrastructure in five key areas. The improvement however. The information technology sector of India also has to spread the range of its activities and also look at the opportunities in other countries.

htm http://www. according to NASSCOM. Moreover. networking and greater efficiency through use of common infrastructure and support services.An Economic Overview of the IT sector Setting up of Software Technology Parks of India (STPIs) in 1991 for the promotion of software exports from the country.wikipedia.aspx http://www. and rebate for payment of Central Sales Tax.org/industry/informationtechnology. Further. excise duty.org/wiki/Information_technology_in_India http://yourstory. Government is also setting up Information Technology Investment Regions (ITIRs).com/telecommunication/28/internet/143/stats. which has been extended till 31st March 2011.ibef.aspx http://www.in/news/5454-sectorwise-budget-2011-2012-analysis http://www.indiastat.internetworldstats. there are currently 51 STPI centers where apart from exemption from customs duty available for capital goods there are also exemptions from service tax.html 11 .com/india-it-industry/challenges.Bibliography http://www.4 billion by 2011.economywatch.org/industry/informationtechnology. These regions would be endowed with excellent infrastructure and would reap the benefits of co-siting.com/stats.aspx http://en. there is US$ 9 billion business opportunity in e-governance in India. III. IT spend was US$ 3. But the most important incentive available is 100 per cent exemption from Income Tax of export profits. according to NASSCOM government.2 billion in 2009 and is expected to reach US$ 5.ibef.

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