A PROJECT REPORT On “A STUDY OF INDIAN INFORMATION TECHNOLOGY SECTOR.
” For the award of degree of MASTER OF BUSINESS ADMINISTRATION Submitted To Dr. Panjabrao Deshmukh Institute of Management Technology & Research, Department of Dhanwate National College, Nagpur
Submitted By: Ankit N. Fating (Researcher) Guided By Mrs. Aparna Samudra Through Dr. Panjabrao Deshmukh Institute of Management Technology & Research, Department of Dhanwate National College, Nagpur Year 2009-10
INTRODUCTION INDIAN IT SECTOR IT CATAGORIES CONTRIBUTION IN INDIAN ECONOMY MAJOR COMPANIES SWOT ANALYSIS OF IT SECTOR GROWTH GOVERNMENT INITIATIVE & POLICIES SCOPE IMPACT FUTURE OF IT SECTOR IN INDIA CONCLUSION BIBLOGRAPHY
The computer systems design and related services industry is among the economy's largest and fastest sources of employment growth. Employment increased by 616,000 over the 1994-2004 period, posting a staggering 8.0-percent annual growth rate. The projected 2004-14 employment increase of 453,000 translates into 1.6 million jobs, and represents a relatively slower annual growth rate of 3.4 percent as productivity increases and offshore outsourcing take their toll. ("Industry output and employment projections to 2014" by Jay M. Berman, Bureau of Labor Statistics) However, the main growth catalyst for this industry is expected to be the persistent evolution of technology and business' constant effort to absorb and integrate these resources to enhance their productivity and expand their market opportunities. Employment of computer and information systems managers is expected to grow between 18 to 26 percent for all occupations through the year 2014. (Career Guide to Industries 2006-07) The Indian IT sector is growing rapidly and it has already made its presence felt in all parts of the world. IT has a major role in
strengthening the economic and technical foundations of India. Indian professionals are setting up examples of their proficiency in IT, in India as well as abroad.
What is information technology?
Information defined by
"the study, design, development, implementation, support or management of computer-based information system, particularly software applications and computer hardware.” IT deals with the use of electronic computers and computer software to convert, store, protect, process, transmit, and securely retrieve information. Information technology is a general term that describes any technology that helps to produce, manipulate, store, communicate, and/or disseminate information
Perceptible is the transformation since liberalization India today is the world leader in information technology and business outsourcing. the industry’s contribution to India’s GDP has grown significantly from 1.8% in FY06. The sector has been growing at an annual rate of 28% per annum since FY01.2% in 1999-2000 to around 4. well supported by a liberalized policy regime with reduction in telecommunication cost and import duties on hardware and software.INDIAN IT SECTOR
The Information Technology (IT) sector in India holds the distinction of advancing the country into the new-age economy. and has been estimated to cross 5% in FY07. The growth momentum attained by the overall economy since the late 1990s to a great extent can be owed to the IT sector.
hardware support and installation and IT training and education. packaged software support and installation. Electronic System Design (including Chip/Board and
. These companies recognize the advantage India offers and the fact that it is among the fastest growing IT markets in the Asia-Pacific region.
The sector can be classified into 4 broad categories . E Business. processing services.
IT Services can further be categorized into Information Services (IS) outsourcing. Lenovo have already established their captive centers in India. SAP. Mechanical Design. Global giants like Microsoft. ITES-BPO Services. They have been enhancing their global service delivery capabilities through a combination of organic and inorganic growth initiatives. Oracle. availability of skilled manpower and the quality of services. Engineering Services include Industrial Design.IT Services. systems integration. Engineering Services.Indian IT companies have globally established their superiority in terms of cost advantage.
Design Validation Prototyping. Back Office Operations.
. According to the National Association of Software and Service Companies (NASSCOM). E Business (electronic business) is carrying out business on the Internet.8 per cent in FY 2008-09.
STRUCTURE OF IT SECTOR
The Indian information technology industry has played a key role in putting India on the global map. Business Process Outsourcing(BPO). Call Centers. For example. India is now a power to reckon with. Data Processing. KNOWLEDGE PROCESS OUTSOUECING (KPO)etc. the revenue of the information technology sector has risen from 1. Remote Maintenance. serving customers and collaborating with business partners. Thanks to the success of the IT industry. it includes buying and selling.
IT Enabled Services are services that use telecom networks or the Internet. the apex body for software services in India.2 per cent of the gross domestic product (GDP) in FY 1997-98 to an estimated 5.Embedded Software Industrialization
6 billion. IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40. System Integration. TCS and Wipro—have seen revenue growth from all important sources of income: from the North American and
. growing at an annual rate of 30 per cent per annum. Service-oriented architecture and Web services.9 billion in FY 2007-08 to US$ 47.India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM).3 billion in FY 2008-09.6 per cent. Infrastructure Management Services. the software and services segment accounted for US$ 59. Despite the uncertainty in the global economy. As per NASSCOM's latest findings:
Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach US$ 71. from the earlier few million dollars worth exports in early 1990s. IT Consulting.
Moreover. Software testing. Application Management. according to a study by Springboard Research. the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18. the top three IT majors— Infosys.7 billion in aggregate revenue (including hardware). Of this. The government expects the exports turnover to touch US$ 80 billion by 2011.
in the financial services vertical and from application maintenance and development (ADM) offerings between fiscal years 2008 and 2009.European regions.
India’s IT Industry (US$ bn)
further says that export earnings in 2007-08 will hit $40 billion.2 per cent in 2006-07. The report.CONTRIBUTION OF INFORMATION TECHNOLOGY IN INDIAN ECONOMY
The information technology (IT) industry has increased its contribution to the country's GDP from 1. points out that the industry has been the trigger for many 'firsts' and has contributed not only to unleashing the hitherto untapped entrepreneurial potential of the middle class but also taking Indian excellence to the global market. growing at a CAGR of 27 per cent in the last decade. The report. while bringing forth the contribution of the IT/ITeS sector. titled Indian IT Industry: Impacting the Economy and Society. Meanwhile.
.2 per cent in 1997-98 to 5. a growth of 36 per cent. according to a Nasscom-Deloitte study. direct employment is expected to be 2 million in 2007-08.
3. 1. 2. 9. 4. No. 6. 7. 8.MAJOR COMPANIES
S. 5. 11 12 13 14 15 Companies TCS Infosys Wipro HP IBM Satyam HCL Patni Polaris Cisco KPIT Cummins I-Flex Solutions Microsoft Dell Larsen and Toubro
Global Human Resources) Software services
TCS Bancs Digital Certification Products Healthcare Management Systems
.Type Founded Headquarters
Public (BSE: 532540) Subsidiary of Tata Group 1968 Mumbai. Global Corporate Affairs) Ajoy Mukherjee (VP & Head. India Ratan Tata (Chairman) S Ramadorai (Vice Chairman) N Chandrasekaran (CEO & MD) S Mahalingam (Executive Director & CFO) Phiroz Vandrevala (Executive Director & Head.
25 billion (2009) ▲ US$ 4.654 (As on 31st Dec.com
.IT Consulting IT Services Outsourcing BPO Software Products Revenue Net income Total assets Employees Parent Website ▲ US$ 5.70 billion (2009) ▲ US$ 1. 2009) Tata Group TCS.36 billion (2009) 149.
374 billion (2009)
Industry Products Services Revenue Operating income
. S. Raghavan Kris Gopalakrishnan S.663 billion (2009) ▼ $ 1. 1981 N R Narayana Murthy Nandan Nilekani N. Shibulal (COO) & (Director) Software services IT Services Information technology consulting services and solutions ▲ $ 4. India N R Narayana Murthy (Chairman) Kris Gopalakrishnan (CEO) & (MD) S. D. Dinesh Ashok Arora Bangalore. Shibulal K.Type
Public BSE: 500209 NASDAQ: INFY July 2. D.
281 billion (2009) $ 4.com
Public BSE: 507685 NYSE: WIT
.905 (2009) Infosys BPO Infosys Consulting Infosys Public Services
Infosys Australia Infosys Brazil Infosys China Infosys Mexico Infosys Sweden Infosys.376 billion (2009) $ 3.Net income Total assets Total equity Employees
▼ $ 1.784 billion (2009) 103.
2009) Wipro. India Azim Premji (Chairman) Girish Paranjpye (joint CEO) Suresh Vaswani (joint CEO) SA Sudarshan IT Services
IT Consulting Business Process Outsourcing Product Engineering Solutions Technology Infrastructure Services
Revenue Net income Total assets Employees Website
▼ US$ 4.82 billion (2009) ▼ US$ 5.Founded Founder(s) Headquarter s
.38 billion (2009) 98.98 billion (2009) ▼ US$ 0. H. Karnataka. Premji Bangalore.391 (As on 27 October.
Infosys.70 billion it is more than the other major companies. The revenue of TCS is now US $ 5. Accenture and IBM are the major market share in the economy.
.TCS is the market leader in IT sector in India and Other major companies like Wipro. The graph shows highest market price of the company.
SEI CMM etc. etc. English-speaking professionals Cost competitiveness Quality telecommunications infrastructure Indian time zone (24 x 7 services to the global customers). increasing tremendously. Adobe. Time difference between India and America is approximately 12 hours.
• • •
. as ISO 9000.SWOT ANALYSIS
• • • •
Weaknesses • Absence of practical knowledge • Dearth of suitable candidates • Less Research and Development • Contribution of IT sector to India’s GDP is still rather small. which is beneficial for outsourcing of work. • Employee salaries in IT sector are Oracle.
Highly skilled human resource Low wage structure Quality of work Initiatives taken by the Government (setting up Hi-Tech Parks and implementation of egovernance projects)
Many global players have set-up operations in India like Microsoft. Low wages
Following Quality Standards such benefit will soon come to an end.
High quality IT education market Increasing number of working age people India 's well developed soft infrastructure Upcoming International Players in the market
Lack of data security systems Countries like China and Philippines with qualified workforce making efforts to overcome the English language barrier
IT development concentrated in a few cities only
direct and indirect employment was expected to reach 2. •Domestic market revenues were expected to touch US$ 24. respectively.
.GROWTH OF IT SECTOR
IT industry: on a steady growth track •The total revenues for the Indian IT industry were estimated to touch US$ 71. •The total revenues from export were expected to reach US$ 47.2 per cent in 1997-08 to an estimated 5. •During this period 2008-2008.7 billion in 2008-09.23 million and eight million.3 billion in 2008-09. •The total exports have been growing at a CAGR of 28.8 per cent 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. •Domestic market revenues have been growing at a CAGR of 24 per cent for the last five years.3 billion in 2008-09.7 per cent over the last five years. •Contribution of IT industry to India’s gross domestic product (GDP) has grown from 1.
REVENUES BY SEGMENT –INDIAN IT INDUSTRY
CAGR: 27 per cent
INDIA MAINTAINS LEAD IN ITES-BPO
IT/ITeSsector has matured considerably with its
into varied verticals
differentiated service offerings
importance among emerging economies.9 per cent in 2008-09
.7 billion and the sector grew at a rate of 18. while India maintains its leading position as a strategic offshoringdestination for multinationals worldwide
Indian ITeS-BPO (domestic and exports) revenues are estimated at US$ 14. is fuelling further IT/ITeSgrowth
to be one of the fastest growing industries in India. both as a supply and demand centre.
•The banking. retail. financial services and insurance (BFSI) vertical continues to account for the largest share of IT/ITeSservices at 41 per cent.3 billion in 2008-09. •Other verticals such as manufacturing.IT SERVICES: ANCHOR SEGMENT FOR THE SECTOR
•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. •Hi-Tech/ telecom vertical accounts for the second-largest share of the pie at 20 per cent.
. media and healthcare are rapidly gaining pace.
•Hardware accounted for about 49 per cent of the total domestic IT-BPO spends in 2008-09.3 billion in 2008-09.Domestic IT-ITeSmarket revenues have been growing at a CAGR of 23 per cent between 2005-2006 and 2008-09 and were expected to reach US$ 24. •Domestic IT-BPO revenues grew by 24 per cent in and were expected to touch US$ 2 billion in 2008-09..
ITeS-BPO: outsourcing growth story
•Indian ITeS industry grew at a rate of 18.7 per cent of total IT/ITeSsector exports in 2008-09.2 per cent in 2008-09 to reach revenues of US$ 14. •Exports accounted for 87 per cent of the revenues and grew at a rate of 18 per cent in 2008-09 to reach US$ 12.84 billion. •The concept of outsourcing is increasingly gaining acceptance even in the more conservative markets around the world. •Services exports account for nearly 67.
. •Scope of services have expanded in the last three to four years to include increasingly complex processes involving rule-based decision making and research services requiring informed individual judgment.•Industry has graduated to providing a high proportion of voicebased services and a range of back-office processing activities.
5% approximately. Trends in Salary Hikes Along with abundant growth opportunities. The average increase in salary in IT sector across the levels was around 16% and the average increase in the ITeS BPO sector across the levels was in between 16%-18% Requisites for balanced salaries End to poaching Review of compensation according to the skills Developing talent in-house Entry of talented freshers in the industry
. In the FY06.GROWTH IN EMPLOYMENT
The bar chart shows that the recruitment of engineers and IT professionals in the industry is growing at the Compound Annual Rate of 14.3 million people and the indirect employment was 3 million approximately. IT sector is one of the highest paying sectors. the direct employment in the IT-ITES sector was 1.
Progressive policy reform (fiscal/trade/other): •No FDI restrictions. overseas investment. •Fiscal reforms (international taxation.) to facilitate ease of international transactions introduced.
.GORVERNMENT INITIATIVE & POLICIES
Software Technology Parks of India (STPI) was setup by the government in 1991 to provide: •Fiscal benefits like tax holidays to attract investment into the industry •Basic infrastructure •Single–window clearances for setting up Export Oriented Units (EOUs) •Virtual model allows firms to avail benefits without restrictions on location.
Enactment of the Information Technology Act.
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. has played an important role in increasing internet penetration in rural India. • Infrastructure development.Recent initiatives: • Area limit exemptions for the IT-BPO sector in the SEZ policy. • Special emphasis on talent and infrastructure development . provisions designed to complement the STPI scheme.
. which provides a legal framework to facilitate electronic commerce and electronic transactions. The government-led National e-Governance Program.
established. ethnicity. political opinions or other relating factors may help form a group of people. and institutions. This can be anything from a small neighborhood to the entire global community. other animals and/or plants and the interactions within that group. Religion.IMPACT OF IT SECTOR
Impact on Society A society can also refer specifically to any group of people. Tradition can be defined as the following: "An inherited. or customary pattern of thought. interests.
." • Cultural Continuity Social attitudes have changed in that citizens of a society now expect the various elements of that society to be better informed than previously. Cultural continuity in social attitudes. They also expect to be able to access more information about a specific product. • Common Traditions In the context of this report it is helpful to highlight a difference between "traditions" and "activities/interests". service or organization so that they can make informed decisions with regard to their interactions with that entity. or behaviour (as a religious practice or a social custom). action. customs.
Information technology has also had a major impact on the defense capabilities of governments.
. For example it would have been impossible to design aero planes such as the B2 Bomber if it were not for the advances made in information technology. Advances in weapons technology and weapons design have increased the effectiveness of various governments' armed forces. Commercial businesses. This covers both a government's capability to wage war and their intelligence gathering capability. News & media organizations. Educational organizations. • Governments The government of a nation is comprised of many varied institutions. It would have been impossible to design or build this machine without the development of computer modeling techniques.Institutions The word institutions can incorporate a wide variety of organizations. For the purposes of this report the institutions we will examine will be:
• • • •
The focus is on how information technology development has improved the processes by which these institutions accomplish their tasks or goals. The B2 bomber relies on a "continuous curvature" design to minimize radar signature. However developments in information technology have helped governments to improve their "service" to their citizens.
moral. • Educational Organizations The developments that have occurred in information technology have had many influences on educational establishments. Advances in information technology over the last thirty years have lead to the television. manipulate. This report focuses on the distribution and creation of information. is to provide a commercial advantage. accountable. "Information technology is the technology used to store. The Government of India is devising new policies to envisage a SMART – simple. Advances such as computeraided design. distribute or create information". spreadsheets and word processing software provide a commercial benefit to the business. responsible. • News & Media Organizations Due to the nature of news and media organizations. for which initiatives have been taken by National Informatics Center (NIC).
. The most important role of information technology in a commercial business. As noted earlier. relational database technologies. however. The customs department plans to use electronic data interface (EDI) to handle all transactions relating to custom duties more efficiently. information technologies have particular relevance to them. The distribution of information is not the only concern of educational establishments.• Commercial Businesses The advances in information technology have heavily influenced commercial businesses in several areas. and transparent governance to bring nationwide reforms. Impact of Information Governance Technology and Electronic
E-governance is the effective way of governance utilizing IT to enhance efficiency of government offices. News and media organizations are intimately acquainted with each of these elements of information technology. as does automation of manufacturing processes (which Sara-Lee did in 1964).
Karnataka. many countries get benefits in terms of labor costs and business processes. Gujarat and West Bengal) and pointed out that all these states have an IT policy.
. expert group. e-governance cell.IT Policy and Emphasis on E-governance E-governance attempts in the country started with a bang. By outsourcing to India.
SCOPE OF IT INDUSTRY IN INDIA
The IT industry has great scope for people as it provides employment to technical and non-technical graduates and has the capability to generate huge foreign exchange inflow for India. emphasizing the method by which the state has to deliver its services in the information age. Talent acquisition. which produced a concept paper. the Indian companies are broadening the range of services being provided to the customers. The initial impetus came from the Ministry of IT. Kerala. Madhya Pradesh. India exports software and services to approximately 95 countries in the world. development and retention initiatives taken by the companies have brought down the employee attrition rates. Rajas than. and some even have a separate IT department. Also. Maharashtra. Uttar Pradesh. thereby providing more stability to the employees and increasing their job commitment. NASSCOM conducted a survey of ten leading states (Andhra Pradesh. Tamil Nadu. Some of them have also included specific policy measures that not only aim to facilitate IT investments in the state but also focus on using IT for governance-related issues. which is resulting in more off shoring. The paper envisages a SMART government and promises to establish the required institutional mechanisms to facilitate initiatives towards synergic utilization of IT to enhance effectiveness of governance.
The Govt. For example: 1. It is providing infrastructure support through organizations such as software technology parks.
. the Indian Government is also taking many steps. is trying to reduce the international communication
FUTURE OF IT SECTOR IN INDIA
IT will continue to gain momentum. competitive duty structures. has provided incentives including tax holiday up to 2010 and cost. 2. Technologies that are emerging are Data Warehousing and Data Mining. IT will bring about a drastic improvement in the quality of life as it impacts application domains and global competitiveness.Many financial institutions are providing funds for the expansion of IT and ITeS businesses. The Govt. telecom and wireless will follow the trend. All these factors collectively create a number of opportunities in the IT sector. They involve collecting data to find patterns and testing hypothesis in normal research. In order to support IT and ITES. The immense expansion in networking technologies is expected to continue into the next decade also. Software services that are being used in outsourcing will go a long way. 3.
showing definite signs of breaking-out of the trend of hardware linked growth with the contribution of software and services exceeding that of hardware •Government is taking up e-governance initiatives and increasing its IT spends/ outlays.8 billion outsourced services in 2008-09. •Demand for domestic BPO services increasing rapidly.9 billion of the US$ 12.3 billion •Domestic IT BPO spending grew by 40 per cent during 2008-09 •The domestic market is picking-up.
Engineering: a new outsourcing opportunity
•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. 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. allocation has increased from US$ 96 million in 2006-07 to US$ 175 million in 2007-08.
. indicating increasing IT spends. with niche verticals like healthcare and retail fast gaining traction apart from the traditional verticals of BFSI and manufacturing.FUTURE OPPORTUNITIES :
•Overall size of the domestic market in 2008-09 was estimated to grow by 20 per cent and reach be US$ 24.
•Opportunities span across several service offerings: legal process outsourcing (LPO). John Deere. etc. which are considered fast moving service offerings. financial and market research and engineering services outsourcing. Ford. Silicon Automation Systems. data modeling. General Motors.automotive. •CRISIL estimates that the Indian KPO export market constitutes about eight percent of Indian ITeSrevenues 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).
. construction. aerospace. however KPO is now growing at a rapid pace with MNCs setting up third party captive units for data analytics. utilities and industrial design •Labourcost arbitrage in this sector is about 60 per cent of the US counterparts •Bechtel. Caterpillar. John Brown Engineering are a few global giants that have set up their engineering services divisions in India
Knowledge Process Outsourcing (KPO)
•The genesis of KPO followed BPO services in India.
The Indian software and services industry has significantly helped to boost the Indian economy. Society expects to be able to store information more than was previously conceived.
. Society expects to be able to distribute information quickly. we are all in agreement that the world is becoming increasingly dependent upon technology as is evidenced by the big role it is playing. All developing nations can derive tremendous advantages from this technology for updating the knowledge of its researchers and scientists. efficiently and cheaply.Today. The Internet has become a major shareholder. Society expects to be able to manipulate the information it has for its own benefit. to increase understanding and discover new relationships. The Government of India has been working gradually and successfully towards improving the IT policy climate in the country.
nasscom.com Articles: From Business Standard Newspaper growth And the opportunity of IT sector.com www.wikepedia.ibef.
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