INDIAN IT INDUSTRY – A SUCCESS STORY India is one of the fastest growing IT markets in the world, the fastest growing

PC market in the Asia-Pacific region, and also the country with the fastest growth in Internet usage in this region. In much of the developed world, India today has a substantial mind share amongst those involved in information technology (IT) software and services. TEN YEARS OF THE INDIAN IT INDUSTRY Indian IT Industry growth

The past decade has witnessed the rise of the Indian IT sector from a position of virtual non existence, to one, where it has occupied a place of pride in the global IT industry. The Indian 13.6 IT sector has grown from a mere $6.4 14 12.1 billion in 1998 – 99 to $ 13.6 billion in 12 2001 – 02. The IT Industry today 10 accounts for 2.87 percent of India’s 8 6.1 GDP. Exports from the Indian Software 6 Industry accounted for over half the 4 industry’s revenues, accounting for US$ 2 5.5 bn of the total IT pie of US$ 10.5 0 bn in 2001. The domestic market was 1998-99 2000-01 2001-02 dominated by hardware at US$ 2.9 bn, followed by services at US$ 1.6 bn, Year Values estimated at the following exchange and packaged software brought up the rear rates: with earnings of US$ 409 mn. 1998 – 99: 1$ = Rs 41.28
IT Market (US $ billion)

THE INDIAN SOFTWARE AND SERVICES MARKET

2000 – 20001: $1 = Rs 45.72 2001-2002: $1 = Rs 47.05

Size (US $ million)

The IT Software and Services export segment has a very crucial role to play in the overall IT market in the country. The IT Software 14000 13510 and Services exports has greatly 12180 12000 contributed to the IT sector which 10000 enlarged from US$ 1.73 billion in 1994-95 8360 to a US$ 13.5 billion industry in 2001-02. 8000 6010 NASSCOM also forecasts a future growth of 6000 5020 30% for FY 2002-03. 3760 4000
2000 0 1994- 1995- 1996- 1997- 1998- 1999- 2000- 200195 96 97 98 99 00 01 02
1730 2575

Key Highlights  The Indian IT Software and Services Industry is the fastest growing sector in India and across the world. This segment accounts for 16.5% of the country's overall exports; 5,00,000 jobs and about US$ 1.6 billion in investments The domestic software market is dominated by products and packages, which account for around 40% of the market and by projects, which accounted for around 30%. The presence of domestic companies in the software product market is negligible - estimated to be less than 20% in value terms In FY 01 in the packaged software segment despite the slowdown there was a healthy growth of 37%. In FY 01 Indian companies launched 92 software packages and MNCs launched the remaining 152. Packaged software as a market grew from US$ 336 mn to US$ 409 mn. Software exports grew from US$ 3.4 bn to US$ 5.2 bn, a 57% growth

NASSCOM has also predicted that revenues from ITES sector will sky rocket to Rs.46 bn in 2001-02 NASSCOM has forecast India's revenues from IT-enabled services to rise more than 20 times to Rs 81000 crores (US $16.000 crore (US$17 billion) by 2008 capturing over a 10 % share of the global ITES market NASSCOM study revealed that the ITES sector has emerged as a leading employment generator with about 68. US continued to be the prime destination for India’s software exports. According to a NASSCOM (National Association of Software & Services Companies)-McKinsey projection.000 people being employed in the Indian IT-enabled services industry. Indian companies now service nearly 220 global 1000 customers Indian productivity-quality-cost model has emerged as a unbeatable value proposition for the software and service industry Quick Facts: 199900 IT Services ITES Total 14750 2400 17150 200001 24250 4100 28350 2001-02 29400 7100 36500 200203* 35800* 11700* 47500 * INDIA’S OUTSOURCING POTENTIAL      India currently exports software to some 95 countries around the globe and 185 of the Fortune 500 companies have outsourced some part of their software requirement to India During 2001-02. The research indicates that an additional 36.000 jobs have been created over the .000 software professionals   Key Trends in the Industry in 2001 . the ITES segment continued to grow at a blazing 70% to clock revenues of over $1. Some SME players grew more than industry average India has emerged as the most preferred destination for BPO and almost every Fortune 100 CEO looking at outsourcing operations to India.02        Increase in the number of fixed price multi-year contracts with many large players winning high value global projects Indian companies moving up the value chain with an emergence of new service lines such as package software implementation. despite the US economic downturn.3 billion of the projected $50 billion exports by 2008 The opportunity in e-solution services is tremendous with Indian IT services firms having positioned themselves as a credible provider of IT services over the past decade. 81. US will continue to be the major market for Indian software services. with Forrester predicting that by 2003 global demand would be 635. systems integration and network management The geographic mix of software exports is shifting with many Indian IT companies targeting countries apart from the USA such as Europe.000 compared to the Indian supply of 475.1 million by 2008. The revenue opportunity is estimated to be US $ 4-13 bn (~1-3% share of the overall esolutions services market) by 2005 for India – NASSCOM & BCG report The IT training industry is all poised to spring back after slowing down due to the US slowdown.94 billion) by 2008 from Rs 7100 crores in 2001-02 NASSCOM has predicted that employment in the Indian IT-enabled services industry could rise to 1. with the US generating about $18. Asia Pacific and Latin America Offshore projects grew nearly 70 per cent while onsite grew only by 10 per cent Top 5 players contributed 55 per cent of growth of industry while top 10 players accounted for 73 per cent of growth.

      According to a Forrester Research survey.250 crore Rs. 500 crore-Rs.500 crore Rs. Infosys Technologies.500 18.   past one year by the ITES sector.50 crore-Rs.50 crore Below Rs.500 37. more than 216 have already acquired ISO 9000 certification. Of the 300 large players in the Indian software industry.950 1. Satyam Computer Services. Silverline Technologies.the offshoring segment India represents a stable environment INDIAN SOFTWARE EXPORTS:DELIVERY MODEL (Rs crore) Onsite Offshore Products Unclassified Total 1999-2000 9. solutions and services. E-commerce.000 crore Rs. 10 crore TIER 1 PLAYER: LEADING THE PACK No. Wipro Ltd.06. 1.850 5.10 crore-Rs.900 10.250 crore-Rs.000 1.000 & STRUCTURE OF THE INDIAN SOFTWARE EXPORTS INDUSTRY Annual turnover Above Rs. Technology Vendors. . which is expected to employ over 1.000 crore Rs.1.000 employeesas of March 2002 Top Five Focus markets for Indian ITES companies include Insurance.500 28.150 2000-01 15.100 crore-Rs.950 1. Financial Services and Telecommunication services A major strength of India’s export oriented software companies has been the high quality of their products. HCL Technologies. of companies 5 7 14 28 25 193 544   Tier 1 players lead the industry with a 33-35 percent share of the overall software export market during 2000-01 and will continue to log in above industry growth rates during 2001-02 Some of India’s software and export revenue leaders are TCS.350 2001-02 E 17.350 17. the average percent spent on off shore will grow from 12 percent to over 28 percent by 2004 A NASSCOM study shows that over one in four global giants outsource their software requirements to Indian companies Many US companies such as DuPont and Deutsche Bank announced an increase in their outsourcing services to India A survey indicates an increase in the IT spend outsourced to India from below 5 percent to over 15 percent in the next two years Indian companies have the necessary experience and infrastructure to offer offshoring services In terms of pricing . Indian software Industry has over 36 companies certified as SEI CMM Level 5 accreditation Business Process Outsourcing (BPO) has been identified as the next high growth business for the Indian IT industry OFF-SHORING: ENLARGING MARKET Global trends indicate that more and more IT spending will go to offshore solution providers and for India these trends hold many positives.100 crore Rs.

 India has a relatively low tele-density of over 3% for fixed line and 0.500 crore in 2001. THE INDIAN INTERNET MARKET SCENARIO    According to NASSCOM’s Internet Survey 2002 the Indian Internet market is growing steadily in terms of subscribers and the number of active subscribers is projected to touch 1.7 billion in '97-98 to $3 billion in '01-02.000 for 2001-02. The total investments made by all ISPs are estimated to be around Rs 5. registering a growth of 44%  Overall the PC purchases in the top 4 metros (Delhi.Merrill Lynch  Telecom industry only accounts for 1. which is a fifth of the investments made NASSCOM has forecasted that Internet subscribers base will increase to 7.  PC shipments were 1.5 million as of March 2002.5 million .  The domestic IT hardware market has grown 76 percent over the last five years.7 million by 2004-05 and user base to 50 million Internet Telephony is the latest buzzword   Only Internet service providers (ISPs) will be allowed by the government to offer Internet telephony services from April 1. This represents a growth of 30 per cent compared to the 1.881. Cognizant Technology Solutions.45% for cellular (4.5 million.. however. Hewlett-Packard ISO. Interconnectivity between ISPs will only be permitted only if both service providers have license to offer Net telephony The government has. Kolkatta & Chennai) accounted for 53% of the total PCs purchased. from $1.640 in 2000-01 and are estimated to be 1. Mumbai. and Pentamedia Graphics MNCs such as GE. Within the country. NIIT Ltd.August . American Express. Pentasoft Technologies Ltd. The industry revenues are likely to be around Rs 1000 crore. THE INDIAN TELECOM INDUSTRY  India has 6th largest telecom network in the world and the second largest among the emerging economies (after China) – Morgan Stanley  India is the world’s 12th biggest telecom market with the telecom pie of $6. limited the scope of the Net telephony service. Intel.2% of GDP. Texas Instruments. up from 24% in the first half of 2000-01.1 million active subscriber base in March 2001 The number of licensed ISPs during 2001 was 470 and of this only 130 are operational. Bulk of the revenues comes from long distance telephony (both domestic & international) .4 billion.6% CAGR Merrill Lynch. The telecom pie is expected to expand at a 15. Microsoft have been showing rapid growth and accounted for 14-15 percent of overall software export revenues during 2000-01. it has to be PC-to-PC THE INDIAN HARDWARE INDUSTRY  The total number of installed PC base in the country is 7. A call from PC to a phone can be made only from India to an overseas location. but the segment has seen a gradual shift from indigenously sourced production in favour of imports  MNC brands maintained a robust performance – a market share of 36%.650.

Nortel.2001) with plans for attaining telephone on demand by 2002 and a tele-density of 7 by 2005. fixed line and cellular  The government has re-opened the fixed-line services segment for private players  The prescribed entry fees are now one seventh to one tenth lower than what the government charged in 1994.39 million subscribers Overview  This year.6 trillion (US$23. is estimated. Motorola and Nokia have already set up R&D centres in the country Morgan Stanley estimates the annual telecom revenue in India will grow to more than Rs 1. the government has laid out guidelines to open up and encourage competition in almost all telecom segments: national long distance (NLD). . Lucent. during the first phase of liberalization  The government has also provided a boost for cellular services to take off in India by allowing the entry of the more cellular operators per circle and fixed-line operators to provide limited mobility using wireless in local loop (WLL)  One of the focus area for Indian companies is telecommunication software and services  Many telecom majors such as CISCO. private cellular service providers have roped in 6. would come from the cellular and data segments. The bulk of the growth.  At present the status of number of telephones (including mobile phones) is over 36 million.  Government ended VSNL’s monopoly over International Long Distance and opened the long distance and International telephony sectors for private participation provides a much-need impetus to the industry and benefit to consumers  This initiative has led to reduction in STD tariffs by 40% and ISD by 20%  Over the last 5 years.2 million as against private basic service providers who have only managed to rope in 0.3 billion) by F2010 – a CAGR of 17%.

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