Information Technology & ITeS Overview

1. Market Overview:
The IT industry includes businesses for development, maintenance and publication of
software that are using different business models, mainly either "license/maintenance
based" (on-premises) or "Cloud based" (such as SaaS, PaaS, IaaS etc.). The industry also
includes software services, such as training, documentation, consulting and data
recovery. Major segments of the industry are:
a) IT Services
b) Software Publishers
c) Computer Hardware
The global IT industry has been valued at $ 5 Trillion. The United States is the largest tech
market in the world, representing 31% of the total, or approximately $1.6 trillion for 2019
and India occupies the second position at 26% or $1.3 trillion for 2019. The global market
has observed a growth of 4.8% in IT services in 2018-19 and the global sourcing market
has been valued at $194-198 bn. The spending in technology and software has also
experienced a growth of 6% and 8% respectively.
India is the leading sourcing destination across the world, accounting for approximately
55 per cent market share of the US$ 194-198 billion global services sourcing business in
2017-18. Indian IT & ITeS companies have set up over 1,000 global delivery centres in
about 80 countries across the world.
India’s IT & ITeS industry grew to US$ 181 billion in 2018-19 with a CAGR 10.45%. Exports
from the industry increased to US$ 137 billion in FY19 while domestic revenues (including
hardware) advanced to US$ 44 billion.
2. Market leaders:
Global market leaders in IT industry are as follows :
Company Revenue (FY Major Products/services
2019)
Google $ 136 billion Search engine, Youtube, Gmail, Android, Chrome,
Adwords
Microsoft $ 126 billion Windows, MS-Office, Outlook, Microsoft Azure, Xbox
SAP € 25 billion SAP ERP, SAP CRM, SAP S/4 HANA
Oracle $ 40 billion Oracle database, Java, Siebel CRM, Solaris
IBM $ 80 billion IBM DB2, Rational softwares, Eclipse, Websphere
Accenture $ 42 billion Accenture Cloud, CRM, HCM, Accenture Newspage

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Indian market leaders in IT industry are as follows :
Company Revenue (FY Major Products/services
2019)
TCS $ 20 billion BPO, IT services, IT consulting, Software
development
Infosys $ 12.1 billion Strategy, IT services, IT consulting, Software
development
Wipro $ 9 billion Strategy, Outsourcing, IT consulting, Software
development

3. Strategies Adopted:
a. MICROSOFT
i. Microsoft’s Generic Strategy (Porter’s Model)
Microsoft Corporation uses broad differentiation as its generic strategy for
competitive advantage. Broad differentiation involves unique products sold to a
wide variety of customers. In this case, Microsoft’s products are unique in terms
of features, such as software products specifically designed for business
organizations. Also, this generic competitive strategy is broad in the sense that
the company sells its products to various market segments. For example,
individuals, households and organizations buy Microsoft’s software and
hardware products.
ii. Microsoft’s Intensive Strategies (Intensive Growth Strategies)
Market Penetration (Primary Strategy): Market penetration is the primary
intensive strategy that Microsoft uses to grow its business. This intensive
growth strategy involves selling more products to the markets where the
company currently has operations. For example, the company grows by
intensifying its marketing and sales in its current markets in Asia. This intensive
growth strategy is responsible for Microsoft’s global dominance in the IBM PC-
compatible operating system market. The company effectively applies market
penetration through the broad differentiation generic strategy, which uses
product uniqueness to attract more customers from various market segments.
A strategic objective based on this intensive strategy is to ensure Microsoft’s
growth through aggressive sales and marketing.
Product Development (Secondary Strategy): Microsoft Corporation uses
product development as a secondary intensive growth strategy. This intensive
strategy facilitates growth based on the development and sale of new products.
For example, Microsoft continually develops new software products to generate

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 higher revenues. Through new products that address market needs, the
company supports its generic strategy, which requires product uniqueness as a
competitive advantage. This intensive strategy points to the strategic objective
of enabling Microsoft’s growth through product innovation.
iii. Market Development (Supporting Strategy): Market development is a
supporting intensive growth strategy that has considerable but minimal impact
on Microsoft’s current business performance. Market development supports
business growth through the firm’s entry into new markets. For example, in its
early years, Microsoft applied this intensive strategy to sell its computer
software products outside the United States. However, considering that these
products are already globally popular, market development is no longer as
significant in the company’s growth. The generic strategy of broad
differentiation empowers Microsoft in applying market development as an
intensive growth strategy. For instance, through unique business-specific
computer products, the company initially entered overseas markets. A strategic
objective linked to this intensive strategy is to grow Microsoft by entering new
markets, likely in developing countries or regions.
iv. Diversification (Supporting Strategy): Microsoft Corporation considers
diversification as a supporting intensive growth strategy. In this intensive
strategy, the company grows by developing new businesses. For example,
Microsoft diversified its business when it acquired Nokia’s devices and services
division to re-enter the smartphone hardware market. The company can
effectively apply this intensive growth strategy through new product
development in new business ventures, based on the broad differentiation
generic strategy. A strategic objective based on this intensive strategy is to
facilitate Microsoft’s growth through mergers and acquisitions.
b. IBM
i. IBM’s Generic Strategies --
At present, IBM’s primary generic strategy is cost leadership. In Michael Porter’s
model, the generic strategies are what companies use to ensure competitive
advantages. In this case, the cost leadership generic competitive strategy
supports IBM’s competitive advantages through cost-effectiveness of its
operations. For example, the company’s strategic objectives are focused on
reducing the costs of production. The cost difference enables IBM to minimize
its selling prices and, consequently, make its products more attractive to target
customers. Also, the lower costs allow the company to keep a higher profit
margin if product prices are maintained. Nonetheless,
the differentiation generic strategy continues to play a strategic role in

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 supporting the company’s competitive advantages despite business emphasis
on cost leadership.
Initially, the company used differentiation focus as its generic competitive
strategy. Differentiation focus involves differentiation of products through
uniqueness or value to customers, and focus on a specific segment or segments
of the market. In this case, IBM’s initial strategy was to focus on businesses as
its target customers, and hence the name International Business Machines.
However, as the business grew, the company started emphasizing cost
reduction to ensure competitiveness in its current markets. This condition
shifted IBM toward using the cost focus generic strategy. Cost focus involves
focusing on a segment or number of segments of the market, but relying more
on cost minimization to ensure competitive advantages. Today, IBM has shifted
toward using the cost leadership generic competitive strategy. The company no
longer limits its product offerings to businesses as its target customers. For
example, in acquiring The Weather Company, PwC Consulting, and SPSS, IBM
has broadened its target markets beyond business organizations as clients.
c. SAP
Five SAP Strategies are as follows :
i. Product Release Strategy: SAP has traditionally released products and made
major changes to underlying functionality on a five-year schedule, Shepherd
notes. So twice a decade, SAP's customer base faced a tough decision."They
could either ignore the product improvements that their maintenance fees had
helped to fund, or they could invest a significant amount of time and money in
an upgrade project that is often disruptive, expensive and deeply unpopular,"
Shepherd writes. "It became quite common for companies to delay or defer
releases. However, that approach carries enough risk and cost that most
organizations didn't dare go longer than eight to 10 years between upgrades."
ii. Growth Strategy: In the AMR report, Shepherd writes that SAP has a business
strategy that is fundamentally focused on organic revenue growth and that SAP
has always been confident about its organization's ability to develop new
products and improve existing ones.However, SAP execs also have realized that
the company has needed to both expand its product offerings to its customers
as well as move into new markets.
iii. Platform Strategy: Shepherd traces the roots of SAP's platform strategy back to
2003, when SAP packaged up its technology components and unveiled
the NetWeaver product set. SAP has continues to refine and market the idea of
a "business process platform," which is made up of SAP's Business Suite

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 applications, a repository of enterprise services, and the NetWeaver technology
platform
iv. Product Strategy: Before 1999, SAP was known as a one-product company,
which a much less confusing naming convention for its products and releases
(R/1, R/2, R/3)."Since then, SAP has accumulated dozens of products with a
bewildering set of options, variants and names,"As to SAP's Business
ByDesign on-demand software offering targeted at SMBs,
SAP has many large customers that need a smaller and simpler application that can be
easily integrated to the Business Suite. "CIOs regularly face the question of what to do
about autonomous divisions, smaller sites in remote locations, new acquisitions, and
joint ventures. Incorporating them into the global, single instance of SAP is often an
unpopular option that may be financially or technically impractical."
d. TCS
i. Business Level Strategies:
TCS has developed its business level strategy by assuming as world financial
institutions are in a tremendous shock of crisis and think of scaling up revenue
from other industries. (Tata Consultancy Services Limited, 2010). TCS names its
business divisions as Industry Service Practice which will help them to collect
maximum revenue from Banking Financial Services and Insurance Sectors.
ii. Generic Business Strategies of TCS:
TCS provides low cost Global delivery with the help global strategy. TCS mainly
focus on customer relationship management & customer retention in order
increase the business revenue.TCS provides timely delivery of IT services with
the help of proven delivery & quality framework called as (iQMS). TCS uses
differentiation strategy by providing low end services in terms of cost,
resources. TCS also differentiate its high end services such as consulting in term
of niche offerings. TCS has strong knowledge management system & resource
Strength by which they has successful in reaching the overall cost leadership in
the (IT) industry.
4. Growth Drivers -
a. Government policies:
i. The government has identified Information Technology as one of 12 champion
service sectors for which an action plan is being developed. Also, the government
has set up a Rs 5,000 crore (US$ 745.82 million) fund for realising the potential of
these champion service sectors.

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 ii. As a part of Union Budget 2018-19, NITI Aayog is going to set up a national level
programme that will enable efforts in AI^ and will help in leveraging AI^
technology for development works in the country.
iii. In the Interim Budget 2019-20, the Government of India announced plans to
launch a national programme on AI* and setting up of a National AI* portal.
iv. National Policy on Software Products-2019 was passed by the Union Cabinet to
develop India as a software product nation.
v. Achievements: About 200 Indian IT firms are present in around 80 countries. IT
exports from India are expected to reach highest ever mark of US$ 126 billion in
2017-18. Highest ever revenue was generated by Indian IT firms at US$ 181 billion
in 2018-19.
b. Investments:
i. Nasscom has launched an online platform which is aimed at up-skilling over 2
million technology professionals and skilling another 2 million potential
employees and students.
ii. Revenue growth in the BFSI vertical stood at 6.80 per cent y-o-y between July-
September 2018.
iii. As of March 2018, there were over 1,140 GICs operating out of India.
iv. PE investments in the sector stood at US$ 2,400 million in Q4 2018.
v. Venture Capital (VC) investments in the IT & ITeS sector stood at US$ 53.0 million
during Q4 2018
c. Infrastructure:
i. Converged Infrastructure - It refers to an optimized, tightly-integrated collection of
IT components offered by a systems vendor that includes a variety
of compute, storage, networking and virtualization resources.
ii. Management of converged infrastructure resources is typically handled by a
discrete hardware component that serves a singular purpose.
iii. Hyper-Converged Infrastructure - hyper-converged infrastructure systems are
similar in nature to converged infrastructure systems, management of the
resources is largely software-defined rather than being handled by one or more
hardware components.
5. Market Size -
a. India’s IT & ITeS industry grew to US$ 181 billion in 2018-19. Exports from the industry
increased to US$ 137 billion in FY19 while domestic revenues (including hardware)
advanced to US$ 44 billion.
b. Spending on Information Technology in India is expected to grow over 9 per cent to
reach US$ 87.1 billion in 2018.
c. Revenue from digital segment is expected to comprise 38 per cent of the forecasted
US$ 350 billion industry revenue by 2025.

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6. Key Trends -
Major key trends in the IT sector are as follows :
a. AI and Advanced Analytics: Advanced Analytics is a term that refers to a wide range of
analytics tools and techniques which includes data mining, machine learning,
forecasting, and pattern matching. Advanced analytics is also a marketing term used
to categorize analytics capabilities beyond basic business intelligence (BI) solutions.
Advanced analytics covers a wide range of analytics including predictive, prescriptive,
and AI-driven.Artificial intelligence is a set of technologies that simulate human
intelligence. AI technologies aim to mimic the human ability to analyze and draw
conclusions from data, understand complex concepts, and interact with humans in a
human-like way.
b. Blockchain: A blockchain is a growing list of records, called blocks, that are linked using
cryptography.Each block contains a cryptographic hash of the previous block,a
timestamp, and transaction data (generally represented as a Merkle tree). According
to Blockchain Report 2019 by NASSCOM, the adoption of blockchain technology in
India is experiencing rapid growth and investments in blockchain-based projects have
touched over $20 billion across various industries
c. Cybersecurity: Computer security, cybersecurity or information technology security (IT
security) is the protection of computer systems from the theft of or damage to their
hardware, software, or electronic data, as well as from the disruption or misdirection
of the services they provide. It is estimated that by 2027, global spending on cyber
security will reach $10 billion. In this age of IoT, where there is no escaping the
internet, it is very important to understand the importance of cyber security and more
importantly, the types of cyber security threats around you!
d. Devices and IOT: IoT involves extending internet connectivity beyond standard
devices, such as desktops, laptops, smartphones and tablets, to any range of
traditionally dumb or non-internet-enabled physical devices and everyday objects.
Smart cities and smart meters are some common examples of IOT in our daily life.
Gartner estimated the total spend on IoT devices and services at nearly $2 trillion in
2017, with IDC projecting spending to reach $772.5 billion in 2018, 14.6% more than
the $674 billion it estimated to be spent in 2017, with it hitting $1 trillion in 2020 and
$1.1 trillion in 2021.
e. AR/ VR / Mixed Reality: AR lets the user experience the real world, which has been
digitally augmented or enhanced in some way. VR, on the other hand, removes the
user from that real-world experience, replacing it with a completely simulated one.
India ranks third globally for technology-driven product startups. According to
NASSCOM 2019 startup report, the startup base is around 5200 tech-based startups
with 7% growth YoY. Of them 28% are health tech, 31% are fintech and 13% e-

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 commerce/aggregators. The one thing that all these startups will have in common is
how they will be driven by AR/VR technology. Byju’s, TATA Sky etc are leveraging
AR/VR in order to dominate the immersive media market.By 2022, $ 6.5 billion will be
the estimated size of the market with AR and VR comprising $ 5.9 bn and $ .5 bn
respectively.
7. Important News -
WIPRO –
In the next phase of promotion, the company will elevate employees at L1 level to L2
while L2 will be promoted to L3 level. Wipro attrition rate reportedly stood at 17%, 60
basis points lower than in the previous quarter, during the quarter ended september. In
July this year, Wipro has offered to pay retention bonus of 1 lakh to the freshers hired by
the company this year in a bid to counter the high attrition rates. BPO and call centre
industry that was at the third position on the list in May 2018, has dropped out of the top
5 job-creators' list Telecom and ISP has found itself on the top 10 list, registering stellar
growth since 2018. US visa rules to hit IT companies' profits, margins in current fiscal:
Crisil report
8. Prospects/ Opportunities -
India is the topmost offshoring destination for IT companies across the world. Having
proven its capabilities in delivering both on-shore and off-shore services to global clients,
emerging technologies now offer an entire new gamut of opportunities for top IT firms in
India. Export revenue of the industry is expected to grow 7-9 per cent year-on-year to
US$ 135-137 billion in FY19. The industry is expected to grow to US$ 350 billion by 2025
and BPM is expected to account for US$ 50-55 billion out of the total revenue.
Key drivers of growth in IT sector :
a. Low cost of operation and tax advantages
b. Supportive government policies
c. Availability of technically skilled manpower
d. Rapid introduction of IT technologies in major sectors such as telecom, BFSI.
e. Strong growth in export demand
f. Government established SEZs

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