PORTER’S FIVE FORCE MODEL – TECHNOLOGY INDUSTRY

India is the world's largest sourcing destination, with the world's greatest
pool of competent technical graduates. The Indian IT industry's revenue is
expected to reach US$ 194 billion in FY21, up 2.3 percent year on year,
according to the National Association of Software and Service Companies
(Nasscom).
Within the private sector, the sector employs the most people. Our
economy has been transformed by information technology (IT), and no
company is exempt to its effects. New business models are being built
using IT that could not have been imagined previously.
The technology industry cannot remain exclusive of just the IT/electronic
data processing/computer department. Firms in the industry and
business organizations now see the need to take a look and be apart of
the IT decisions that are taken and integration of IT with firm’s processes
and managing the trends of the IT industry.
Porter’ s five force model defines the framework that establish strategies
through its five forces that are integrated with the IT/technology industry.

threat to
new
entrants

Rivalry
Bargaining
among
power of
existing
suppliers
Porter's five competitiors

force model

Bargaining threat of
power of subsititute
buyers products
Threat to new entrants:
In the technology industry the threat to new entrants is quite low. One of
the main reasons is that the discounts that come in have a specific ticket
size requirement. And not every business will be able to handle a project
of that magnitude. Furthermore, about 4-5 players have developed the
ability to cope with multi-million dollar transactions. Although there is a
startup culture, these businesses operate in a very specific industry.
These firms operate in fields such as Fintech, AgriTech, and Deep Neural
Networks. As a result, the huge firms have built a barrier to entry, making
it difficult for any new startup to enter and take on the project.

Bargaining power of customer:

In the technology industry the bargaining power of the customer is high,
which is basically because of the Indian IT services companies have the
ability to handle the of that nature as well as size. In spite the number of
such companies being, the customers have a sizable option from as every
company comes forward with something unique. Also, the firms are
mostly dependent on the same geography, which also increases customer
power.

Bargaining power of suppliers:

The bargaining power of suppliers in the industry less as many of the
businesses come from the same geography. the firms are firms are
usually the price taker rather than the price maker.
Yet whether the bargaining power of suppliers is quite low or high is still
debatable. For example, taking the example of software vendors who
provide firms licensed software in bulk to the Indian IT services and firms
in the industry but yet that are in the position to demand for a high price
for what they provide where as at the same time there are hardware
manufacturers who cannot really be in a position to demand for price
because of the small size orders that they receive for the hardware
components. Taking consideration with such situations the bargaining
power of suppliers is still at a point a debatable topic.
Rivalry among existing competitors:
The industry rivalry in the technology sector is high and is the driving
force in the industry. As said earlier, there are just few significant IT firms
with strong competition between them in terms of who would be
catching the deal, the market share that is gained and the bottom line
that is demonstrated. In some ways, the strong industry competitiveness
has aided the growth of the Indian IT services by creating the path for
innovation and by allowing each firm to come up with a creative solution.

Threat of substitutes:
Seeing the current situation where the economies of the world are
slowing down. The Indian technology industry has a high threat of
substitute products. the foreign companies are giving the projects to the
Indian IT sector, can do a backward integration can pretty much set up
their own IT solution company. For example, companies like infosys,
Accenture etc. These firms used to be largely consulting firms, but now
they are known for their IT solutions. Both have off-shore centers to serve
the rest of the world.

The above graph shows the significant growth of the IT sector in the
market domestic being constant yet there is a substantial increase in
export of the sector.
In 2020, the IT industry will contribute for 8% of India's GDP. The Indian IT
industry is predicted to grow by 1.9 percent in FY21, reaching US$ 150
billion in exports. The IT industry will employ 138,000 new people in
2020.