TMR LIVE PROJECT

Indian IT-BPM sector Analysis

MRIDUL
CHAKRABORTY
NMIMS MUMBAI
 TABLE OF CONTENTS

Sr No Topic Page No
1 IT and BPM industry overview 3
2 Evolution of Indian IT sector 4
3 IT and BPM exports 6
4 Country wise export contribution 6
5 IT-BPM Industry- Major force behind 7
India Growth Story
6 Indian IT Service Industry 7
7 Indian eCommerce 8
8 Growth Opportunities for IT sector 9
9 Future Trends 10
10 References 10

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IT and BPM Industry overview
The Indian IT-BPM industry is a massive USD 150 billion dollar industry which has expanded at a
steady CAGR of 15% over 2010-2015. This rate is approximately 3-4 times higher than the global
IT-BPM growth rate. It is estimated that it will expand at a CAGR of 9.5% to USD 300 billion
dollars by 2020.

The IT-BPM sector has grown by 13% for the year 2015 over 2014. An approximately USD 17
billion dollar revenue has been added over the last year. The majority of the share of revenue
comes from the exports which has risen from 88 Billion to 98 Billion dollars where as the
domestic component has risen from 42 Billion to 48 Billion Dollars.

160

140

120 48
42
100

80 Domestic

60 Exports
98
40 88

20

0
FY 2014 FY 2015

Fig 1: Revenue generation by the IT-BPM sector for 2014 and 2015

The breakup of the USD 150 Billion Dollar can be given as-

IT Services-Greater than USD 68 Billion

BPM- Greater than USD 26 Billion

ER&D, product Development- Greater than USD 18 Billion

eCommerce- Greater than USD 14 Billion

Hardware- Greater than USD 14 Billion

Software Products- Greater than USD 6 Billion

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 Revenue Distribution
IT Services BPM
ER&D and product development eCommerce
Hardware Software Products

4%
10%

10%
46%

12%

18%

Fig 2: Revenue Distribution under IT-BPM sector

Some of the key trends that the IT-BPM industry is seeing currently

1) The industry added approximately USD 29 Billion since FY 2013

2) The exports currently account for 67% share in revenues which shows the huge
international dependence of this industry
3) The eCommerce sector is currently driving the growth of the domestic markets and it is
attracting considerable interest among global investors
4) The domestic sector is further expected to see a boost due to the current Government’s
“Digital India” initiative

Evolution of the Indian IT sector

The Indian IT sector’s evolution can be seen as 4 stage journey right from Pre- 1995 to the
current 2005-2015

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 • This is the era of early 1990s when the US and other global
countries began to see India as a new destination for
outsourcing, predominantly because of low cost and skilled
Pre-1995 labour pool

• This is the period when the IT industry slowly began to

develop and mature
• Investments started pouring in R&D and slowly the IT
infrastructure started to build
1995-2000 • India incresingly seen as a product development destination

• The firms started to increase in size and numbers

• The firms started providing multiple complex solutions like
product management
2000-2005

•Firms in India became multinational with delivery centres across the

globe
•The Indian firms started making global acquisitions
•The IT sector is considered to be employing 3.5million people
•Shift from enterprise services to enterprice solutions
2005-2015 •Major focus on startups
•Digital India Initiative

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IT-BPM Exports
Out of the total export USD 98 Billion dollars, the majority of the share has been from the IT
services sector which comes at around USD 55 Billion Dollars. The BPM, ER&D and hardware
contributes USD 23, 20 and 0.4 respectively.

0.4

20

IT Services
BPM
ER&D
55
Hardware
23

Fig 3: Export distribution across IT-BPM sector

Country wise Export Contribution-

It can be clearly seen from the below mentioned graph that the majority chunk of the export
demand comes from the United States of America. The figure stands at a massive 62%.

8% 2% USA
11% UK

Continental Europe

17% 62% APAC

Rest of the World

Fig 4: Export demand across different countries

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IT-BPM Industry- Major force behind India Growth Story
The IT-BPM industry can very well be regarded as the major power engine behind the India
growth story. It has contributed tremendously to the economy over the last two decades. Some
of the key pointers that validates the above statement are-

1) The IT-BPM industry holds the highest relative share in the national GDP and it stands at
9.5%
2) The industry can be regarded as the largest private sector employer. It employs nearly
3.5 MN employees.
3) Not only it employs in huge numbers, it supports the diversity as well. The industry has
more than 1.2 MN women employees.
4) The industry is considered to be having the largest share in total services exports with a
share of 38%
5) India is known as the leading global sourcing destination with a market share of 55%
6) It is the 4th largest startup hub in the world

Indian IT Service Industry

70
13
60 12

50
Domestic
40
Export
30 55
49

20

10

0
FY 2014 FY 2015E

Fig 5: Revenue generation by Indian IT service Industry

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The Indian IT services industry has grown from USD 61 billion in 2014 to USD 69 billion dollars in
2015 due to the positive environment. Again in the IT services industry, the exports form a very
crucial part. The IT services exports has risen from USD 49 in 2014 to USD 55 in 2015 whereas
the domestic component has risen from USD 12 billion to USD 13 billion. An overall growth of
12% has occurred in the IT services industry.

Some key Trends in IT services industry-

 The IT services revenue growth is ~2X in last five years

 CADM: Approximately 48 per cent , largest share in IT services exports
 There are 250-300 number of IT services GICs in India
 IS outsourcing is approximately 20% share (2nd largest in total IT services exports)
 The software testing has seen more than 2X growth in last five years

Indian eCommerce

Key trends in the Indian eCommerce sector

 The Indian eCommerce sector is a USD 14 Billion industry which has been growing at
more than 25% CAGR from FY 2010
 Approximately USD 10 Billion has been added in the last 5 years

Revenue USD Billion

14
12
10
8 14
Revenue USD Billion
6 10.5
4
2
0
FY 2014 FY 2015 E

Fig 6: Revenue generation by Indian eCommerce Industry

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  The major factors for this tremendous growth could be attributed to better
infrastructure, logistics and internet devices
 Better mobile applications and payment mechanisms also adds to the growth
 The consumers from not only the metros but also from smaller towns are taking
more interest in online shopping
 The online travel forms the largest segment with 70% market share
 Etailing is the fastest growing segment with a CAGR of 55% in last five years

2%

5%
6%

17%
Online Travel
eTailing
Financial Services
70%
Classifieds
Others

Fig 7: eCommerce segment wise breakup

Growth Opportunities for IT sector

1. The latest cloud technologies and mobility are the way forward for the IT industry in the
traditional verticals like BFSI, Telecom, manufacturing and pharmaceuticals
2. The need of the hour is to focus on newer verticals like education, healthcare and retail

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 3. The government sectors have a huge potential for IT and IT enabled services. With the
new Government’s focus on improving governance through the digital way will help the
industry to grow positively
4. Niche technologies like telemedicine, health, remote monitoring solutions and clinical
information systems will continue to boost demand for IT services across globe
5. Emerging technologies like SMAC (Social, mobility, analytics and cloud) provides a
plethora of business opportunities for the IT companies.

Future Trends

1. In a recent move, the US has drastically increased the fees for the H1B and L-1 visas. It
will hit the profitability of the IT companies negatively.
2. India predominantly was considered as a cheap labor destination. But with the advent
of countries like Philippines in the IT sector, it is giving a stiff competition to Indian
counterparts.
3. The companies are no longer focusing on only IT services. This trend is expected to
continue and the focus will shift to providing end to end solutions right from developing
the IT strategy to implementation. Companies focusing on newer technologies like
SMAC (Social, Mobility, Analystics and Cloud) are expected to perform better relative to
companies focusing on traditional work.
4. With the new Government’s focus on the Digital India initiative. The homegrown IT
companies are expected to get benefitted the most. An improved IT infrastructure
across the country will in turn benefit this industry itself.

References

1) (n.d.). Retrieved January 08, 2016, from http://www.nasscom.in/

2) (n.d.). Retrieved January 08, 2016, from http:// www.ibef.org

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