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IT & ITeS

November 2010

IT & ITeS

November 2010

Contents
 Advantage India

 Market overview
 Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations
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ADVANTAGE INDIA IT & ITeS November 2010

Advantage India

It is forecasted that India BPO exports segment would employ 768,000 knowledge professionals in 2009–2010 and added 30,000 jobs alone in 2009–2010. Indian knowledge services export revenue grew at a CAGR of 19.4 per cent between 2006–07 and 2009– 2010 to US$1 billion. Growing BPO/KPO industry

Cost advantage

The cost of an engineer in India is around 20 to 40 per cent of the cost in the EU. General, administrative and selling costs in India amount to around 80 per cent of the costs in the EU. India’s average offshore billing rates, at US$ 20 to US$ 35 per hour, are around 50 to 70 per cent lower than those in the EU.

Quality/ maturity of processes

Advantage India

Ease of scalability
• •

More than 85 global SEICMM level 5 firms have a presence in India. India has the largest number of quality certifications among in the world.

An enabling business policy and regulatory environment

In 2009–2010, 0.37 million technology graduates and postgraduates (in fields such as Computer Science, Electronics and Telecom) qualified in India. More than 50,000 MBAs graduate every year. It is estimated that India’s IT industry has added 90,000 employees in 2009–2010.

• The sector was deregulated in the 1990s to allow private-sector participation. • 100 per cent FDI is allowed through the automatic route.
Sources: Department of Information Technology 2008–09 annual report; ―The IT-BPO Sector in India - Strategic Review 2010,‖ Executive Summary, NASSCOM website, www.nasscom.org, 19 November 2010; Ernst & Young research.

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IT & ITeS

November 2010

Contents
 Advantage India

 Market overview
 Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations
4

Of this.2 per cent in 1997–98 to 6.7 per cent. www.Strategic Review 2010.‖ Executive Summary. 5 August 2010. NASSCOM website. 5 . The software and service sector posted revenues (excluding hardware) of US$ 63. The contribution of the IT industry to India’s GDP has grown from 1.1 per cent in 2009–2010. business process outsourcing (BPO) accounted for 23 per cent and engineering services/product development accounted for the remaining 20 per cent.MARKET OVERVIEW IT & ITeS November 2010 Market overview … (1/2) • Total revenues in India’s IT industry touched US$ 73.org.7 billion in 2009– 2010. growing at 3.1 billion in 2009–2010 compared with US$ 70.5 billion in 2008–09.nasscom. IT revenue in 2009–2010 (US$ billion) 60 50 50 40 30 20 23 • • 10 0 Exports Domestic Source: ―The IT-BPO Sector in India . IT services accounted for 57 per cent.

000 new jobs in the 2009–2010.2 million indirect jobs. The industry added 90.nasscom.Strategic Review 2010. taking the total number of employees to 2. 5 August 2010. It also generated around 8. Revenue segmentation in 2009–2010 IT Services 13% • ITeS-BPO 17% 50% Software products and engineering services 20% Hardware Sources: ―The IT-BPO Sector in India .MARKET OVERVIEW IT & ITeS November 2010 Market overview … (2/2) • The country’s IT/ITeS exports have grown at a compound annual growth rate (CAGR) of 23. 6 .org. Department of Information Technology 2009–2010 annual report.‖ Executive Summary.1 per cent between 2005–06 and 2009–2010.3 million. www. NASSCOM website.

6 13.5 1.4 22. and support and training.8 10.1 1.1 IT services exports by service line (per cent) Application development IS outsourcing 1. In 2008–09.3 14 Project oriented Outsoursing Support and Training 14.2 15.8 8. The IT services segment comprises of project oriented.9 6.8 per cent to reach US$ 27.8 Application management 10.MARKET OVERVIEW IT & ITeS November 2010 IT services segment IT services exports (US$ billion) 30 25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10E 17.9 Network consulting and integration IT education and training Hardware deplot and support Others • The Indian IT services exports is estimated to grow by 5.9 37.0 5.3 billion in 2009– 10E.4 25.8 2 27. the project oriented segment comprised 51% of the exports followed by outsourcing (41%) and support and training (8%).10.2 2.2 11. and application management are estimated to account for more than 65 per cent of the IT services exports.3 2.2 1. infrastructure (IS) outsourcing. Source: NASSCOM Strategic Review 2010 – The IT–BPO sector in India • • 7 .4 Software testing Software deploy and support SI IT consulting 11. outsourcing. Application development.8 3.7 6 9.

9 per cent.9 1.MARKET OVERVIEW IT & ITeS November 2010 ITeS segment … (1/2) • India’s ITeS exports have grown to US$ 12.3 Source: Department of Information Technology 2009–2010 annual report.7 12. ITeS is the fastest-growing segment across the IT services and software segments and accounts for 20 per cent of the country’s IT industry (including hardware).93 11.6 6.9 2.4 • 1.5 0.3 8.4 billion in 2009–2010 from US$ 11. 8 .1 4. a growth of more than 5.4 10. US$ billion ITeS sector revenues 14 12 10 8 6 4 2 0 2004–05 2005–06 2006–07 2007–08 2008–09 2009–2010 Domestic market Exports 0.6 1.7 billion in 2008–09.

The sector’s scope of services has expanded in the last three to four years to include increasingly complex processes involving rule-based decisionmaking and research services. 2009 (per cent) 6 16 2 Customer management Finance and accounting 52 Human resource administration Training • 23 Procurement Sources: The IT-BPO Sector in India .MARKET OVERVIEW IT & ITeS November 2010 ITeS segment … (2/2) • The industry has graduated to providing a high proportion of voice-based services as well as a range of back-office processing services.Strategic Review 2010 9 . Global BPO revenues by segments.

8 3.0 2.0 US$ bn • Desktop PC sales (including notebooks) increased to 3. 2008–09 2007–08 2006–07 2005–06 2004–05 • CAGR 10.0 Source: Department of Information Technology 2009–2010 annual report.MARKET OVERVIEW IT & ITeS November 2010 Computer hardware … (1/2) • Computer-hardware production grew at 7 per cent in 2009–2010. Sales of notebooks and netbooks grew by 43 per cent y-o-y to 1.7 2. 2009–2010E Indian computer production 3.0 2.0 1.3 2.3 1.8 0.0 4.71 million units in the first half of 2009–2010.1 million between April and September 2010 while the sale of desktops have declined by 11% over the same period of last year. 10 .4 per cent 3.

11 .21 0.3 per cent 0.21 0. 2008–09 2007–08 2006–07 2005–06 2004–05 0. Exports registered a CAGR of 8.34 0.MARKET OVERVIEW IT & ITeS November 2010 Computer hardware … (2/2) • • PC sales crossed 7.3 million units in 2009–2010.25 0.10 0.30 CAGR 8.31 0.40 Source: Department of Information Technology 2009–2010 annual report.20 US$ bn 0.00 Indian computer exports 0.3 per cent between 2004–05 and 2008–09.

Strategic Review 2010: Executive summary. Worldwide BPO spending grew by 2 per cent in 2009. www.Strategic Review 2009: Executive summary. NASSCOM website.MARKET OVERVIEW IT & ITeS November 2010 Growth drivers … (1/4) Increased global technology-related expenditure • Global technology expenditure 2 1.5 Worldwide technology products and related services declined at 2.org. 12 . • 1 • 0 2008 2009 • • Sources: The IT-BPO Sector in India . The IT-BPO Sector in India .nasscom.5 trillion in 2009. Global expenditure on software products grew by 1 per cent and reached US$ 307 billion in 2009. www.54 US$ trillion 1. IT services constitute the largest segment of India’s worldwide spend on technology products and related services. NASSCOM website.nasscom.9 per cent to around US$ 1. accessed 19 November 2010. The global IT sourcing market has grown threefold between 2004 and 2008.org. accessed 20 September 2009.

Global spending on IT services.8 EMEA APAC Sources: The IT-BPO Sector in India .1 North America 18 North America 19. 2009 (per cent) 16 42. Large-scale recruitment and variable pricing in service sector businesses.Strategic Review 2010 EMEA – Europe Middle East and Africa APAC – Asia Pacific 13 .MARKET OVERVIEW IT & ITeS November 2010 Growth drivers … (2/4) Global technology-related spending • • Government and healthcare verticals witnessed growth in technology spending.5 EMEA APAC 41. 2009 (per cent) Global spending on the BPO sector.4 62.

8 1.Strategic Review 2010 14 .0 -8.3 1.MARKET OVERVIEW IT & ITeS November 2010 Growth drivers … (3/4) Global spending on IT/ITeS in 2009 Segment IT services BPO Package software Hardware Growth y-o-y (per cent) -0.3 Aggregate (US$ billion) 589 112 307 550 Sources: The IT-BPO Sector in India .

Increased M&A activity needs to be driven by the requirement for global service delivery capabilities. IBM (1.30. HP Enterprise Services (15. IBM and Cap Gemini are eyeing India to expand their offshore delivery capability either organically or inorganically.000+). Wipro and Infosys expanding their overseas presence. while mitigating the risks and timeline issues involved in expanding to new geographies. HP Enterprise Services. HP.000+) and Cap Gemini (26. Source: News publications • 15 . particularly in Asia and Europe. • Indian IT companies seek to expand their global footprint through the Global Delivery Model (GDM) to seamlessly service their clients’ needs worldwide. with giants such as TCS. They aim to grow onshore service providers who can deliver seamless hybrid onshore-offshore services at low costs.000+). • • • These vendors have a large number of India-based employees — Accenture (40.000+). Indian firms are gradually gaining a global foothold.MARKET OVERVIEW IT & ITeS November 2010 Growth drivers … (4/4) Global IT vendors increasing their India presence • Emergence of Indian IT multinationals Global vendors such as Accenture.

MARKET OVERVIEW IT & ITeS November 2010 Industry structure … (1/2) Leading Indian IT/ITeS firms by revenue (2009–2010) TCS Tech Mahindra Limited Infosys Technologies Limited Wipro Technologies Limited Mahindra Satyam Computer Services Limited HCL Technologies Limited Patni Computer Systems Limited Oracle Financial (I-Flex Solutions Ltd) Mphasis Larsen & Toubro Infotech Limited 16 .

High client concentration characterises such companies. IBM. HP Enterprise Services and Cap Gemini. Mid-cap companies are mainly concentrated on specific domain capabilities. They are facing increasing competition from large-cap/middle-cap players entering niche areas. They have strong delivery capabilities across multiple verticals. package implementation.and large-cap players Such companies are focused on developing capabilities around a specific domain and aspiring to be leaders in the domain Scale and growth pressures as well as limited growth in niche areas are typical of such companies. Such companies are well-positioned to bag large IT contracts with scalable capabilities. Low client concentration characterises such companies. They are facing increasing competition from small.MARKET OVERVIEW IT & ITeS November 2010 Industry structure … (2/2) Revenue • • • • • • • • • Key characteristics — business model Large-cap companies are mainly concentrated on application development and maintenance. Such companies compete with global IT vendors such as Accenture. BPO and consulting. Large cap Revenue > US$ 250 million Mid cap US$ 50–250 million Small cap Focused on key niche areas of operations • • • Source: News publications 17 . Scale and margin pressures characterise such companies.

1 million in 2009–2010 registering a decline of 13% y-o-y.02 billion in 2008–09.MARKET OVERVIEW IT & ITeS November 2010 Key players — Indian TCS • Wipro Technologies Ltd • Infosys Technologies Ltd • Aditya Birla Minacs • The company recorded revenues of US$ 6. its global presence can be primarily attributed to acquisitions and the expansion of business verticals. employee base of 97. compared with US$ 6. Aditya Birla Minacs 2009–10 annual report 18 . Wipro Technologies 2009–10 annual report. Profitability (operating margin) for 2009–2010 — 30 per cent of revenues.900.80 billion in 2009–2010. the company has an employee base of 126. Acquired six companies and formed joint ventures (JVs) with two.796 professionals registering growth of more than 8 per cent in 2008–09. The company recorded revenues of US$ 306.150.071 professionals in 2009–2010. with 12 per cent growth in 2008–09. with more than 10 per cent growth in 2008–09.4 billion in 2008– 09. Profitability (operating margin) for 2009–2010 amounted to 26 per cent.810. the company has an employee base of 1. a 6 per cent growth over revenues in 2008– 09. recording 9 per cent growth over revenues of US$ 4.13. The company’s workforce exceeded 108. TCS has a strong foothold in the Indian market. increasing its offshore delivery centres and expanding its service offerings. TCS has a workforce of more than 140.34 billion in 2009–2010. The company had a workforce of more than 14. • Sources: TCS 2009–10 annual report.724 employees in 2009–2010. Management selected the organic route to develop the company’s overseas operations. • Revenues of US$ 4. The company is spread across 27 global delivery centres.619 professionals in 2009–2010. Infosys 2009–10 annual report. • • • • • • • • Workforce of more than 1.03 billion in 2009–2010. • Wipro Technologies recorded revenues worth US$ 6. Profitability (operating margins) for 2009–2010 amounted to 19 per cent of the company’s revenues.04.

Online Services Division. The company operates in five business segments — clients (Windows & Windows Live). Microsoft recorded revenues of more than US$ 62 billion in 2009– 2010. The company’s revenues amounted to US$ 126 billion in 2009. Microsoft Business Division. especially health care. Oracle 2009 annual report and website. Cognizant 2009 annual report and website. The company was founded in 1994 as a captive arm of Dun & Bradstreet. Cognizant adopts a client-centric market approach. with more than US$ 3. Cognizant is a leading provider of IT. Server and Tools. with major service offerings for various sectors.000 employees. The company recorded revenues of US$ 26. It has a workforce of more than 95.MARKET OVERVIEW IT & ITeS November 2010 Key players — international … (1/3) HP • Oracle • Cognizant • Microsoft • HP is one of the largest IT firms in the world. consulting and IT infrastructure management. The company ranked seventh on Forbes list of the 25 fastestgrowing technology companies worldwide.27 billion. its revenues for 2009 were estimated at more US$ 3.8 billion in 2009. With a workforce of more than 304. • • • • • • • • • • Sources: HP 2009 annual report and website. The company has more than 89.000 employees worldwide.5 billion dedicated to developing new technology. • Microsoft is the world’s leading developer of software products and services. and the Entertainment And Devices Division. it has been operating for more than 30 years in 145 countries worldwide. • Oracle is one of the largest software business companies in the world.600 employees in more than 50 delivery centres. HP operates from more than 170 countries. Microsoft 2009 annual report and website 19 . it was founded in 1939 and ranked ninth in the 2009 Fortune 500 ratings. The company focuses on establishing presence in class-C and class-D cities by launching mobile vans and linking them with channel networks. HP’s strong focus area is R&D.

ranging from multinational banks and consumer electronics firms to oil and gas companies. Accenture is a leading global management consulting. • The company generated net revenues of US$ 21. • • • • • The company recorded more than US$ 582 million in revenues in 2009–2010. Cisco’s workforce amounts to more than 70.MARKET OVERVIEW IT & ITeS November 2010 Key players — international … (2/3) WNS • Accenture • Cisco • Flextronics • A leading global BPO company. which has accounted13. technology services and outsourcing company with extensive industry knowledge. Known for its rich R&D. Cisco is one of the largest chipmaking companies in the world.000 professionals serving clients in more than 120 countries. The company operates from 30 countries. The company has a workforce of approximately 204. although it is primarily present in the AsiaPacific region. Cisco has invested more than US$ 5. Flextronics 2009 annual report and website 20 . Cisco 2009 annual report and website.2 billion in internal innovation.000 employees worldwide.000 people worldwide.55 billion in 2009–2010. Accenture 2009 annual report and website. The company recorded revenues worth US$ 24 million in 2009–2010. • Flextronics is a leading provider of electronics manufacturing services (EMS) with strong focus on delivering complete design. Founded in 1968.2 per cent of net sales in 2009–2010. Flextronics employs more than 165. engineering and manufacturing services. The company recorded revenues of more than US$ 40 billion worldwide in 2008–09. WNS has more than 215 global clients. NASSCOM has ranked WNS as the secondlargest BPO company in India. • • Sources: WNS 2009 annual report and website.

000 people worldwide and has the world’s third-largest market share in the personal computers segment.MARKET OVERVIEW IT & ITeS November 2010 Key players — international … (3/3) Dell • Lenovo • Dell is a US-based IT multinational that develops. Lenovo develops and manufactures computers. laptops and other IT management software. Lenovo 2009 annual report and website 21 .200 employees worldwide.9 billion in 2009–2010 worldwide. Dell employs approximately 96. A China-based technology firm. • • • • Sources: Dell 2009 annual report and website.6 billion in 2009–2010. The company registered revenues of US$ 52. sells and supports computers and related products and services. The company has more than 22. The company has global revenues of US$ 16.

IT & ITeS November 2010 Contents  Advantage India  Market overview  Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 22 .

www. India’s young demographic profile and academic infrastructure are strengthening the country’s potential to cater to the growing demand for IT/ITeS. with the Government of India (GoI) working towards capacity building. • Source: "IT industry may create 40k jobs this fiscal: Nasscom.com. including individual firms and associations. Some such initiatives include: • • • • • • • • • The national rollout of skill certification through NASSCOM Assessment of Competence (NAC). 23 . The availability of STPI infrastructure across the country is reflective of government support to the sector. India has an abundant talent pool suited to this industry. accessed 20 September 2009. quality real estate in the form of Software Technology Parks of India (STPIs) and special economic zones (SEZs). cost-effective. with the cost of connectivity reducing rapidly and service levels improving significantly. Real estate.4 million ITeS professionals in 2009–2010.4 million IT and 1. The establishment of finishing schools in association with the Ministry of HRD to supplement graduate education.indiatimes.37 million technology graduates and post-graduates (in fields such as Computer Science.‖ The Economic Times website.economictimes. It is estimated that the country will witness additional demand for 0. air and road connectivity. Electronics and Telecom) in 2009–2010. Infrastructure availability is set to complement industry growth.INDUSTRY INFRASTRUCTURE IT & ITeS November 2010 Industry infrastructure Infrastructure • Scalability • The industry has infrastructure support in the form of dedicated. Industry stakeholders. are undertaking initiatives to address issues relating to talent enhancement. producing In 0. as well as hospitality are registering impressive growth and providing a supportive business environment to the IT sector. High-quality telecom infrastructure is available.

Cognizant Infosys. Genpact. KPIT. EXL. TCS. Convergys. TCS. Convergys. Amazon. Accenture Infosys. Infosys.INDUSTRY INFRASTRUCTURE IT & ITeS November 2010 Industry infrastructure — SEZs Location Andhra Pradesh (Hyderabad) Delhi-NCR West Bengal No of SEZs 59 Major players HP. Pune) Tamil Nadu (Chennai) 51 38 37 28 19 15 Ahmedabad Pune. Wipro. Siemens.WIPRO Cognizant. Convergys HP IBM. Cognizant. Wipro TCS. HP. Siemens. Mumbai Hyderabad Bengaluru. Mysore Karnataka (Bengaluru. Verizon. Mysore) Delhi and NCR (Gurgaon. Msource. Infosys. Accenture. Compaq Maharashtra (Mumbai. Infosys. Am Ex. Wipro. TCS. Noida) West Bengal (Kolkata) Gujarat (Ahmedabad) IBM. Oracle. EXL. Wipro Chennai Source: Ernst & Young analysis 24 .

The emergence of tier-III cities such as Chandigarh and Mysore has played a key role in the expansion of the ITeS-BPO segment. Chandigarh • Jaipur Ahmedabad Vadodara Surat Nagpur Bhubaneshwar • Visakhapatnam Mangalore Mysore Coimbatore KOCHI Madurai Thiruvananthapuram • 25 . Tier-II and tier-III cities are gaining in importance in the IT/ITeS industry. Most IT companies initiated their operations in India in tier-I cities and have subsequently expanded their operations to tier-II cities. maintenance.INDUSTRY INFRASTRUCTURE IT & ITeS November 2010 Industry infrastructure — emerging IT/ITeS destinations Expanding to tier-II and tier-III cities • The Indian IT/ITeS industry is primarily concentrated in seven clusters — Bengaluru. Pune. Mumbai and Kolkata. Hyderabad. Chennai. since they offer substantial savings in administration. Delhi-NCR. real estate and infrastructure costs and human resource availability.

IT & ITeS November 2010 Contents  Advantage India  Market overview  Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 26 .

406 million between April 2000 and September 2010. Cumulative FDI inflow into the computer software and hardware sector have been estimated at US$ 10.dipp.in. Sources: Private Equity Deals 2008-2009. US$ 1.INVESTMENTS IT & ITeS November 2010 Investments … (1/3) • India’s technology sector witnessed M&A deals worth US$ 1. Mergers and Acquisitions 2009–2010. accessed 19 November 2010 27 . ―Fact Sheet On Foreign Direct Investment (FDI)‖. The technology sector saw FDI inflow of US$ 1. www. Thomson One Banker.410 million in 2007–08.7 billion* in 2009–2010. • • * Complete data for all deal values is not available.‖ Bloomberg. Asian Venture Capital Journal. Department of Industrial Policy and Promotion website. “Transactions.677 million in 2008–09 and US$ 919 million in 2009–2010. accessed 4 December 2009.nic. • The country’s IT-BPO sector has consistently attracted the highest share of private equity (PE) and venture capital (VC) investments in the country.

accessed 4 December 2009. Department of Industrial Policy and Promotion website.903 159 2. Mergers and Acquisitions 2009–2010.609 1500 1000 500 0 2006–07 2007–08 PE deal value 2008–09 PE deal count Value (US$ million) 4000 3000 2000 1000 0 2006–07 Value (US$ million) 2. “Transactions. Asian Venture Capital Journal.in. ―Fact Sheet On Foreign Direct Investment (FDI)‖.‖ Bloomberg.INVESTMENTS IT & ITeS November 2010 Investments … (2/3) Technology sector M&A deal volume and value 5000 200 2000 80 Technology sector PE deal volume and value 1.dipp.886 3. accessed 19 November 2010 28 .393 150 100 57 55 55 744 488 Count (No) 60 40 20 0 Count (No) 97 102 50 0 2007–08 2008–09 M&A deal value M&A deal count Sources: Private Equity Deals 2008-2009. www. Thomson One Banker.nic.

00 125.87 36.33 - Source: Mergers and Acquisitions 2009–2010.INVESTMENTS IT & ITeS November 2010 Investments … (3/3) Target SKR BPO Services Pvt Ltd Jubilant Software Service Pvt Ltd Quick Heal Technologies Pvt Ltd Lycos Inc Tech Mahindra Ltd DecisionOne Inc Fortify Infrastructure Services Inc IndigoTX Software Pvt Ltd Tech Mahindra Ltd Spheris India Pvt Ltd OLR Barclays PLC Anant Raj Industries Ltd Sequoia Capital India Advisors Pvt Ltd Ybrant Digital Ltd Life Insurance Corp of India (LIC) Glodyne Technoserve Ltd MphasiS Ltd Polaris Software Lab Ltd AT&T Inc CBaySystems Holdings Ltd HCL Technologies Ltd Acquirer Value in US$ million 17.34 12.57 116. Thomson One Banker 29 .78 104.00 34.

IT & ITeS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 30 .

etc. overseas investment.POLICY AND REGULATORY FRAMEWORK IT & ITeS November 2010 Policy and regulatory framework … (1/3) Establishment of a nodal agency — STPI • The GoI established STPI in 1991 to provide: • Fiscal benefits such as tax holidays to attract investment into the industry • • • Basic infrastructure Single-window clearance for setting up export-oriented units (EOUs) Virtual model allowing firms to avail of benefits without restrictions on locations Progressive policy reform (fiscal/trade/other) • • No FDI restrictions The introduction of fiscal reforms (international taxation.) to facilitate ease of international transactions 31 .

adjudicating officers and a cyber appellate tribunal. The Information Technology (Amendment) Act. improved service quality and declining tariffs. 2000 to deal with new forms of cyber crime. Regulatory reforms were introduced to allow the adoption of new technologies. 2008 upgraded the existing legal framework to instill confidence in users and investors in the area of IT and added provisions to the existing Information Technology Act. Information Technology Act. 2000 • The act granted hierarchy of infrastructure that comprised a controller for certifying authorities. • 32 .POLICY AND REGULATORY FRAMEWORK IT & ITeS November 2010 Policy and regulatory framework … (2/3) Telecom sector deregulation • • • The sector was deregulated in the 1990s to allow private-sector participation. Deregulation enabled the benefits of free market competition.

with exemption from countervailing duty (CVD) of 16 per cent on capital goods.POLICY AND REGULATORY FRAMEWORK IT & ITeS November 2010 Policy and regulatory framework … (3/3) Special incentive package to set up semiconductor fabrication unit in 2007 • The scheme encourages FDI investment in the hardware production segment and provides coherent policy structure to attract capital through focus policies. The package proposes a minimum investment of US$ 200 million for semiconductor manufacturing (wafer fabs) plants and US$ 100 million for ancillary plants. The scheme provides a capital subsidy of 25 per cent for 10 years to set up fabrication facilities and other high-end manufacturing units outside SEZs. • • • 33 . The scheme emphasises on wafer fabrication and ancillary manufacturing plants. and 20 per cent in SEZs.

IT & ITeS November 2010 Contents  Advantage India  Market overview  Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 34 .

Caterpillar. construction. EY-IACC. automotive. utilities and industrial design. The labour cost arbitrage in this sector is around 60 per cent of that in the US. General Motors. The country’s range of services includes engineering and designing solutions across diverse industry verticals such as telecommunications. aerospace. with its market size estimated to touch US$ 30 billion annually by 2015. 2006 35 . John Deere. Knowledge process outsourcing (KPO) • Legal process outsourcing (LPO) Engineering services outsourcing • ITeS • Engineering services outsourcing Source: Global Offshore Outsourcing Summit.OPPORTUNITIES IT & ITeS November 2010 Opportunities … (1/4) • India is poised to become the hub for engineering process outsourcing (EPO). Ford. Silicon Automation Systems and John Brown Engineering are among the global leaders that have established their engineering services divisions in India. Bechtel. attracting 25 per cent of the US$ 70billion global EPO industry.

India’s KPO export market constitutes around 8 per cent of the country’s ITeS revenues and employs nearly 3 per cent of its workforce. Outsourcing of legal and intellectual property research is presently at an early stage of development in the country. this space holds tremendous growth potential. India offers impressive opportunities to scale up. with increasing VC investment to tap into its market potential. However. 36 . In addition. KPO — a growth driver for the ITeS sector • • • • LPO • • Firms such as SDD Global Solutions. compared with US$ 350 per hour in the US). JuriMatrix. Integreon. Pangea3 and RR Donnelly are establishing operations in the country. The country is set to achieve significant growth with a rise from its current share of 3 to 4 per cent to 6–7 per cent in the global LPO market by 2010. Indian lawyers bill at one-tenth of their counterparts in the US (US$ 40 to US$ 60 per hour in India.OPPORTUNITIES IT & ITeS November 2010 Opportunities … (2/4) • The KPO industry is now growing rapidly. with several companies establishing third-party operations for functions such as data analytics and data modelling.000 law graduates qualifying every year) and significant cost arbitrage. Growth drivers include the high productivity of India’s human resources and outsourcing of knowledge processes by SMEs. with a large pool of legal professionals (with more than 1million lawyers and 70. According to CRISIL.

nasscom. The demand for domestic BPO services is increasing rapidly.3 billion by 2010.org. www. virtualisation and enterprise managed services are other fields of IT witnessing expenditure. Governments across the world are increasing their IT spending on infrastructure and security.OPPORTUNITIES IT & ITeS November 2010 Opportunities … (3/4) Increased government spending across the globe • The GoI is implementing e-governance initiatives and increasing its IT spend/outlay with an allocation of more than US$ 400 million for the Unique Identification Authority of India (UIDAI) in 2010–11. 37 . on-demand ERP. Business process management (BPM).Strategic Review 2009: Executive summary. www. NASSCOM website. NASSCOM website.org. accessed 20 September 2009. Growth in domestic market • • Sources: The IT-BPO Sector in India . • • It has been estimated that the overall size of the domestic market grew has grown by 20 per cent in 2008–09 to reach US$ 24. apart from the traditional verticals of banking. financial services and manufacturing. data management. The IT-BPO Sector in India . accessed 19 November 2010.nasscom.Strategic Review 2010: Executive summary. with niche verticals such as healthcare and retail fast gaining traction. Domestic IT BPO spending grew by 40 per cent in 2008–09.

retail.nasscom. • Sources: The IT-BPO Sector in India . 38 .Strategic Review 2010: Executive summary. NASSCOM website.1 billion in 2009–2010.nasscom.OPPORTUNITIES IT & ITeS November 2010 Opportunities … (4/4) • The off-shoring market constitutes a small part of outsourcing market. Growth opportunities reside in the US and emerging economies such as the Asia-Pacific region. www. Indian IT-BPO revenues may rise to US$ 225 billion by 2020 from US$ 73. www. financial services and insurance. NASSCOM website.org. accessed 19 November 2010.org. accessed 20 September 2009. The IT-BPO Sector in India . Potential for increase in offshoring • • Banking. and government offer significant opportunities.Strategic Review 2009: Executive summary. healthcare.

IT & ITeS November 2010 Contents  Advantage India  Market overview  Industry infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 39 .

Chanakyapuri.in 40 . New Delhi – 110 021 Phone: 91 11 2301 0199 Fax: 91 11 2301 5452 E-mail: info@nasscom.INDUSTRY ASSOCIATIONS IT & ITeS November 2010 Industry associations National Association of Software and Services Companies (NASSCOM) Address: International Youth Centre Teen Murti Marg.

numbers in the report have been rounded off to the nearest whole number.NOTE IT & ITeS November 2010 Note Wherever applicable. Conversion rate used: US$ 1= INR 48 41 .

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