Industry and Company

Analysis

IT and ITeS
Group 1

“Our industry does not respect tradition. It only respects

innovation. “
-Satya Nadella
Overview
1. Top 10 players in Indian IT market
2. Evolution of India’s IT sector
3. Notable trends in Indian IT
4. Porter’s Five Forces Analysis
5. Growth drivers
6. Opportunities in IT and ITeS
7. History of Dell
8. Recent developments: Mergers and Acquisitions
9. Locations and Facilities
10. SWOT Analysis
11. Global initiatives
12. The road ahead
 Top 10 players in the Indian IT Market

• Tata Consultancy Services

S. No. Company tops the list of Indian IT
1 Tata Consultancy Services (TCS) companies with a market
share of 24%
2 Infosys
3 Wipro • Infosys has consistently
4 HCL Technologies bagged the second spot with
a market share of 21.1%
5 Tech Mahindra
6 Mphasis • Wipro emerged as a
7 L&T Infotech promising entity with its
innovative technology and
8 Mindtree customer service; market
9 Oracle Financial Services Software share being 18.7%
10 Rolta
Source: NASSCOM, FY2016

Total revenue of Indian IT sector: Rs 8.4 lakh crore

 Executive Summary
Strong growth • CAGR of 13.7% over 2010–16
opportunities • CAGR of 9.1% by 2025

Leading sourcing • 56% market share in the global services sourcing business
destination • 38%in the overall BPM sourcing market

• One of the largest highly qualified talent pool of technical

Largest pool of ready- graduates
to-hire talent • 98 per cent of the colleges offering this stream

• Ranks 4th in India’s total FDI share

Most lucrative sector • 37 per cent of total Private Equity & Venture investments
for investments
in the country

• USD160 billion (FY15)

Cash Cow • Helped save USD200 billion for clients (in the last 5 years)
• 670 offshore development centers around 78 countries
 Evolution of India’s IT sector
2005-16
2000-05

1995-2000

• The number of firms in • Firms in India became

Pre-1995 India grew in size & multinational companies with
started offering complex delivery centres across the globe
services such as product (670 centres in >78 countries, as of
• IT industry started to 2015)
management & go-to
mature
market strategies
• Indian IT-BPM revenue is likely to
• Increased investment reach USD160 billion in FY16
• Western firms set up a
in R&D & infrastructure
number of captives in
• By early 90s, US started • Employment in IT sector is
India
based companies expected to increase & reach 3.7
began to outsource • India increasingly seen million people directly & over 10
work on low-cost & as a product million indirectly, as of FY16
skilled talent pool development
in India destination • The industry is 3rd largest start up
base, supporting over 4,200 new
start-ups
 Segments of India’s IT Sector
IT and ITeS Sector

Software
Business Process
products and
IT Services Management Hardware
engineering
(BPM)
services

• Market size: • Market size: • Market size: • Market size:

USD 75 USD 28 billion USD 27 billion USD 13.3
billion during during FY16E during FY16E billion during
FY16E FY16E
• 87% of • Over 83.9% of
• BFSI revenue comes revenue • Domestic
continues to from the comes from market is
be the major export market exports growing with
vertical of the penetration of
IT sector personal
computers
 Domestic Market size of IT industry in India
Export
(USD Billion)
108
98.5
86 The market size of IT industry in
69 76
59 India has been growing consistently
and both domestic and export
48 52
29 32 32 32 revenue have been in constant
proportion too.
FY11 FY12 FY13 FY14 FY15 FY16

Sector-wise breakup of export

revenue FY16 20.78%
IT Services
• IT Services constituted 56.59%
BPM
of total IT exports during FY16 Software
56.59%
22.63% services
• BMP accounted for 22.63% of
total IT exports during FY16

Source: NASSCOM, TechSci Research

 67 Geographic breakup of export
61
52
revenue (USD Billion) (March
42
2016)

• US is the largest importer of

12 15 17 18 12 Indian IT services
8 10 11 5 7 8
9
2 2 2 2
• Over 62 per cent of Indian IT-
US UK Europe APAC RoW BPM exports were absorbed by
(Excl. UK)
the US during FY16
2013 2014 2015 2016

Distribution of export revenue across

geographies (FY16)
8% 2%

• Europe is expected to emerge as a 11% US

potential market as higher inclination UK
towards offshoring firms would Cont. Europe
increase demand for IT services. 17% 62% APAC
RoW
• Being the low cost exporter of IT
services, India is going to attract more
Source: NASSCOM, TechSci Research
markets in other regions.
Notable Trends in India’s IT &
ITeS Sector
 Notable Trends in India’s IT & ITeS Sector

Changing business • About 5000 new technology start-ups are expected

dynamics • Alteration in delivery models (shift from opex to capex)

• From simple maintenance providers to full service players

Large players gaining • 80% revenue is contributed by 200 large & medium
advantage players

• Linear models (rising headcount to increase revenue) to

New technologies- non-linear ones
new jobs! • SMAC market is expected to grow to USD 225 billion by
2020

• Increased emphasis on beyond cost benefits

• Innovation-led growth to clients
Consumerization of IT
• From SLA satisfaction & RoI calculations
 Notable Trends (Contd.)

• Tier II & III cities are increasingly gaining traction

Emergence of Tier II • Reasons: Cheap labour, affordable real estate, favourable
cities government regulations and tax breaks

Boost the Make in • Phased Manufacturing Program, May 2017

India initiative

• India is the most preferred location for global R&D

Engineering
outsourcing
offshoring • 670 ODCs (Offshore Development Centers) across 78
countries

Most lucrative sector • Increasing FDI in Indian IT services

for investments
Porter’s
Five
Forces
Analysis
 Threat of New Entrants Substitute Product

• Easy entry as the capital Threat of New • Threat is medium as new

required is low Entrants centers, such as Philippines
(Medium) and China, are fast gaining
• Large players, however, toughen
prospects of small and medium ground among investors due
players to win large deals to their low cost advantages

Bargaining Competitive Substitute

Power of Rivalry Products
Customers (High) (Medium)
(High)

Bargaining Power of Customers Bargaining Power of supplier

• Bargaining power is high as Bargaining • Bargaining power of suppliers is

many IT firms fight for a similar Power of less as most of their businesses
project Supplier come from the same geographies
(Low) • Price taker rather than price
• Firms are mostly dependent on
same geography, which increases maker
customer power Competitive Rivalry
• Intense competitive rivalry exists
due to low switching costs
• Most of the bigger Indian firms
offer same services and there is little
product differentiation
Growth Drivers
 Talent Pool

• 6 million graduates are

estimated to have been added
to India’s talent pool in FY16,
wherein, ITBPM employees are
estimated to reach 3.7 million.

Global Demand Domestic Growth

• Global BPM spending • Computer penetration

estimated to rise & reach to expected to increase
USD233 billion by 2020 Growth
• Increasing adoption of
Drivers technology & telecom by
consumers

Policy Support Infrastructure

• Tax holidays for STPI and SEZs • Robust IT infrastructure across

• More liberal system for raising
capital, seed money & ease of
doing business.
various cities in India
• Technology mission for services in
villages & schools & E-Kranti for
government service delivery
 Reasons for growth of IT in India

• Introduction of large e-Governance projects

• Strong consumer demand for IT services & products:

-> Advent of smartphones, tablets & iPads

-> Stressing the need for promoting support start-ups

-> Rising computer literate population

-> Enhanced internet & mobile penetration

-> Growing disposable income

-> Emerging verticals are driving growth above 14 per cent

Opportunities in IT and ITeS Sector
 • BRIC nations, Europe, Canada & Japan have IT spending of
approximately USD380–420 billion
New
Geographies • Adoption of technology & outsourcing is expected to make Asia
the 2nd largest IT market

• SMBs have IT spend of approximately USD230–250 billion, but

New contribute just 25 per cent to India’s IT revenue
Customer
Segments • The emergence of new service offerings and business models
would aid in tapping market profitably & efficiently

• Government, healthcare, media & utilities together have IT

spend of approximately USD190 billion, but account just 8 per
New cent of India’s IT revenue
Verticals
• Non-linear growth due to platforms, products & automation
• Emerging verticals (retail, healthcare, utilities) are driving
growth
 Expansion of focus area to aid future growth

Market size of other progressing ver-

ticals by 2020 (USD billion)

Media 17

Utilities 25

Healthcare 58

Government 90

SMB 250

0 50 100 150 200 250 300

All of the above mentioned verticals need IT to go digital and integrate their business
processes.
Source: NASSCOM, TechSci Research
 Emerging technologies to aid future growth

• Emerging technologies
present an entire new gamut
Growing technologies to aid
of growing future growth
future growth
opportunities for IT firms in 60%
India
Big Data/Analytics
50%
• Cloud represents the largest
opportunity under SMAC,
40% Social Media
increasing at a CAGR of
approximately 30 per cent to
around USD650–700 billion 30%
by 2020
20%
• Social media is the 2nd most Mobility Cloud
lucrative segment for IT 10%
firms, offering a USD250
billion market opportunity by
0%
2020 0 100 200 300 400 500 600 700 800
Source: NASSCOM, TechSci Research
Company Analysis: Dell
History

• 1984: Michael Dell founds Dell Computer Corporation

• 1987: Dell becomes the first computer systems company to offer next-day, on-site
product service

• 1990: Manufacturing center in Limerick, Ireland opens to serve European, Middle

Eastern and African markets

• 1996: Customers begin buying Dell computers via the Internet at www.dell.com

• 1997: Dell ships its 10-millionth computer system and joins the top-five computer
system makers worldwide,

• 2000: Dell ranks No. 1 in global market share

• 2001: Dell enters the Indian market

• 2002: Consumers choose Dell as their No. 1 computer service provider

Dell: Vision and Mission Statements

Mission
“To be the most successful computer company in the world at
delivering the best customer experience in markets we serve.”

Vision
“To continue to grow responsibly – protecting our natural
resources and practicing sustainability in all its forms – and
improve the communities where we live and work through our
financial and volunteer efforts."
Recent developments: Mergers and
Acquisitions

In 2016, Dell acquires EMC for $67

billion, together becoming Dell
Technologies - the biggest technology
integration in history.

In November 2016, Dell Services integrates

with NTT Data, expanding the company’s
brand and IT services leadership globally.
 Locations and Facilities

Dell headquarters, Round Rock, Texas

Dell, Bangalore

• Dell has office locations in over 12 countries with

multiple facilities in the US

• In India, Dell operates from four major cities:

Hyderabad, Chennai, Noida and Bengaluru

• The US and India are the only countries that have all
Dell's business functions and provide support
Dell, Hyderabad
globally: R&D, manufacturing, finance, analysis, and
customer care
 Strengths Weaknesses

• Brand name valued at $7.5 billion • Commodity (computer hardware)

• Product customization
• Environmental record
• Competency in mergers and
acquisitions
• Direct selling business model
products
• Low investments in R&D
• Weak patents portfolio
• Too few retail locations
• Low differentiation

SWO
T
Opportunities Threats
• Expand services and enterprise • Growing demand for smartphones
solutions businesses and tablets
• Obtain more patents through • Profit margin decline on hardware
acquisitions products
• Strengthen their presence in • Slowing growth rate of the laptops
emerging markets market
• Tablet market growth • Intense competition
 Market share and overall performance

India: PC vendor market share 2015 2016 • Dell saw a substantial

increase in its market
28.8%
share in the first quarter
26% of 2016.
24.1%
• Growing from 19% to
19%
18%
17.00%
24.1%, it captured the
16%
second spot in the Indian
12.00% PC market after HP, who
had 28.8%.
5%
4.00% • The company’s growth
3% 3.00%
rate has been 6 times
faster than its
HP Dell Lenovo Others Cisco Acer
competitors.

Source: Fortune.com

Significant investments in India have made it the second largest operations base outside
the US and the fastest growing market for Dell.
Global Initiatives

• Legacy of Good Plan: 2020 vision; technology as a

driver of human progress

• Integration: To be the market leader in revenue

(server and storage) with the formation of Dell EMC

• Co-creation: Customers at the core of everything

the company does

• Green initiatives: More use of renewable resources

to power offices, factories and outlets

• Dell SecureWorks: To make the world free of cyber

attacks and malware
The Road Ahead: IT and Dell

• The IT industry is moving more and more towards the global delivery
model with delivery centers in almost all parts of the world.

• India will continue to be the sourcing hub due to its inexpensive and
talented human resources.

• Dell has emerged as a global mammoth in the IT and Software sectors as it

has successfully kept up with the trends in the industry.

• Providing B2B services can be an inroad for Dell into the lucrative segment
of end-to-end solutions and also help capture more market share with
better service.

• Increasing the number of retail outlets can help Dell in becoming a

‘masstige’ brand.
Review
Strong growth • CAGR of 13.7% over 2010–16
opportunities • CAGR of 9.1% by 2025

Leading sourcing • 56% market share in the global services sourcing business
destination • 38%in the overall BPM sourcing market

• One of the largest highly qualified talent pool of technical

Largest pool of ready- graduates
to-hire talent • 98 per cent of the colleges offering this stream

• Ranks 4th in India’s total FDI share

Most lucrative sector • 37 per cent of total Private Equity & Venture investments
for investments
in the country

• Increasing market share of 24.1% in FY2016

Dell Technologies • Operations in line with the latest trends in IT and ITeS
• India-most profitable market due to its talent pool