IT Industry Revised

8/9/2019 IT Industry Revised

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IT/ITeS IndustrySubmitted to

G.V.Sandeep

Cygnus Business Consulting and Research Pvt Ltd.

Submitted By

Karan Arora (09ESHYD018)

Mordwaj Pal (09ESHYD022)

Phaneesh Mashetty (09ESHYD029)

Saurabh Vyas (09ESHYD036)


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Agenda

Industry overview

IT/ITeS sector: Value Chain

Industry Segments

IT services KPO

Engineering services outsourcing

Major Players and Competition

Porters 5-forces

Technology Growth Drivers

Issues & Concerns

Outlook


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Industry overview

The total revenues for the Indian IT industry were estimated to touch US$71.7 billion in 2008-09.

The Indian IT industry has been growing at a compound annual growthrate (CAGR) of 27 per cent for the last five years.

Contribution of IT industry to Indias gross domestic product (GDP) has

grown from 1.2 per cent in 1997-08 to an estimated 5.8 per cent in 2008-09.

The total revenues from export were expected to reach US$ 47.3 billion in2008-09.

The total exports have been growing at a CAGR of 28.7 per cent over thelast five years.

During this period 2008-2009, direct and indirect employment wasexpected to reach 2.23 million and eight million, respectively.

Domestic market revenues were expected to touch US$ 24.3 billion in2008-09.

Domestic market revenues have been growing at a CAGR of 24 per cent forthe last five years.

Source: NASSCOM


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IT/ITeS sector: Evolution

Source: IT: Industry profile, July 2009, CRIS INFAC


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IT/ITeSCompanies

HW Vendors

InfrastructureProviders

Value AddedServices

AcademicInstitutions

Boutique Firms

SW providers

Government

R&D

Value Chain


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Industry Segments

Services

BPO

Consulting

Infrastructure

Engineering & Industrial Services

Application Development & Maintenance

Enterprises Services

Products


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Industry Segments - Domain

BFSI

Telecom

Manufacturing

Retail & Distribution Hi-Tech

Life Sciences and Health Care

Transportation

Energy & Utilities

Media & Entertainment

E- Governance


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Industry Segments Region wise

North America

Ibero America

UK Continental Europe

India

Asia Pacific Middle East & Africa


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IT services

The Indian IT services market grew by 23 per cent between 2005-06 and2008-09 and the revenues are estimated at nearly US$ 8.3 billion in 2008-09.

The banking, financial services and insurance (BFSI) vertical continues toaccount for the largest share of IT/ITeS services at 41 per cent.

Hi-Tech/ telecom vertical accounts for the second-largest share of the pieat 20 per cent.

Other verticals such as manufacturing, retail, media and healthcare arerapidly gaining pace.

Domestic IT-ITeS market revenues have been growing at a CAGR of 23 percent between 2005-2006 and 2008-09 and were expected to reach US$24.3 billion in 2008-09.

Domestic IT-BPO revenues grew by 24 per cent in and were expected totouch US$ 2 billion in 2008-09.

Hardware accounted for about 49 per cent of the total domestic IT-BPOspends in 2008-09.

Source: IT: Industry profile, July 2009, CRIS INFAC


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IT services - Segments

IT services export revenues

(2008-2009 Estimates) US$ bn

Project oriented 12.9

IT consulting 0.65

Systems integration 0.75

Custom application development 11.12

Network consulting and integration 0.32

IT O ts rci g 11.02

Application management 7.21

Infrastructure management 3.80

Support and training 1.96

Total 25.88

41

20

17

8

59

Sector Wise Revenue (Percentage)

BFSI Hi-tech/Telecom

a

fact ri g etail

edia,P blishi g a d E tertai me t Others

So rce: IT: I d stry profile, J ly 2009, C IS INFAC


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Knowledge Process Outsourcing (KPO) The genesis of KPO followed BPO

services in India, however KPO is nowgrowing at a rapid pace with MNCssetting up third party captive units fordata analytics, data modeling, etc.

CRISIL estimates that the Indian KPO

export market constitutes about eightpercent of Indian ITeS revenues andemploys nearly three percent of thework force

Growth drivers for this business includehigh productivity of Indian resourcesand growing adoption of KPO by Small

and Medium Enterprises (SMEs). Opportunities span across several

service offerings: legal processoutsourcing (LPO), financial and marketresearch and engineering servicesoutsourcing, which are considered fastmoving service offerings.

Sources: Global Offshore Outsourcing Summit, EY-IACC, 2006.

ITeS: Industry profile, April 2009, CRIS INFAC


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Engineering services outsourcing Global engineering services spend estimated at US$ 750 billion

which is expected to increase to more than US$1 trillion by 2020 Indias share is about US$ 4.9 billion of the US$ 12.8 billion

outsourced services in 2008-09; India is estimated to garner a shareof about US$ 50 billion by 2020

Range of services include engineering and designing solutionsacross diverse industry verticals like

telecommunications, automotive, construction, aerospace, utilitiesand industrial design

Labour cost arbitrage in this sector is about 60 per cent of the UScounterparts

Bechtel, General Motors, Ford, John Deere, Caterpillar, SiliconAutomation Systems, John Brown Engineering are a few global

giants that have set up their engineering services divisions in India

Source:Global Offshore Outsourcing Summit, EY-IACC, 2006.


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Major Players and Competition

Herfindahl Index:

HI = 1771

It can be said that theindustry is operating in

competitive environment

Company Sales Turnover (Rs. cr.)

TCS 22,404.00

Infosys 20,264.00

Wipro 20,987.30

HCL Tech 4,675.09

Oracle Financ 2,212.62

Mphasis 3,405.02

Mahindra Satyam 8,137.28

Tech Mahindra 4,357.76

Financial Tech 334.32

Patni Computer 1,751.33

MindTree 1,561.00

Polaris 1171.34

Sonata 243


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Porters 5-forces

Low-High

Large supply at low cost from around the world

Matured education/ training freely available

Small players for support services

Bargainingpower of

Suppliers

High

Large players Technology is commoditized

Supply has significantly increased

Bargaining

Power ofBuyers


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High

Numerous players

Difficult to differentiateCompetition

Low-MediumProduct differentiation is harder

Brands established

Much higher switching costs

Easier in low value services

Barriers toEntry

Low

Must haveThreat of

Substitutes


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Technology Infrastructure

Data Centers CISCO

Data Connectivity Ericsson, Nokia-Siemens, Alcatel-Lucent

Optical, Microwave etc

Ethernet, SDH etc

Hardware Servers Intel and AMD

Product ERP & CRM SAP, Oracle, BAN etc

OS Linux, Unix, Microsoft etc Databases Oracle, Sybase etc

Programming Languages Java, C++ etc

Grid Computing


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Established IT/ITeS SEZs in India

Source: "Formal approvals granted SEZs as on 15 January 2009", SEZ India website, www.sezindia.nic.in, accessed 20 September 2009


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Growth Drivers

Availability of Large Human Resources

Indian Education System

Quality Manpower

Government Policies

Cost of Labor and resources

Long term profitability


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Issues and Concerns

Need for Management expertise Presently only 30000 professionals; needed 2.5L (Source: NASSCOM)

Ex. Employees and expatriates: -Management experience and niche skills

Top IT companies have used Economies of Scale and Scope to the full

extent Industry revenues- majorly Export Led

Need to penetrate in domestic market

Create more awareness for SMBs

Exchange Rate Fluctuations

Open Source Software is eating the revenues

Talent Pool Need for Proper Background Check

Bias towards service business

Lack of funding, esp. in early phase: key limitation for entrepreneurs Source of funds: VC, PE firms, HNIs


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Outlook

Software products CAGR of 44% for past 3 years.

Software products: Global Potential by 2015 Financial & Accounting: USD 30.3bn

BI: USD 15bn

Storage: USD 26.2

Security: USD 17.3bn ERM: USD 59.8bn

Telecom: USD 33.1bn

Gaming: USD 25bn

Search engine : USD 60.4bn

Other: Retail, Mobile application

KPMG report: 31 emerging global destinations Ahmedabad Jaipur

Nagpur

Sources: NASSCOM Newsline April 2009

NASSCOM Software product Study


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Outlook

Extend Global recognition: key challenge

Focused branding and trade development

Need for Academic and Industry collaboration is large

Need to establish presence higher up in the valuechain.

2-Tyre City growth and distribution of IT companiesacross cities spread out within the state.

Industry Consolidation through M&As Growth of Domestic Industry

UID Project throws up lot of opportunities in e-Governance


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Thank You

IT Industry Revised

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