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Indian IT-BPO industry - FY2011-performance & future trends by NASSCOM

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IT-BPO industry: Strong growth with focus on transformation and enhanced value proposition …

IT-BPO industry: Strong growth with focus on transformation and enhanced value proposition

FY 2011 characterized by broad-based growth across mature and emerging verticals

* Domestic Market is at an inflection point; healthy growth of 16% in FY 2011
* Industry added 240,000 jobs in FY 2011
* FY 2011-12 Outlook: Software and services export revenues expected to grow by 16-18 per cent and domestic revenues to grow by 15-17 per cent

Amidst speculation and an uncertain global economic environment, the Indian IT-BPO industry once again exhibited buoyancy and maturity, reflected through a strong customer demand in FY 2010-11.

The IT-BPO industry (excluding hardware) witnessed a quick rebound in growth and is estimated to grow by 19 percent, aggregating revenues of USD 76 billion this fiscal year. While exports continued to be the mainstay of the industry with revenue of USD 59 billion, the domestic market demonstrated steady growth of 16 percent to aggregate INR 787 billion. Direct employment is expected to reach nearly 2.54 million, an addition of 240,000 employees. As a proportion of national GDP, the sector revenues are estimated 6.4 per cent in FY2011. More details at http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id=60499

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  • informative
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  • Useful BPO/SSC information from Eastern Europe:
    http://www.slideshare.net/csorjan/how-to-select-your-new-ssc-site-in-hungary
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  • The presentation is very useful to those who are in search of the prospects and contribution of Indian ITES-BPO Industry in strengthening our GDP and the role it has in insulating the Indian economy from the setbacks of various economic, political, technological and other issues from both domestic and global perspectives.
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  • very informative
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  • 1. Indian IT-BPO Industry – FY2011Performance and Future Trends New Delhi, 2nd February 2011
  • 2. What we are covering today• Industry Performance – Snapshot of FY2011• FY2012 Outlook• NASSCOM Agenda for 2011
  • 3. Start of 2010: Backdrop of globaleconomic recession • Will the economic recovery be broad- based? • What if there is a double dip recession? • How will the industry re-affirm its value proposition under changing demand scenario? • Where will growth come from?
  • 4. End of 2010: Varied global recovery 5.0% World GDP growth for 2010 estimated at 3 per cent in 2.8%GDP growth Jan 2010; revised to 5 per cent in Dec 2010.per cent Emerging economies driving growth; corporate 0.0% revenue growth significantly up 2008 2009 2010 0.6% Employment While employment growth in advanced economies -0.1% Growth increased by 0.6 per cent in 2010, unemployment still -2.4% per cent remains a major concern 2008 2009 2010 Industrial 10.0% Industrial output fell by 5 per cent in advanced Production -6.4% -5.3% economies in 2009, increased by 10 per cent in 2010 per cent 2008 2009 2010 5.2 2.0 Inflation Worldwide inflation is up, from 2 per cent in 2009 to 3.2 per cent 3.2 per cent in 2010; Currency and crude price 4 fluctuations fuelling inflation 2008 2009 2010 17.5% Stock Market NYSE stock index declined by ~24 per cent in 2009, - - Index rebound by ~18 per cent in 2010 16.6% 23.8% 2008 2009 2010Source: IMF Global Economic Outlook, December 2010
  • 5. Global technology spending grew by 4%,outpaced by global sourcing growth of 10% Worldwide IT-BPO Spend (USD billion) Global Sourcing Market size, (USD billion) 2010 102-106 574 2009 IT Services 92-96 10% 566 91 Business 158 USD 1.6 42 Process trillion* 38 152 36 Outsourcing Packaged 282 Software 272 58 64 55 599 Hardware 563Engineering and 1,150 2008 2009 2010 R&D 1,125 IT Sourcing Business Process Sourcing * 2010Source: IDC, Everest Research, NASSCOM
  • 6. Indian IT-BPO industry exhibits aspectacular rebound in FY2011 IT-BPO Export revenues* (USD billion) 59.0 • India’s share in global sourcing - 55 18.7% percent in 2010, up from 51 per cent in 49.7 2009 11.3 • Industry accounts for 26 per cent of India’s exports; 11 per cent of services 10.0 revenues 14.1 • IT services exhibiting fastest growth at 12.4 22.7 per cent, BPO growing by 14 per cent • Transformation, new business models, driving organization wide efficiencies • Emergence of verticalized solutions, 33.5 27.3 Business analytics and knowledge-based services, re-engineering skills, technology- enabled platforms • ER&D-Expanding the portfolio from “Art to FY2010 FY2011E Part” IT Services BPO S/W prod and EnggSource: NASSCOM * Excluding Hardware
  • 7. Domestic Market – stability and maturity- healthy growth of 16 per centIT-BPO Domestic revenues*(INR billion) 787 •Maturing domestic market – key thrust area 678 16% for the industry •IT services growth 16.8 per cent, driven by 159 localized strategies by service providers 140 •Domestic BPO - 16.9 per cent driven by 127 demand from new verticals and technology 109 platforms •Software products to grow by 14 per cent: New wave of start-ups driving growth •Government accelerating economic 501 reforms, improving government 429 performance and efficiency •IT seen as a critical enabler for inclusive growth and transformation FY2010 FY2011E IT Services BPO S/W productsSource: NASSCOM * Excluding Hardware
  • 8. The Industry added 240,000 jobs inFY2011Direct Employment (‘000) • Industry directly employs 2.54 million 10% professionals 2,300 2,540 • 10% employee growth corresponding to 18.7% revenue growth signifying 560 growing non-linearity 527 • Industry building future ready organizations through- 835 770 • Sustained investment in training • Opportunities for career growth • Managing people challenges 1,145 effectively 1,003 • Ensuring cost competitiveness • ~2 per cent of revenues spent on training - industry supplementing the FY2010 FY2011E education system IT Services exports BPO exports IT-BPO DomesticSource: NASSCOM * Excluding Hardware
  • 9. Broad-based growth - Emergingverticals growing faster than the traditional ones Vertical wise Break-up100%= USD 23.6 billion USD 49.7 billion USD 59.0 billion 22.3% 23.5% 24.0% 21% Emerging 15.4% 15.8% 15.6% 17% verticals 5 yr CAGR – 21.8% 1.5X traditional 21.5% 20.2% 18.7% 10% 19.5% verticals 19.5% 40.8% 40.5% 40.8% FY2006 FY2010 FY2011E BFSI YoY growth Hi-tech/Telecom Manufacturing Emerging Verticals (Retail, healthcare, media, utilities, transport) *Excludes hardware exports Source: NASSCOM 9
  • 10. Broad-based growth - North America,Emerging markets consistent drivers; Europe growing in2HFY11 Geography wise break-up100%= USD 23.6 billion USD 49.7 billion USD 59.0 billion 8.4% 9.4% 9.7% 22.3% 9.8% 12.1% 11.6% 13.5% Emerging geographies 15.3% CAGR – 23.9% 17.9% 17.2% 14% 1.3X other geographies 20.5% 66.5% 60.6% 61.5% FY2006 FY2010 FY2011E YoY growth US UK Continental Europe Emerging (APAC, RoW)*Excludes hardware exports 10Source: NASSCOM
  • 11. India multipliers – Future ready; stayingahead of the curve; enhanced value proposition INDICATIVE Fixed price contract revenues Shift towards managed services model, New Business 1 risk sharing 43% 34% Models From FTE based to outcome based; 2 pay per use model, CAPEX to OPEX Dec-08 Dec-10 Patents granted to top 5 Indian IT companies 3 IP Led innovation Innovation and 133 Transformation 65 4 Innovation through process re-engineering FY2007 FY2010 Cross border and domestic Globally dispersed footprints, blurred corporate M&A deals 5 boundaries and decoupled value chains 126 Global Delivery 83 6 Customer intimacy, geo political diversity 2009 2010 Leading Indian companies offering cloud solutions 7 Everything as a service model, platforms Service delivery 25% around new tech 5% 8 Develop applications around cloud andSource: NASSCOM Strategic Review 2011 platform based solutions FY2007 FY2010
  • 12. At the same time internally re-engineeringitself INDICATIVE YoY Growth of Business Development 1 Vertical focused business units to better service clients 25% Customer centricity 10% Enhance client relations from vendor to partnerships, 2 augment sales teams FY2008 FY2011 Revenue and Employee growth CAGR FY07-11E 3 Development of IP, investment in labs Push towards Non- 16.5 linear growth 11.5 % % 4 Alliances and partnerships, M&A Employee Revenue % of fresh hires with Non technical background in IT 5 Sustained investments in training services Talent re- 10-12% engineering 2-3% 6 Leveraging alternative talent streams FY2005 FY2010 SG&A as a % of total revenues Reduction in expenses even as 13.3 Continued 5 business development increases 14% % Operational Excellence Increase fresher hiring, expansion to 6 Tier II/III locationsSource: NASSCOM Strategic Review 2011 Sep-08 Sep-10
  • 13. Going forward, growth in Worldwide IT –BPO spend to continueWorldwide IT Services spending Growth Worldwide BPO spending Growth 6.3% 6.5% 5.0% 4.5% 5.4% 3.5% 4.0% 1.4% 2010 2011 2012 2013 2010 2011 2012 2013 IT indices, contracted in 2009, recovered in 2010, and is expected to continue to show growth in 2011Source: IDC
  • 14. FY2012 Outlook: Software and servicesexport revenues to grow by 16-18 per centIT-BPO Export revenues* (USD billion) Growth of 16-18% • FY2012 software and services growth forecast 16-18 per cent 68-70 (USD) 59.0 • Broad based growth – across service 49.7 lines and verticals • BPO expected to rebound • M&A - niche domains and global presence to escalate • Onshore delivery – key priority FY2010 FY2011E FY2012P E: Estimate, P: ProjectedSource: NASSCOM * Excluding Hardware
  • 15. FY2012 Outlook: Software and servicesdomestic revenues to grow by 15-17 per centIT-BPO Domestic revenues*(INR billion) Growth of 15-17% •FY2012 software and services growth forecast 15-17 per cent (INR) 900-920 •Fastest growing market in the APAC 787 region in terms of IT spending 678 • Government, SMB to be key growth drivers •Technology enabled inclusion witnessing new products and solutions FY2010 FY2011E FY2012P E: Estimate, P: ProjectedSource: NASSCOM * Excluding Hardware
  • 16. However, the industry has to addressmultiple challenges • Talent – quality and employability; Wage Inflation and attrition • Currency fluctuations, Inflation • Business environment – Need for clear roadmap on GST, DTC, IFRS; SEZ expansion to smaller cities • Issues of Protectionism and Visas Concerted effort required by all stakeholders – Industry, NASSCOM, Government
  • 17. NASSCOM agenda in 2011 • Talent Development – Leverage NSDC partnership; Foundation skills for IT and BPO, benchmarking entry level talent; Industry best practices • Domestic Market – Enable private sector partnership for e-governance, cluster development for SMBs • Small company / start-up ecosystem – Mentorship programs, partnership with industry, participation in e-governance projects • Innovation / Transformation – industry best practices, successful examples and enable scale • Globalization and Protectionism – factual perspectives and demonstrate impact of job creation by India in key markets • Inclusion – NASSCOM Foundation to create industry-government partnership on inclusion
  • 18. 18To Summarize – Sustained growthfocused on value creation • Growth in Global sourcing - Globalization demanding higher efficiencies and competitiveness • India continues to take centre stage in global sourcing strategies - maintains its position as a strategic off-shoring destination • Shared vision with customers on driving transformation and enterprise-wide cost efficiency • Industry witnesses broad based growth across verticals and geographies • Efficiencies gained during the economic crisis not lost – industry continues to reengineer internally • Industry will be net hirer, continue to create employment opportunities