DEFINITION OF INDUSTRY:
As per Section 2(j) of Industrial Disputes Act,1947 “Industry” means any
systematic activity carried on by co-operation between an employer and his
workmen(whether such workmen are employed by such employer directly or by or
through any agency, including a contractor) for the production ,supply or distribution of
goods or services with a view to satisfy human wants or wishes (not being wants or
wishes which are merely spiritual or religious in nature), whether or not,-
(i) any capital has been invested for the purpose of carrying on such activity; or
(ii) such activity is carried on with a motive to make any gain or profit, and
(a) any activity of the Dock Labour Board established under section 5-A
of the Dock Workers ( Regulation of Employment)Act, 1948( 9 of
(b) any activity relating to the promotion of sales or business or both
carried on by an establishment,
but does not include-
1) any agricultural operation except where such agricultural operation is
carried on in an integrated manner with any other activity (being any such
activity as is referred to in the foregoing provisions of this clause) and
such other activity is the predominant one.
Industry can be defined as:
• ‘Any type of Economic Activity producing GOODS or SERVICES’
• ‘It is part of a chain – from raw materials to finished product, finished product to
service sector, and service sector to research and development.’
• ‘It includes AGRICULTURE, MANUFACTURING and SERVICES’
• ‘Industry varies over time and between different countries’
TYPES OF INDUSTRY:
There are four types of Industry:
- Tertiary & Quaternary
This involves RAW MATERIALS or NATURAL RESOURCES (before
Raw Materials can be:
- Mined all below the earths surface
- Drilled for
- INCLUDING: Coal Mining, Oil Drilling, Gold Mining
- Grown - Collected
-INCLUDING: Farming and Forestry - INCLUDING: Fishing
This involves a PRODUCT from Primary Industry which is PROCESSED or
MANUFACTURED into another product
Processing of Raw Materials (where raw materials are changed into something different)
- Oil refined to make Petrol - Fish is processed to make Fish Fingers!
- Wheat ground to make Flour - Trees are sawn to make Timber
Manufacturing of Raw Materials (different parts assembled to make a finished product)
- Steel Making - Making Ships/Cars/Televisions
- Building Roads and Houses
(the FINISHED PRODUCT from one Secondary Industry may be the Raw Material from
another e.g. One factory may make tyres which are then sent on to be used in a Car Plant)
This provides a SERVICE
It involves a wide range of services INSTEAD of making anything and is the LARGEST
group of industries in MEDC s
Examples of so-called ‘Service Industries’
- Teaching - Nursing - Retail
- Civil Service - Police Force – Transport
Software Industry Definition:
Software refers to a series of logical instructions given to the computer. A program or
information stored in the main memory of a computer is called SOFTWARE
Computer instructions or data. Anything that can be stored electronically is software. The
storage devices and display devices are hardware.
The terms software and hardware are used as both nouns and adjectives. For example,
you can say: "The problem lies in the software," meaning that there is a problem with the
program or data, not with the computer itself. You can also say: "It's a software problem."
The distinction between software and hardware is sometimes confusing because they are
so integrally linked. Clearly, when you purchase a program, you are buying software. But
to buy the software, you need to buy the disk (hardware) on which the software is
Software is often divided into two categories:
• Systems Software : It is a collection of programs, which control, coordinate and
supervise the activities of various components of a computer This category of
software is concerned with making the computer work and understanding the user
given data to produce the necessary software. System Software also includes
device drivers, programming languages, compliers, assemblers and translators
• Applications Software: The software developed for a specific function is
categorized in application software. These programs are written to solve particular
problems only. Examples of Application software include Word, PowerPoint,
Graphic Packages, and Excel etc.
History of Software Industry:
The software industry started in the early 1960s when universities and businesses
first began to use computers and to seek out programs to do certain computing tasks.
Many of these programs were written in-house by full-time staff programmers. Some
were distributed freely between users of a particular machine for no charge. But others
were done on a commercial basis, and the very first standalone software firms started in
the United States in 1959-1960.
The industry expanded greatly with the rise of the personal computer in the
mid-1970s, which created a growing market for games, applications, and utilities. And
gradually the concept that software should be bought and paid for took hold. One of the
earliest proponents of this view was Bill Gates, founder of Microsoft.
The Software Industry Special Interest Group is dedicated to preserving the
history of the software industry, one of the largest and most influential industries in the
world today. The industry originated with the entrepreneurial computer software and
services companies of the 1950s and 1960s, grew dramatically through the 1970s and
1980s to become a market force rivaling that of the computer hardware companies, and
by the 1990s had become the supplier of technical know-how that transformed the way
people worked, played and communicated every day of their lives. The SI SIG is working
to preserve for future generations information about the companies, people, products, and
events that shaped the evolution of this vital industry.
2009 Software Industry:
The Software Industry Directory is an annual reference to software development
and publishing companies. This publication is a comprehensive, industry-wide listing of
software companies in North America serving all markets and platforms. With this handy
reference, the industry will have it finger on vital company, product, personnel and
contact information in this ever-changing marketplace.
The Software Industry Directory contains important market information organized in a
way to make it a valuable reference tool. Containing:
- 24,800 contacts
India Software Operations:
India as a country has been able to attract a number of global players in software.
Microsoft has built its largest development centre outside the US in Hyderabad city of
India, almost 20% of the development activities of SAP are done in India, the Bangalore
development centre of Philips contributes in every product of the company that has
software in it. Hewlett Packard is conducting all its high level research on futuristic
technologies for emerging markets in India.
The Software in India industry profile is an essential resource for top-level data
and analysis covering the software industry. It includes detailed data on market size and
segmentation, plus textual and graphical analysis of the key trends and competitive
landscape, leading companies and demographic information.
SCOPE OF THE REPORT:
- The report provides the background of the company, outsourcing activities of the
development center, and other useful information.
The companies profiled in the directory can be broadly classified into two categories on
the basis of their parent companies - IT and End User companies; 158 companies fall into
the former category and the balance 39 in the latter. Out of the IT companies, 63% are
from IT services and balance is IT product companies. About 82% of the companies
profiled have their parents from the North American region,13% from the Europe and the
THE REPORT IS USEFUL
- To have a better understanding of the outsource operations in India.
- Helps in building partnerships with the MNCs
- To market complementary services to the MNC software centres.ing activities of the
MNCs with software.
Objectives of the study:
The general objective is to understand the nature and the feature of the software industry.
1. To understand the history of the software industry.
2. To understand the production pattern of the software industry
3. To understand the consumption pattern of the software industry
4. To understand the financial position of the software industry
5. To understand the personnel policies of the software industry
6. To understand the growth potential of the software industry
The computer software market consists of systems and application software. Systems
software comprises operating systems, network and database management, development
tools and programming languages, and other systems software
The computer software market consists of systems and application software. Systems
software comprises operating systems, network and database management, development
tools and programming languages, and other systems software.
Market research is an orderly, objective way of learning about people . the people who
buy from you or might buy from you.
The purpose of this fact sheet series is to help producers and processors understand the
key elements needed to manage a business. The fact sheets also discuss some of the
essential components used to develop a business plan and assess the profitability of a
It can provide unbiased answers to questions such as:
Who will buy the company product?
What are the requirements of the company customers?
What are the characteristics of the company customers?
What are the attitudes and perceptions of the company customers?
Who else is producing the same or similar product? At what cost? Can the company
compete with their price, quality, etc?
What advantages the company offer that the company competition can’t or doesn’t?
What marketing constraints exist?
What does the company see as the future for the company business? etc…
Market Research For The Software Industry:
NPD offers the only retail point-of-sale (POS) tracking information available for the
software industry. By providing comprehensive and timely market research information,
Market Research offer publishers, developers, retailers, and the financial community an
exclusive view of the software marketplace. Research deportment item-level detail on
what is selling, where, and at what price, combined with proven software industry
expertise, gives Market Research clients a critical advantage in decision-making.
Why do market research?
It.s impossible to sell people what they don’t want. That’s obvious. Just as obvious is the
fact that nothing could be simpler than selling people what they do want. Market research
is essential in helping you find out what people want.
Market research provides what you need to get sound information about the industry agri-
food product, service or market so you can develop good marke ting and business
Market Research For The Software Industry:
NPD offers the only retail point-of-sale (POS) tracking information available for the
software industry. By providing comprehensive and timely market research information,
Market Research Team offer publishers, developers, retailers, and the financial
community an exclusive view of the software marketplace. Market Reserch item-level
detail on what is selling, where, and at what price, combined with proven software
industry expertise, gives to software clients a critical advantage in decision-making.
The eight steps of market research:
As with any business activity, the industry market research should be carefully planned,
written down and carried out. If the industry business is already up and running, you
probably do market research every day in the industry routine management activities
without even realizing it. Market research simply makes the process more orderly and
ensures no bias. The eight steps of market research are:
State the situation you are facing. For example, many adults in southern Alberta go to
work every day without first eating breakfast. There are very limited food choices, often
only sweet pastries, available at worksites for mid-morning snacks.
Clearly define the industry product or service. You want to market two varieties of low-
fat, high-fibre homemade muffins . carrot pineapple and zucchini bran.
State the objective(s) of the industry market research. What do you need to find out?
Think about what decisions you want to make from the information you will get. An
objective may be identifying or verifying a target market, identifying or verifying
customer needs and wants, finding new opportunities and new markets, or estimating the
size of markets.
A well-written objective is clear, concise, complete, realistic and commercially
worthwhile. One objective may be to find out whether working people in the community
are interested in more nutritious midmorning snacks. Another objective may be to learn
whether or not the industry nutritious muffins appeal to the tastebuds of these people. A
third objective may be to discover whether the local high school will sell them in its
Look at the information you already have. Research may simply mean organizing and
analyzing existing information. Check sales receipts for the industry Saskatoon cranberry
muffins from the past three years. They may show a steady increase in sales, indicating
the industry market is ready for more muffin varieties.
Collect additional information if needed. Begin by doing some indirect market research.
Find information that is already available such as government or nutrition studies which
look at peoples. Breakfast habits, the importance of nutrition in peoples. food choices and
the importance of a low-fat, high-fiber diet for good health. Then, if need be, do some
direct market research. Generate some information the industry by doing a taste test of
the industry new muffin varieties at a local supermarket or farmers. market.
Organize and analyze the information collected. Make where, when and why, so you
don’t jump to conclusions. Is there anything else you need to know? Who is the industry
competition? Who else is producing muffins, breakfast bars or non-nutritious snack
foods? Information from every source should be compared, i.e. all similar types of snack
foods available in local and nearby supermarkets.
Make decisions based on what you have learned. If all questions are answered, including
customers. willingnes to pay $1.25/muffin, make a decision to add these two new muffin
varieties for a three-month trial basis..
Watch the results of the industry decision and learn from them. If sales receipts and
customer feedback during the trial period indicate that fewer carrot/pineapple muffins are
sold than the industry other types, you may want to further explore the reasons for this.
The information will help you decide whether to scrap the muffin variety or simply make
a minor recipe modification.
Bolstered with such a significant, technically sound resource base, the software industry
has grown unimpeded. With a compounded annual growth rate of more than 50%
between 1992 and 2001, the Indian software sector has expanded almost twice as quickly
as the world-leading U.S. software industry did during the same period, although from a
India’s software industry statistics illustrate the massive strides achieved by this sector
and the opportunities the future holds. According to NASSCOM’s estimates for the fiscal
year 2000-01, the country’s software industry is worth $8.26 billion, up from $100
million ten years ago. A study conducted by renowned consultancy firm McKinsey and
Co., for NASSCOM, has proven why India is becoming the off-shore software
development out-source’s destination of choice. According to the NASSCOM-McKinsey
study, the Indian software industry is expected to gross US$50 billion in exports in 2008!
This is based on an average growth rate of 35 percent per year. The industry is well
placed to achieve this target.
US $ billion
India's Silicon Valley:
While the industry has been growing at above average growth rates, software
development activity is not confined to a few cities in India. Software development
hotspots, such as Bangalore, Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-
Gurgaon belt, Vadodara, Bhubaneswar, Ahmadabad, Goa, Chandigarh, Trivandrum are
all developing quickly. They boast state-of-the-art software facilities and the presence of
a large number of overseas vendors. A large part of India’s success in the software sector
is due to the crucial role played by the State of Karnataka in promoting and providing a
boost to IT. Karnataka has emerged as the computer capital and center of high-tech
industries, especially software. Bangalore has for long been known as India’s answer to
Silicon Valley, and this is the city where most large software companies have set up shop
and operate out of state-of-the-art facilities. The Government of Karnataka has also been
extremely positive about the software and services marketplace and has helped create the
relevant telecom and policy infrastructure conducive to the growth of this sector.
E-commerce, Remote Processing:
Taking The Front Seat India’s strengths in the software market also lie in its
pursuit of new opportunities. In fact, two key segments that are expected to open up over
the next few years for India are e-commerce and remote processing. Opportunities in e-
commerce software solutions are emerging as a major area of growth in the Indian IT
software and services industry. A recent study undertaken by The Boston Consulting
Group for NASSCOM clearly stated that India can earn revenues of US$9 billion from e-
business solutions by 2005.
IT-Enabled Services, or “Remote Processing”, has emerged as the next major driver of
the technology services industry. With competitive telecommunication costs, well
developed infrastructure and a huge pool of English-speaking and computer-literate
graduate manpower, India rates higher than many other countries as a hub for IT-enabled
services. Call centers and business process outsourcing is emerging as the next wave of
growth in India. The McKinsey study indicated that India will earn $18 billion in
revenues through these services and create additional employment of one million jobs.
Already companies like GE Caps, British Airways, Swissair, American Express and
British Telecom are using Indian companies for these services.
The IT-Enabled Services segment currently employs around 70,000 people and accounts
for 10.6 percent of the total IT software and services industry revenues.
Quality: The Magic Mantra
Outsourcing software requirements depends mostly on quality of services, and quality has
continued to remain a prime edge for Indian software companies. According to the
NASSCOM survey, the Indian software industry continued to win recognition for its
quality in software development over the last year. Out of the top 400 companies, more
than 250 have already acquired ISO 9000 certifications. However, it is in the SEI CMM
(Software Engineering Institution Capability Maturity Model) Level 5 segment that the
real accolades have come India’s way.
Out of the 54 companies in the world that acquired SEI CMM Level 5 certification, 27
companies are located in India.
Large Pool of Professionals
Today, India’s strong base of skilled software manpower is a beacon for software
customers. The advantages offered by this significant pool can never be over-
emphasized. As of March 2001, India had over 410,000 working software professionals.
Out of a total of 122,000 engineers trained each year, almost 75,000 new software
engineers are ready to join the industry on an annual basis. Others migrate overseas or
join end-user organizations. Educational universities, as well as the prestigious Indian
Institutes of Technology (IITs), are the principal sources of newly-qualified personnel. In
addition, thousands of other technical personnel are trained by private sector institutes.
The demand for Indian skilled manpower is also on the rise among countries outside of
the U.S. According to Step stone, the largest career portal in Europe, major opportunities
are emerging for Indian talent from within the European Union. By 2003, in fact, Step
stone says there will be around 1.6 million unfilled jobs in the EU. Germany alone
accounts for about half of the vacancies—400,000. France has recently announced over
100,000 openings in the public sector alone. Austria has over 30,000 vacancies, and
Norway is offering over 30,000 jobs. Since most of the European companies are looking
to leverage India’s skills in the IT sector, Indian companies are increasingly expanding
their presence in Europe. In the year 2000-01, Europe accounted for over 24 percent of
India’s software export destination.
India is Best positioned for cross border IT services.
India’s software and services industry has and will continue to remain in the driver’s seat
of the country’s IT sector. India’s success in the software arena is attributed to the
software industry’s knowledge and expertise in cutting edge technologies and skilled
manpower base. Both these strengths are likely to contribute towards the industry’s future
growth. In fact, India’s prowess in emerging technologies is also helping the software and
services industry obtain new customers, even in the face of a debilitating U.S. economy
slowdown. There is only one way that the Indian software industry is headed and that is
up. The coming years will only reiterate this trend.
The Software Products Segment :
The products segment represents a key jump in the value chain in the industry. While
only a handful of majors such as Hughes Software Systems focus on this area, this
segment offers a great deal of potential. Some of the major revenue drivers in the future
1.The Telecom Software Segment – India Rings a Bell
The telecom networks across the globe represent one of the fastest growing end
users of software products and applications. One of the major reasons for the success of
the offshore model in the domestic context has been the rapid improvement in the
telecom capabilities in the country. In recent times, the software industry has developed a
synergy with the telecommunication industry. Consequently, the telecom industry that
was hitherto been dominated by the hardware equipment is fast transforming to being
dominated by the software industry. Recent estimates indicate that around 50.0
percent-65.0 percent of the costs of telecom products are accounted for by software.
2.The Embedded Software Segment – Leaving an Impression:
Globally, there has been a constant growth in the level of embedded devices
across industries. For instance, in case of automobiles, typical applications include the
deployment of the airbags, fuel injection, global positioning systems (GPS) etc. Other
major areas of applications include the wireless data applications, mcommerce, control
systems in the case of various appliances etc. While the demand for such services and
solutions was an estimated US$ 41.0 billion in the year 1999-2000, this market is
forecasted to explode to around US$ 70.0 billion by the year 2002. Consequently, this
will trigger the demand for software to enhance the level of intelligence in these devices.
The growth opportunities for the domestic majors are aplenty. With phenomenal growth
levels forecasted for mobile devices penetration in the Indian market, development of
applications and solutions will also witness a faster growth rate.
3.Software Components – A Small But a Growing Segment:
Recent estimates peg the global software components industry at around US$
681.0 million and this segment is forecasted to increase to nearly US$ 2.7 billion. This
high growth segment has caught the attention of domestic majors such as TCS, Infosys
etc. At the same time even start-ups such as Persistent Solutions and iSoly are also
targeting this segment. Despite such a potential, this segment had not caught off in a big
manner in the past. This was because domestic companies were risk averse. Huge
investments initially and subsequent development of the market was not a strategy that
many companies were willing to take.
However, all this is fast changing and software is getting more component-based.
With software accounting for around 60.0 percent of any system, the complexity of code
is only increasing. Consequently, no single company can generate all its coding
requirements by itself. This is fueling the demand for software component companies.
Also, margins in this segment are far higher at around 35.0 percent-70.0 percent.
Furthermore, off-the-shelf packages typically don’t meet all the requirements of the user.
The Software Services Segment:
Software services are an area that domestic majors have made a mark at the global
level. However, this is just the tip of the iceberg with a majority of companies focusing
on maintenance kind of projects. This segment offers a great deal of potential in the
global market. In case of the domestic market, two major factors are likely to fuel the
growth in this segment. They include the impending computerization of domestic banks
1.The Impending Computerization of Domestic Banks:
NASSCOM estimates for the year 1999-2000 indicated that only around 30.0
percent of all banks in the country were computerized. This rather low level of
computerization amongst domestic banks indicates the high degree of potential that is
waiting to be tapped by software majors. E-banking is fast catching up across the globe.
Already, private and foreign banks have started to tap these new developments and are
moving rapidly into technology-friendly financial service providers.
Electronic Governance (E-Governance) is the process of using information
technology to enable the government to work in a more transparent and efficient manner.
Globally, e-governance is assuming importance. In the domestic scenario, while a lot has
been talked about in this area there still requires a lot to be done. The Andhra Pradesh
government has been a steadfast implementer of this concept and has been a pioneer of
sorts in the domestic context. Some of the key features of this concept include,
a) Greater level of information to the citizen thereby enhancing his awareness
b) Create a more easier medium for citizens and their elected representatives to interact
c) Encouraging the citizen to contribute in terms of ideas, conduct debates etc to improve
the administrative process.
The IT Training Segment:
Despite the current slowdown, the market for information technologists is likely to grow
in the future. Global shortage of IT professionals, rapid computerization in the domestic
environment, need for new software packages etc will constantly need a large pool of
qualified brain power. Consequently, the training segment will be required in a greater
degree in the coming years. Some of the prominent revenue drivers for this segment
1.Attrition in the Industry-
Fuel for More Training The IT industry in general witnesses a higher degree of
attrition when compared to other sectors. During the year 2000, estimates pegged the
attrition level at around 16.0 percent. This represented a marginal increase from the 1999
levels of around 14.0 percent. While switching over of jobs both in the domestic and
overseas markets is a major reason for these high levels, this also necessitates the
constant upgrade of skill sets. This in turn acts as a major driver for the IT training
Other Major Revenue Drivers:
a) Rising Literacy Levels:
Notwithstanding the fact that a large population of India still continues to live in
the village, the literacy rates in the country has steadily increased from 18 percent in 1951
to 52 percent in 1991. This trend continued through the ‘90s and is currently at around
64.0 percent. Rising literacy levels are crucial for the creation of a sound technical
manpower pool. At the same time, this huge base needs constant training both in terms of
preliminary IT-related skills and also constant re-skilling. Thus, the huge population base
coupled with rising literacy levels will act as a major revenue driver for this industry.
b) Greater Penetration of PCs:
With the PC penetration in India having crossed just the 5 million mark by the
end of 2000, there still lies a huge potential market. The 250.0-million strong middle
class populace will largely drive this growth. Rising PC penetration levels will result in
additional demand for packaged software applications. Also, the likely implementation of
e-governance initiatives will in turn drive the demand for more PCs, which will in turn
drive the demand for vernacular software packages.
c) Wireless Internet Applications
By 2005, more than one billion Internet-enabled cellular phones will exist
worldwide within five years, enabling viewers to access Internet-based programs more
easily. With increased wireless access and availability of broadband, there will be growth
in the number of new “Internet appliances”. These new appliances will require the
creation of a new range of software programs/ applications etc.
d) Declining Piracy Levels
Constant initiatives by NASSCOM have resulted in the domestic piracy levels
decline from around 89.0 percent in the year 1993 to nearly 60.0 percent in the year 1999.
In the future, with increasing consumer awareness and more stringent regulations, piracy
levels are bound to decline. This in turn will provide greater impetus to the domestic
Porter’s Five Factors:
As the industry is still in its growth stage, there is enough room for expansion for existing
players and new entrants. With the entry of many multinational companies (MNC) are
opening their operations in India to leverage the low cost advantage provided by India,
has increased the completion ratio (CR) of the industry. Also as there is no huge capital
investment required to start a new company, the industry see a very large numbers of
small and medium-size companies operating in a niche market. Presence of such large
number of players has made the industry as one of the most competitive industry in the
Threat of Substitutes
The Indian IT industry currently enjoys a very high growth rate due to following
advantages High availability of skilled labour Availability of large English speaking
population Low cost of labour Good government policies (like tax holidays till 2009 for
IT companies & setting up of special economic promotion zones) But there are many
countries such as China, Philippines, and many east European countries that has started to
provide similar opportunities and Indian IT industries always need to innovate and move
into new sectors to keep out the competition.
Buyers in IT industry can be briefly classified into following categories: institutional
buyers and individual or small consumers. Institutional buyers comprises of big and small
enterprises which outsource part of their work or implement an IT solution for improving
their processes. As the IT industry has large number of suppliers and few entry barriers
for new entrants, the buyer has a many option to choose from thus have a large
bargaining leverage. Similarly the individual consumer enjoys options of plenty and has
large bargaining power.
As there exist many competitive suppliers in the market the supplier has very little or no
power in this industry
Porters five factors:
Five Factors read in Software Industry course book about Porter’s five forces. For those
of you who are not familiar with Porter’s five forces we must explain that Michael Porter
is the leading strategist of the world and Harvard professor and Porter’s five forces is a
framework for the industry analysis and business strategy development developed by him
in 1979. It is a framework to analyze industry and for the development of business
The concepts developed in the Economics of Industrial Organization, Porter derives five
forces from it that determines the intensity of the competitiveness and hence
attractiveness of a market. In this context attractiveness refers to overall profitability of
the industry and an "unattractive" industry refers to the one where the combination of
forces acts to pull down overall profitability.
Portes Five Factors:
Market Profitability Analysis
Profitability Analysis (CO-PA) enables you to evaluate market segments, which
can be classified according to products, customers, orders or any combination of these, or
strategic business units, such as sales organizations or business areas, with respect to the
company's profit or contribution margin.
The aim of the system is to provide the industry sales, marketing, product management
and corporate planning departments with information to support internal accounting and
Two forms of Profitability Analysis are supported: costing-based and account-based.
1. Costing-based Profitability Analysis is the form of profitability analysis that groups
costs and revenues according to value fields and costing-based valuation approaches,
both of which the industry can define itself. It guarantees the companies access at all
times to a complete, short-term profitability report.
2.Account-based Profitability Analysis is a form of profitability analysis organized in
accounts and using an account-based valuation approach. The distinguishing
characteristic of this form is its use of cost and revenue elements. It provides you with a
profitability report that is permanently reconciled with financial accounting.
Profitability is calculated as=(Net Profit/Total income)*100
Barriers to entry & Exit:
Barriers to Entry
An IT company can be started with very low initial cost, further the government policies
also promotes the entrepreneurs by providing benefits in terms of tax holidays and
building Software Technology Parks. Apart from this there is large amount of venture
capitalist who are ready to fund new start-ups enabling them to scale up.
Barriers to entry are designed to block potential entrants from entering a market
profitably. They seek to protect the monopoly power of existing (incumbent) firms in an
industry and therefore maintain supernormal (monopoly) profits in the long run. Barriers
to entry have the effect of making a market less contestable
A barrier to entry is something that blocks or impedes the ability of a company
(competitor) to enter an industry. A barrier to exit is something that blocks or impedes the
ability of a company (competitor) to leave an industry.
The economist Joseph Stigler defined an entry barrier as "A cost of producing (at some or
every rate of output) which must be borne by a firm which seeks to enter an industry but
is not borne by firms already in the industry"
This emphasises the asymmetry in costs between the incumbent firm (already inside the
market) and the potential entrant. If the existing businesses have managed to exploit some
of the economies of scale that are available to firms in a particular industry, they have
developed a cost advantage over potential entrants. They might use this advantage to cut
prices if and when new suppliers enter the market, moving away from short run profit
maximisation objectives - but designed to inflict losses on new firms and protect their
market position in the long run.
EXAMPLES OF BARRIERS TO ENTRY:
Giving the firm the legal protection to produce a patented product for a number of
years (see below)
Firms may adopt predatory pricing policies by lowering prices to a level that
would force any new entrants to operate at a loss
Lower costs, perhaps through experience of being in the market for some time,
allows the existing monopolist to cut prices and win price wars
Advertising and marketing:
Developing consumer loyalty by establishing branded products can make
successful entry into the market by new firms much more expensive. This is particularly
important in markets such as cosmetics, confectionery and the motor car industry.
Research and Development expenditure:
Heavy spending on research and development can act as a strong deterrent to
potential entrants to an industry. Clearly much R&D spending goes on developing new
products (see patents above) but there are also important spill-over effects which allow
firms to improve their production processes and reduce unit costs. This makes the
existing firms more competitive in the market and gives them a structural advantage over
potential rival firms.
Presence of sunk costs:
Some industries have very high start-up costs or a high ratio of fixed to variable
costs. Some of these costs might be unrecoverable if an entrant opts to leave the market.
This acts as a disincentive to enter the industry.
International trade restrictions :
Trade restrictions such as tariffs and quotas should also be considered as a barrier
to the entry of international competition in protected domestic markets.
Sunk Costs :
Sunk Costs are costs that cannot be recovered if a businesses decides to leave an
industry Examples include: " Capital inputs that are specific to a particular industry and
which have little or no resale value " Money spent on advertising / marketing / research
which cannot be carried forward into another market or industry When sunk costs are
high, a market becomes less contestable. High sunk costs (including exit costs) act as a
barrier to entry of new firms (they risk making huge losses if they decide to leave a
A good example of substantial sunk costs occurred in 2001 when British Telecom
announced it was scrapping its loss-making joint venture with US telecoms firm AT&T.
The closure was estimated to lead to the loss of 2,300 jobs - almost 40% of Concert's
workforce. And, it will cost BT $2bn (?1.4bn) in impairment charges and restructuring
costs, and AT&T $5.3bn.
Barriers to Exit:
Investment in specialist equipment – Investments in specialized equipment that cannot
readily be used in other industries tends to be an impediment to leaving the industry.
Specialized skills – Highly specialized skills by industry participants that cannot be
utilized in other industries tend to be an impediment to leaving the industry.
High fixed costs – High levels of dedicated fixed costs tend to be an impediment to
leaving an industry
If we combine entry and exit, we can predict industry rivalry, stability and profitability.
As shown in Figure 1, an industry that is easy to enter but difficult to leave has intense
industry rivalry and low profitability. At the first sign of excess profitability in the
industry, competitors flock to the industry. However, when profitability falls, it is
difficult to leave the industry so profitability remains low.
Figure 1. Industries that are easy to enter but difficult to exit.:
Conversely, an industry that is difficult to enter but easy to leave is shown in Figure 2. It
has limited industry rivalry and tends to have good profitability. Competitors have a
difficult time entering the industry during times of good profitability. However, during
period of low profitability, competitors leave the industry easily.
Figure 2. Industries that are difficult to enter and easy to exit.:
Industries that are easy to enter and easy to exit are shown in Figure 3. The size and
composition of the industry is fluid and changes easily. Supply responds quickly to
changes in demand and prices tend to stabilize. Rivalry is moderate due to the easy flow
of businesses into and out of the industry.
Figure 3. Industries that are easy to enter and easy to exit.
Industries that are difficult to enter and difficult to exit are shown in Figure 4. The size
and composition of the industry is static and changes slowly. Supply changes slowly due
to market signals so price responds strongly to changes in demand. The amount of rivalry
can change radically due to changes in demand.
Figure 4. Industries that are difficult to enter and difficult to exit.:
8P’s of Software Industry:
The product aspects of marketing deal with the specifications of the services, and how it
relates to the end-user's needs and wants. The scope of a product generally includes
supporting elements such as warranties, guarantees, and support.
For service marketers, the core of the service element is the interaction between those
providing services and the customer, which is known as service encounter. To achieve
customer satisfaction appropriate processes are designed to ensure that the service
encounter meets customer expectations. To deliver the satisfactory services, the
employees of a company have to play an important role. Employees must possess
personal qualities, ability to understand and satisfy customer needs, flexibility, skills and
knowledge. Friendly and warm employees increase customer loyalty.
In service place refers to location and use of distribution channels. It is referring to the
channel by which a service is sold (e.g. online vs. retail), which geographic region or
industry, to which segment (young adults, families, business people), etc. also referring to
how the environment in which the product is sold in can affect sales.
In Service Industry Process refers to how a service is provided and delivered to the
customer. IT relies on processes to consistently deliver high quality solutions while
executing a growing number of engagements from multiple locations. Values, vision and
policies form the first level of IT three-tiered process architecture. They are implemented
through process execution at the next level. These processes are defined with clear
ownership using the ETVX (Entry, Task, Verification, and Exit) paradigm and clearly
defined roles and responsibilities.
5. Physical Evidence
The environment in which the service is delivered and where the firm and the customers
interact; and any tangible commodities that facilitate performance or communicate the
service. Physical evidence enhances customer’s perception of quality.
The general elements of physical evidence include (Organization Physical Facility):
• Exterior facilities • Interior Facilities - Billing statements
-Exterior design - Interior design - Reports
-Signage - Equipment -Employee
- Parking - Layout dress/uniform
- Landscape • Other tangibles - Brochures
-Surrounding - Business cards
environment - Stationery
Productivity refers to the success or failure of any business, so the quality of the product
should be very good for his companies have different quality standards which are
certified by the quality department and are approved all over the world. If one does not
have approved quality standards then he develops its own to meet the quality that are
demanded by the customers.
Software pricing strategy is price planning for a software firm takes into view factors
such as overall marketing objectives, consumer demand, product attributes, competitors'
pricing, and market and economic trends. When a firm launches a product, the pricing
decision is one of the most critical decisions. Software pricing has been concentrated the
internal business objectives of vendors such as costs, specified margins, and the
competition. On the marketing point of view, the goal of pricing strategy is to set a price
that is the pecuniary equivalent of the value perceived by the customer in the product in
order to meet the profit and achieve investment goals.
Over here, services and project consulting is through contract or agreement between the
parties and promotions are carried out only for the particular client selected as upgrading
and extended service for a particular period, etc. : This includes advertising, sales
promotion, publicity, and personal selling. Branding refers to the various methods of
promoting the product, brand, or company.
Genpact Limited, a business process outsourcing company (BPO) based in India
plans to raise about USD 700 million through its IPO (initial public offering) at the New
York Stock Exchange. The company had filed a registration statement with the Securities
and Exchange Commission (similar to SEBI) in US on May 11 this year. The company
has proposed a price band of USD 16 – 18 and the issue size is 35.29 million shares. It
has requested for the ticker ‘G’ previously used by Gillette a few years ago before it was
taken over by Proctor & Gamble. Morgan Stanley, Citi and JPMorgan are the co-lead
Genpact is registered in the Caribbean island of Bermuda and has operations in
China, Hungary, India, Mexico, The Netherlands, Philippines, Romania, Spain, United
Kingdom and United States.
The company was formerly known as GE Capital International Services. It was
founded in 1997 at Gurgaon, India. General Atlantic and Oak Hill Capital Partners
acquired a 62.63% stake in Genpact from General Electric in 2005.
Genpact has 5 sites in India at Gurgaon, Hyderabad, Bengaluru, Jaipur and
Kolkata. As of 2007, it has an employee strength of 30,000 globally.
The Genpact signature is a graphic representation of our organization and the
values for which it stands. Recently, company simplified the logo by removing the
symbol and tagline, and introducing a more concise and efficient version of the
wordmark. The position, size and color of the logo are predetermined and should not be
Pramod established Genpact (formerly GE Capital International Services) in 1997
and under his leadership pioneered the Business Process Outsourcing industry in India.
Genpact has also been the pioneer in this industry in China, and in Eastern Europe.
Today, it is acknowledged as a leader in the globalization of services and technology that
manages business processes for companies around the world. Genpact serves its
customers from over 35 operations centers in 13 countries, employing over 37,000
associates across a wide range of business processes, technologies and industries.
Genpact has built a strong organization by driving a culture which focuses on delivering
business impact, simplification, continuous improvement, process excellence leveraging
Six Sigma and Lean tools, and building deep domain expertise, while growing an
impressive client base which includes several Fortune 500 companies.
Genpact has been recognized globally as a leading BPO provider by the International
Association of Outsourcing Professionals, International Quality & Productivity Center,
American Society for Training & Development, Neo IT, Global Services, NASSCOM,
Dun & Bradstreet, Everest, Forrester and FAO Research, among others. Genpact became
a publicly traded company and listed on the New York Stock Exchange in August, 2007.
Pramod was earlier an Officer of General Electric (GE). His career with GE and RCA
spanned 25 years across the US, Europe and Asia. He was most recently the head of GE
Capital in India and in Asia, having earlier worked with GE Capital's Corporate and
Finance Group in Stamford, Connecticut, USA.
Pramod is a Chartered Accountant from Thomson Mc Lintock & Co., London, and holds
a Bachelor of Commerce degree from Delhi University. He is the Chairman of India's
National Association of Software & Services Companies (NASSCOM) for the year
2009-10, and is also a member of the Board of Trustees of NASSCOM Foundation.
Genpact has a global network of over 35 operations centers in 13 countries: India, China,
Guatemala, Hungary, Mexico, Morocco, the Philippines, Poland, the Netherlands,
Romania, Spain, South Africa, and the United States. This allows for multi-lingual
capabilities, access to a larger talent pool and ‘near shoring’ capabilities to take
advantage of time zones. Genpact uses different locations for different types of services
depending on the needs of the relevant client and the mix of skills and cost of talent
available in each location.
Genpact serves the following industries: Banking and Finance, Insurance,
Manufacturing, Transportation and Automotive.
Banking and Finance:
Genpact has more than 650 associates and 3,500 full time employees serving
businesses across USA, Europe, Australia and Asia from its global locations in India,
China, USA, Mexico and Hungary. A range of customer end financial products including
private label credit cards, dual cards (PLCC with credit card functionality), retail finance,
auto finance, personal loans and mortgage are supported. The services include finance
and accounting, sales / marketing analytics, customer services and financial services
collections / operations.
More than 1,800 employees serve the insurance operations. Life insurance, health
insurance, annuities and pensions, mortgage insurance, liability insurance and property /
casualty insurance are the key areas covered. These services fall into 4 categories viz.
insurance policy set up and maintenance, agent support, billing / collections, risk
assessment / marketing and IT services.
The company serves high end manufacturing industries like power systems,
transportation etc. Services include online support, payment collections, procurement
assistance and execution, vendor coordination, production planning / control and sales /
Genpact provides customer relationship and trade support, business operations
support, finance and accounting, employee services and marketing support to global
airlines, travel agencies, logistics service providers, car rental firms etc.
Genpact's service solutions comprise of supporting clients across component and
sourcing execution, manufacturing forecasting and planning, financing, after sales and
dealer support. It helps its clients gain control over their supply chain costs by providing
transactional procurement functions remotely, while also providing inventory
management planning through analytical techniques unique to the offshore industry.
Genpact has direct fiber optic connectivity to US, Europe and Australia, thus
enabling redundancy for links and equipment. It has more than 500 servers and 10,000
desktops to perform the operations.
1. All figures are in million USD.
2. The financial year is considered as January – December.
3. It is to be noted that the general, selling and administrative expenses for 2004, 2005
and 2006 were 76.3, 117.5, 159.2 million USD, the main reason for drop in net profits.
I-flex was earlier known as Citicorp Information Technologies Industries Ltd.
(CITIL).It was carved out of a Citicorp (now Citigroup), wholly owned subsidiary called
Citicorp Overseas Software Ltd. (COSL) in 1991. While COSL's mandate was to serve
Citicorp’s internal needs globally and be a cost center, CITL's mandate was to be
profitable by serving not only Citicorp but the whole global financial software market.
In 2006, i-flex became a majority-owned subsidiary of Oracle Corporation. Oracle built
its stake through a series of purchases, first buying Citigroup's 44% stake in i-flex
solutions for US$909 million (Rs3,960 crore at Rs43.55=US$1) in August 2005, a further
7.52% in March and April 2006 , and 3.2 per cent in an open-market purchase in mid-
Incorporated in 1989, Mumbai based I-flex Solutions Limited is basically
engaged in delivering provides information technology (IT) services to the financial
services industry to over 825 financial institutions over 130 countries. Major product
offered by i-flex includes FLEXCUBE i.e. a banking product suite for retail, consumer,
corporate, investment and Internet Banking, asset management and investor servicing.
Recently a number of reputed Global organizations like WWB Colombia (Latin
American financial institution), Leading French bank “Credit Agricole”, “TAIB Bank”, a
leading bank in the Middle East, “Israel Discount Bank” and “Vietnam's FPT bank”
selected Flex cube, i-flex's core-banking platform, to support international consolidation
and growth. Also, Company has decided to change its name to Oracle financial services
software limited for which shareholder approval will be sought on August 11, 2008.
Company has won a number of prestigious awards for its excellence in production,
design and communication such as League of American Communications Professionals
Awards in 2004- 2005 and the Society of Technical Communication Award in 2005-
i-flex is a leading software vendor for the banking and financial services vertical. It
provides technology products, custom applications and services, consulting services, IT
infrastructure services, and KPO services focused specifically on the financial industry.
The company’s product suite comprises FLEXCUBE, DAYBREAK, Reveleus,
CASTEK, and recently acquired Mantas’ behavior detection platform. Its core banking
product, FLEXCUBE has been ranked world's No. 1 selling core banking solution for
four years in a row since 2002 by the UK-based International Banking Systems (IBS). i-
flex’s services business, focused on BFSI segment, has also grown rapidly and currently
contributes ~42% to the total revenues. The company employs over 11,000 people and its
revenues for the past twelve months (TTM) stood at INR 17. bn (USD 433 mn).
i-flex is a clear leader in the Indian financial services space. Its strong product portfolio
has an extremely comprehensive range of solutions for the financial services industry.
Besides developing a strong product suite, the company has been constantly expanding
its capabilities through organic and inorganic routes. However the company has shown
consistent lackluster performance on the operational side especially in S, G & A costs
• i-flex launched FLEXCUBE private banking suite to increase its focus on Asia,
Europe and Latin America.
• The Company won multi-country deal to implement FLEXCUBE across all
domestic and overseas branches of China Trust Commercial Bank.
• i-flex is spending Rs 200 crore to expand its software development centre in
Mumbai and Bangalore.
The Company’s traditional stronghold ‘Products’ segment led the growth in the top-line.
i-flex launched FLEXCUBE private banking suite during the quarter that will increase
the cross-selling opportunity to existing client
Company is having strategic alliances with organizations like:
• Hewlett Packard
• Sun Microsystems
i-flex became a majority-owned subsidiary of Oracle Corporation. Oracle built
its stake through a series of purchases, first buying Citigroup's 44% stake in i-flex
solutions for US$909 million (Rs3,960 crore at Rs43.55=US$1) in August 2005, a further
7.52% in March and April 2006 , and 3.2 per cent in an open-market purchase in mid-
• One of the oldest hardware manufacturers.
• Control over the product.
• High quality product.
• Easy to carry products
• Product diversification
• Focusing on internal engg. more than marketing
• High price
• Consumer faced problems with faulty batteries
• Had difficulties on some of its products’ quality control
• Less expensive new product lines with quality.
• Product line is functional and attractive.
• Flexibility to its users.
• Pressure from competitors.
• Substitution effect
• Technology changes at a rapid rate.
The Group's principal activity is to provide information technology solutions to the
Financial service industry worldwide. The Group is organized into three businesses
Products, Services and KPO Services.
Product licenses and related activities segment deals with banking software products like
the FLEXCUBE suite of products, Revalues, Micro banker and Daybreak which cater to
needs of corporate, retail and investment banking as well as treasury operations and data
They have provided product/services t0 765 financial institutions, in over 130 countries,
including Banco de Chile, Citibank, the International Monetary Fund (IMF), Shinsei bank
and UBS. Below is another list of some of their major customers
• Amritsar Central Cooperative Bank, India
• Antwerp Diamantbank, India
• Asia Fund Services, Singapore
• Asian Finance Bank, Malaysia
• First Gulf Bank, UAE
• Kotak Mahindra Finance, India
• Lord Krishna Bank, India
Major Events in the company (M&A etc.):
i-Flex Solutions Limited Increases Its Stake In Castek To 100%
Oct 04, 2007
i-Flex Solutions Limited announced that it has acquired a 100% stake in Castek Software
Inc. The Company board has approved the acquisition and the transaction is expected to
close by March 2008.
Bank M (Tanzania) Selects i-flex's FLEXCUBE As Core Banking Solution
Sep 17, 2007 i-Flex Solutions Limited announced that Bank M (Tanzania) has selected its
flagship product FLEXCUBE as its core banking solution.
i-Flex Solutions Limited Announces Appointment Of Managing Director
Aug 24, 2007
i-Flex Solutions Limited announced that the Company has appointed Mr. N R K Raman
as the Managing Director for a period of five years with effect from May 01, 2007, to
April 30, 2012. i-Flex Solutions Limited Partners i-Flex Solutions Limited announced
that the Company has appointed Mr. N R K Raman as the Managing Director for a period
of five years with effect from May 01, 2007, to April 30, 2012. i-Flex Solutions Limited
I-Flex Solutions Limited's Ii-Flex Solutions Pte Ltd To Acquire Capco's Singapore
Jan 02, 2007 I-Flex Solutions Limited announced that its Singapore headquartered
subsidiary, i-flex solutions pte ltd, has entered into a definitive agreement to acquire the
Singapore subsidiary of Cap co -The Capital Markets Company Pte Ltd. Details of the
transaction were not mentioned.
Recent award and recognition:
Best Core Banking Project Award
• i-fl ex® solutions and Syndicate Bank, one of India’s leading public sector banks, won
the ‘Best Core Banking Project Award for Large Banks’ at The Asian Banker IT
Implementation Awards, 2006. Launched last year, the Asian Banker IT Awards aim to
discover emerging best practices in the use of IT in the financial services industry. The
assessments were based on four inter-related criteria: project implementation, business
value created, qualitative analysis and architectural design, and technical innovation.
One of the 38 Best Earners in Financial Services
• Research by The American Banker and Financial Insights, an IDC company, resulted in
i-fl ex receiving the Fin Tech citation at the BAI-RDS conference in Las Vegas, USA, for
best fiscal results. The Fin Tech 100 evaluates IT services companies on fiscal year-end
revenues and the percentage attributed to the financial services industry.
• Forbes Asia ranked i-fl ex No. 12 in its ‘Best under Billion List’.
IBS ranks FLEXCUBE® the #1 Banking Solutions for the Fifth Consecutive Year
• FLEXCUBE retained its position as the world’s No.1 selling banking solution for the
fifth consecutive year, in International Banking Systems (IBS) Annual Sales League
Tables for 2006, leading all other banking products across all categories in the number of
new wins for the year.
1. Have a clear development process:
A good process is fundamental for a successful project. It should be as lean as
possible and everyone in the team should embrace it. It doesn’t matter if the process is
agile oriented, or waterfall oriented, having a clear understanding of what to do and how
to do it is basic to reduce waste and to align everyone in the team in the same direction,
not having a clear development process is highly unproductive.
2. Understand the vision and goals of the project:
It is easier to fulfill the customer needs when everyone understands the reasons
behind the product development, that’s why every project should have a vision document
and a list of goals, these documents should have high visibility and all the team should
3. Use iterations:
Even in waterfall projects it is a good idea to deliver the product in iterations:
• It helps to know if the development is going in the right direction.
• It makes easier the development by splitting a big problem into smaller ones.
• It provides value to the business sooner, so the ROI is maximized.
Transparency helps to prevent some of the most common problems in software
• It helps to detect misdirection sooner during the development process.
• It helps to build trust.
• It helps to validate the planning.
In order to be transparent is important to enhance the communication across the team and
with the stakeholders.
A good leader removes impediments, coaches the team, makes sure that all the
conversations and meetings are fluent, and is always keeping an eye to make sure that the
project is going in the right direction, a project without good leadership is likely to waste
many time in meetings and development.
Selecting the right mix of sales channels and optimizing their performance is a
critical issue with many of Distribution Channel clients. Software industries work in
maximizing the effectiveness of direct sales organizations, representative, distributors,
and resellers. Assessing the performance of the sales channels, recommending alternative
means of reaching customers and developing the capabilities of the sales organization are
important aspects of many of Distribution Channel assignments.
Computer Peripherals Company, Global Distribution Strategy:
A major manufacturer of computer peripherals and office automation equipment wanted
to change the structure of their distribution and dealer networks around the world. We
worked with them and their trading partners in key geographies to refine their sales
distribution in key countries, establish new dealer support programs, and drive more
active sales efforts in these countries. CPC conducted a series of workshops with the
trading partners to establish a strong foundation to the sales strategy. CPC followed these
with planning sessions with each trading partner to establish specific country strategies
and programs. These sessions resulted in detailed roadmaps for expanding market share
and growing revenue in each country.
Software Company International Sales Channel Expansion:
This established software company had not fully developed their sales and distribution
channels to address opportunities in Latin and South America. Software company sales
channel worked with the management team in identifying the opportunities and priorities
for expansion into this region. Additionally, channel recommended the organizational
design, metrics and business processes that needed to be put in place to support the
implementation the new organization in the region. Finally, we worked with the
management team in refining the business plan to better meet their objectives. As a result
of the planning efforts, this new sales organization exceeded it goal in growth, sales
revenue, key customer, and profitability.
System Software Company Channel Audit:
Software client had put in place a sales strategy that relied strongly on sales through
systems integrators and resellers. Executive management sought an independent audit of
the program, seeking opinions of customers, channel partners and their own people.
Company Channel Audit conducted this audit and benchmarked several similar
organizations. Channel Audit provided software client with an assessment of the channel
strategy and recommendations to improve execution through the channel.
Financial Services Organization (Retail Banking):
Financial Service Organization worked with a major Bank in helping the executive
management better exploit its non-traditional channels to sell financial products. This
project involved integrating bank marketing plans, the customer service centers and the
telesales organization to attract banking consumers to utilize the telesales centers, driving
incremental sales of financial services products through more cost effective distribution
Telecommunications System Software Company Sales Organization Audit and
Restructuring: This Company had experienced very rapid growth with its sales
organization, but was seeing sharp declines in productivity, forecast integrity and sales
effectiveness. This was coupled with significant turnover in the sales organization. Sales
organization worked with the client in auditing the organization, establishing a commons
selling process, developing a forecasting and funnels management process and
implementing a much stronger management review process. Sales organization also
worked in establishing strong forward-looking metrics to give the management team
stronger capabilities in controlling their business.
Technology Based Product Sales Organization:
This organization worked with a major manufacturer of PC peripherals in developing
their strategies to expand the distribution of their products. This client traditionally
distributed their products through a specialized industry remarketer channel. As the client
broadened their product line, they sought new channels to expand the distribution of their
The assignment included the development and implementation of a strategy to identify
important software developers, industry resellers, retailers, and distributors to expand
distribution. TBP organization worked with the client in developing their priorities,
putting in place the appropriate support programs and infrastructure, and targeting the
highest leverage opportunities. Finally, TBP organization helped the client establish and
train a dedicated sales team to drive the development of these new channels. These
channels are expected to drive as much as 40% of the client’s sales in the coming years.
Reaching New Market Segments:
Researching client had established dominant share of several applications markets for its
application software packages. They had an established distribution channel that was very
effective in reaching its traditional markets.
Their traditional direct sales model was unaffordable in addressing the thousands of new
customers researching client wanted to reach. Research new market segments established
a plan that would leverage an existing infrastructure of resellers and service providers in
these markets. Reaching New Market Segments identified the organizational support
requirements, programs, metrics, and people needed to support this new distribution
channel. Reaching New Market Segments helped the client understand the critical
success factors in implementing a reseller channel, establishing strong relationships and
value for the resellers and the end customer.
Developing the Solutions Oriented Sales Force:
Solutions Oriented Sales Force assisted an information technology organization in
developing their strategies to increase their penetration of several key markets. The client
sought to gain share leadership in selling very complex systems of hardware, software,
and professional services. The selling process involved a conceptual sale at executive
levels. The selling cycle typically took 12-18 months.
Solutions Oriented Sales Force recommended the development of a specialized sales
organization, with the experience to significantly reduce the selling cycle as well as
improve the competitiveness in each sales situation. This sales organization worked with
the existing account teams to increase their success in selling these solutions in their
This approach has been replicated through the rest of the organization and is the
cornerstone to the sale and support of complex solutions in the target markets.
Industrial Control and Process Monitoring Product Sales: A manufacturer of
industrial products had developed a very strong direct marketing program. Through it
advertisements, catalog, and direct mail programs, they were generating a large number
of new customers every year, driving significant sales growth. This focus on new
customer acquisition had blinded Industrial Control client to the poor sales results
produced by the existing customer base and the ineffectiveness of their major accounts
Monitoring Product Sales showed them that they were losing opportunities by not
generating follow-on sales with existing customers. Monitoring Product Sales suggested
re-deploying internal resources and developing their representative organization to
support and grow the business they derived from existing customers. Monitoring Product
Sales helped them in developing a major accounts program to drive closer and more
profitable relationships with their top customers. These programs provided a basis for
doubling the growth of Industrial Control and Monitoring client.
The first and most important factor to note is that the level of economic development and
ICT infrastructure greatly affects the strategies employed. Depending on whether a
country already has an existing infrastructure, appropriate strategies change significantly.
Relatively advanced nations typically have existing ICT infrastructure and a trained
• Before 1984: State Planned Development
• 1984 - 1991: Guided and guarded liberalization
• 1991 - 1998: State getting out of the way
• Post 1998: Complete Liberalization
A BRIEF HISTORY IN TIME – SOFTWARE POLICY PRIOR TO 1984
• First mention in 5-Y Plans in late 1960s & early 1970s.
• Electronics Commission and the Doe instituted in 1970
Allowed the import of computers on condition to export software above 200% of import
over a period of 5 years.
In retrospect, one might consider that the high export requirements for imported
computers might have contributed towards the "export of human resources" as a strategy
to expand software exports.
1984-1990: GUIDED AND GUARDED LIBERALISATION
Software Policy of 1986 aimed to
• promote software exports
• promote the integrated development of software
• sirnplify the existing procedures
• promote the use of computers for decision making
• Better access to telecommunications services
• Assistance in the training and education of computer software personnel
• Liberalization of access to imported inputs
• De-licensing production capacity for computers/electronics
• Allowing foreign firms to operate 100% EoUs
Agencies formed/ Programs undertaken
• S/W Dev. Agency in the Doe
• Software Technology Parks
• Electronics & Computer S/w Export Promotion Council
• Software export seminars
INDUSTRY EVOLUTION OF SOFTWARE POLICY IN THE LAST DECADE
The appropriateness of the policy's objectives.
The goal of rapidly expanding exports of software and computer services via deputation?
Reducing the % of exports in deputation contracts from the 80- 85% in 1990 to around
50% by 1995.
The importance of altering the composition of software exports &Low portion of
value-added market with Indian firms
• developing long term relationships with clients and foreign affiliates
• developing embedded software for hardware manufacturers
• setting up corporate service centers in India, and
• constructing alliances among Indian software services
ECONOMIC LIBERALISATION - 1991 ONWARDS
New measures introduced were:
• Virtual abolition of industrial licensing,
• The dilution of MRTP Act w.r.t. expansions/mergers
• Relaxation of FERA on foreign companies holding a majority stake in certain
• the abolition of import licenses
• The lowering of customs duties.
Software exports were also aided by
• Decline in disputes over intellectual property rights
• Lessening of complaints from the international s/w industry
• Lessening of export of certain technologies after Cold War ended
Prospects for future:
• IT exports will move to the paradigm of global manufacturing
• Conditions have been created for the much talked about Value Chain jump of
• Working Capital problems for software exports will be eased
• Venture capital funding will unleash the entrepreneurial talent
• Quality Manpower shortage to ease out
• Development of Management Skills
Many people have the view that outsourcing software development services is waste of
time, money, and strength. People who assume this view are layman! I’m not authoring
this on a biased or irrational though. Once they come to realize the enormous benefits
associated with outsourcing software development, many who oppose it are themselves
going to advocate its use in many areas.
Outsourcing a software development project, boost up the economic scale of the vendor.
Economical considerations being the centric point for manufacturing divisions, the
company can actually reap benefits by outsourcing. Setting aside the business jargon, one
cannot turn away from the fact that India has emerged as one of the cheapest source of
developing outsourced software development.
Outsourcing software development projects to offshore companies facilitate the
maximum utilization of resources. Be it human resource or IT service, offshore
companies provide their best of services. Outsourcing projects can actually help to
compensate lacunae of individual firms. They can gainfully use the potential of multiple
companies, specialized in certain area to make their dreams come true. This will make
them free to concentrate on their fields.
Another substantial factor to advocate outsource software development projects is - time.
It is easily noticeable that production time is greatly reduced once software project is
outsourced. The vendor if sees a non-functional component in his project and expresses it
to his outsourced partner, he is sure to get it rectified the next working day. This is only
possible as the time difference in destination of client and vender comes as a positive
Offshore companies that work with the motive of providing “consumer satisfaction” can
be relied on to develop fruitful services. Strategically outsourcing software development
will save the clients their money and help to improve the products and services.
Marketing strategies for product software assist software firms to determine the type of
market analysis that is needed for decision-making. Two general strategies that are well
known in the marketing discipline are:
• Marketing mix; and
• Relationship marketing.
"Marketing mix" is the typical strategy for traditional mass marketers of product software
in competitive markets. Structured market research, and agility in reacting to sales, are
characteristic of their product development process (Alajoutsijarvi et al., 2000). An
example would be Electronic Arts, with their various home computer software games,
which are advertised on television and sold in many electronic stores.
"Relationship marketing", (closely associated to CRM), is used by product software
companies who focus on long-term customer relationships (Alajoutsijarvi et al., 2000).
An example of this is SAP, which offers enterprise resource planning systems, along with
support (since the software is complicated to install). Maintaining customer relationships
helps sell additional modules and future upgrades.
Brothers and van’s Kruis explain two other strategies that are important to the growth of
• A service-based strategy; and
• A different marketing channels strategy.
Information about customer preferences, observations of customer reactions, and
knowledge of past mistakes are important for the "service-based strategy". "Different
marketing channels strategy" tries to discover non-traditional marketing channels to help
increase distribution of software products to other target markets that take advantage of
positional differences. "Alliance-based strategies", on the other hand, are helpful at
providing knowledge exchanges, opening previously inaccessible markets (such as export
markets), and an overall larger market access (1997).
Besides helping with current strategies, market analysis can improve future planning and
growth strategies that are helpful in product road mapping decisions. It also helps
discover areas where "complementary product development" and "diversification
strategies" can be profitable. Complementary goods can be in the form of other software
products, hardware, or services, such as consultancy, user training, and customization
(Rao & Klein, 1994). The development of these goods increases the opportunities for
companies in the software market (Sengupta, 1998). Even complementary products from
other vendors can lead to an increase in the value of the original product, while reducing
the time to market (Messerschmitt & Szyperski, 2004).
The complementary product strategy adds value by showing innovation, and creates a
multiplier effect on the original product (Sengupta, 1998). Investing in other products and
services aids in diversification, which can increase the overall customer base, and helps
decrease the risks of being overly specialized (Rao & Klein, 1994). Diversification can,
therefore, increase the financial health of the company. An example of this is Microsoft,
which has increased the sales of its primary operating system software by offering
products, such as word processing, and media player software.
• Political stability: Indian political structure is stable with majority as ruling party
(Election 2009) Positive
• U.S. government has declared that U.S Companies that outsource IT work to
other location other than U.S will not get tax benefit Negative
• Government owned companies and PSUs have decided to give more IT projects
to Indian IT companies Positive
• Terrorist attack or war Negative
• Global IT spending (Demand) Negative
• Domestic IT (Demand): Domestic market to grow by 20% and reach approx USD
20 billion in 2008-09-estimated by NASSCOM Positive
• Currency Function Negative
• Real Estate Prices: Decline in real estate prices has resulted reducing the rental
expenditure midly Positive.
• Attraction: Due to recession, the layoffs and job-cuts have resulted in low attrition
rate Midly Positive.
• Economic attractiveness due to cost advantage and other factors Positive.
• Language spoken: English is widely spoken language in India, English medium
being the most accepted medium of education. Thus, India boasts of large English
speaking population highly positive.
• Working age population –positive
• Technology : Highly positive
A) India has the world’s lowest call rates (1-2US cents
B) Expected to have total subscriber base of about 500 million by 201
C) APPRU for GSM is USD 6.6 per month
D) India has the second largest telephone network after china.
E) Teledensity –19.86%
• Energy efficient process and equipments: Companies are focusing on reducing the
carbon footprints, energy utilization, water consumption, etc. positive
• Steady Growth
• Global IT spending (demand)
• Lack of scale
• Financial slowdown, slowing US economy.
• Competition from foreign markets
• Currency Fluctuation
Government has provided several policies tohelp and improves prospects for domestic
software companies. These include Setting up of STPs: STPs (Software Technology
Parks) are autonomous organizations setup by the Department of Electronics (DOE).
Under the STP scheme, member software units are provided various incentives. Currently
the Government has set up STPs at various cities like Bangalore, Pune, Bhubaneshwar,
Thiruvanthanapuram, Hyderabad, Noida, Gandhi agar, etc. To provide further incentives
to units in the STP, government relaxed the 100% export requirement. Software
companies are also exempted from applicability of Minimum Alternate Tax (MAT).
Export processing zones (EPZ): The government has set up various EPZs. Units setup
inside the zone can have 100% foreign equity. The firms are expected to export 75% of
their production and can sell the balance in the domestic market. Additional incentives
are provided in the form of cash compensatory support, a tax break for 5 years and
exemption from income tax on export profits.
Telecom policy: In May 1994, the government released the Telecom Policy to improve
the telecommunication infrastructure in India. The policy sought to encourage
privatization of infrastructure, which was a radical step at that time.
Curbing piracy: To protect the intellectual property rights (IPR) of software companies,
apart from cracking down on piracy, the government has also made several policies to
actively discourage piracy. Authorized sellers of imported software are allowed to
reproduce software in India and sell it without import duty. Local software manufacturers
are exempt from excise taxes
Other incentives include:
• Depreciation on IT products allowed at 60% pa, taking into cognizance the high rate of
obsolescence of such products.
• Exemption of withholding tax on interest on ECBs is proposed to be extended to the IT
sector as well. This will reduce cost of borrowings for IT companies through the ECB
• 100% customs duty exemption on all software used in the IT sector.
• Extension of 80HHE to the supporting developers. This will enable supporting
developers to enjoy tax concessions, similar to the supporting manufacturers concept in
Software companies to move up the value chain, it is imperative that they become
Innovative and look at the business opportunities that intellectual property brings. This
calls for a Paradigm shift in the way these companies are run. Backed up by focused
initiatives from Management, knowledge worker will certain help to convert India from a
brain pool to innovation Hub.
Software is an ever-expanding field. Every day newer fields are being created,
older ones upgraded. This is what makes the study of Software’s both interesting and
challenging Experts spent sleepless nights trying to keep pace with the latest in the field,
but a newer application would always elude them .That’s where the fun ends and the toil
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