Indian IT-ITes Industry


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Indian IT-ITes Industry

  1. 1. Indian IT-ITes Industry Updated :: 26 Feb 2009
  2. 2. Current Scenario <ul><li>FY07-08 performance reflects sustained growth of 32% </li></ul><ul><li>Clocking revenues of USD 52 billion in FY07-08 up from USD 39.6 billion in FY06-07 </li></ul><ul><li>Projected USD 60 billion in exports by FY09-10 </li></ul>Here comes your footer  Page
  3. 3. IT/ITeS industry: On a steady growth track <ul><li>The Indian IT-ITes industry grew at a rate of 32 per cent in FY2008 </li></ul><ul><li>Potential size of India’s offshore IT/BPO industry in 2015 is estimated at US$ 120 to 180 billion(10 to 12 per cent of GDP) </li></ul><ul><li>Direct employment for four million and indirect employment for 10 to 12 million by 2015 </li></ul><ul><li>Expected to earn revenues of US$ 64 billion in FY2009, recording a CAGR of 31 per cent over the last five years </li></ul>Here comes your footer  Page
  4. 4. Share of GDP Here comes your footer  Page
  5. 5. Forex Earnings Here comes your footer  Page <ul><li>IT/ITES industry grew by impressive 32.6% in FY07 </li></ul><ul><li>Expected to reach 40 bn USD in FY08 </li></ul>
  6. 6. Employment Generation Here comes your footer  Page <ul><li>CAGR of 26% in last decade </li></ul><ul><li>Direct employment of around 2 million by end 2008 </li></ul>
  7. 7. IT Services : Anchor Segment <ul><li>Hardware accounted for about 49 per cent of the total domestic IT-BPO spend in FY2007 </li></ul><ul><li>Software exports expected to reach US$ 40.8 billion, while the domestic market is expected to touch US$ 23.2 billion by FY2008 </li></ul>Here comes your footer  Page
  8. 8. IT Service : Anchor Segment <ul><li>Banking, Financial Services and Insurance (BFSI) vertical continues to account for the largest share of exports at 31 per cent </li></ul><ul><li>Telecom vertical accounts for second-largest share of the pie at 19 per cent </li></ul><ul><li>Other verticals such as Manufacturing, retail, media and healthcare are rapidly gaining pace </li></ul>Here comes your footer  Page
  9. 9. ITes –BPO <ul><li>Services exports account for nearly two-third of the total IT/ITeS sector exports. </li></ul><ul><li>Indian IT-BPO sector grew at an estimated 28 per cent in 2007 </li></ul>Here comes your footer  Page
  10. 10. ITes -BPO <ul><li>Industry has graduated to providing a high proportion of voice-based services and a wide range of back-office processing activities </li></ul><ul><li>Scope of services has expanded in the last (three to four) years, to include increasingly complex processes involving rule-based decision making and research services requiring informed individual judgment </li></ul>Here comes your footer  Page
  11. 11. Indian IT/ITeS industry structure Here comes your footer  Page
  12. 12. IT/ITeS sector: Value chain Here comes your footer  Page
  13. 13. DotCom-Bubble <ul><li>DotCom boom : 1995 – 2001 </li></ul><ul><li>Many new internet based companies called dotcoms emerged </li></ul><ul><li>BSE Sensex climbed from 4000 to 6,000 </li></ul><ul><li>Many new IT firms emerged during this period </li></ul><ul><li>Existing IT firms like Infosys, Wipro, TCS , Satyam registered huge profits. </li></ul><ul><li>Indian IT engineers made their presence felt in Silicon Valley </li></ul>Here comes your footer  Page
  14. 14. DotCom-Bubble Burst <ul><li>In Sep 2001, Sensex again dropped to 3,000 level. </li></ul><ul><li>Many dotcom companies that originated during the dotcom boom, were closed. </li></ul><ul><li>Other IT companies suffered heavy losses. </li></ul>Here comes your footer  Page
  15. 15. Current Economic slowdown – Impact on IT/ITeS <ul><li>Indian IT sector is going through a phase of uncertainty. </li></ul><ul><li>Many IT engineers are losing their jobs </li></ul><ul><li>No further recruitments is taking place </li></ul><ul><li>Profits declined for companies like Infosys, TCS </li></ul><ul><li>Salaries at all levels are being cut to minimize the losses </li></ul><ul><li>No new development is taking place </li></ul>Here comes your footer  Page
  16. 16. India : Value Proposition <ul><li>• Service offerings have evolved from low-end application development to high-end integrated IT solutions </li></ul><ul><li>• Range of services offered by leading players spans a wide spectrum cutting across multiple verticals </li></ul>Here comes your footer  Page Breadth of service offering Quality/maturity of processes • Host to more than 55 per cent of global SEI CMM Level 5 firms • Expected to host the highest number of ISO certified companies
  17. 17. India : Value Proposition <ul><li>• Cost of an engineer is about 20 – 40 per cent of comparable cost in European Union (EU) </li></ul><ul><li>• Selling, general and administrative costs approximately 80 per cent of comparable cost in EU </li></ul><ul><li>• Average offshore billing rate of US$ 20 to 35 per hour; about 50 to 70 per cent lower than EU </li></ul>Here comes your footer  Page Cost Advantage
  18. 18. India : Value Proposition <ul><li>• 6,75,000 technical graduates per annum, of which 4,00,000 are engineers </li></ul><ul><li>• Over 50,000 MBAs graduating per annum </li></ul><ul><li>• Leading firms add more than 10,000 new employees per annum </li></ul>Here comes your footer  Page Ease of Scalability
  19. 19. India: Strong offshoring credentials <ul><li>Key offshoring destination </li></ul><ul><li>India’s share in the global market has increased by 3 per cent in the IT segment and by 6 percent in ITeS from 2000-01 to 2005-06 </li></ul>Here comes your footer  Page
  20. 20. Government initiatives and progressive policy reforms <ul><li>Establishment of a nodal agency (STPI) </li></ul><ul><li>Fiscal benefits like tax holidays to attract investment into the industry </li></ul><ul><li>Basic Infrastructure </li></ul><ul><li>Single-window clearances for setting up Export Oriented Units (EOUs) </li></ul><ul><li>Telecom sector deregulation </li></ul><ul><li>Sector deregulated in the mid and late 1990s to allow private sector and MNC participation </li></ul><ul><li>Regulatory reform to allow adoption of new technologies </li></ul><ul><li>Enable benefits of free market competition, improved service quality and declining tariffs </li></ul>Here comes your footer  Page
  21. 21. Government initiatives and progressive policy reforms (contd…) <ul><li>Progressive policy reform (fiscal/trade/other) </li></ul><ul><li>No FDI restrictions </li></ul><ul><li>Fiscal reform (international taxation,overseas investment, etc.) to facilitate ease of international transactions </li></ul>Here comes your footer  Page
  22. 22. Recent/current initiatives <ul><li>Area limit exemptions for the IT-BPO sector in the SEZ policy </li></ul><ul><li>Special emphasis on talent and infrastructure development </li></ul><ul><li>Infrastructure development; provisions designed to complement the STPI scheme </li></ul><ul><li>Highest level of commitment to addressing core issues faced by the industry </li></ul>Here comes your footer  Page
  23. 23. Semiconductor Policy, 2006 <ul><li>Encourages FDI investment in hardware production segment and provides lucid policy structure for attracting capital through focus policies </li></ul><ul><li>Government to bear 20 per cent of the capital expenditure for manufacturing units located inside SEZs and 25 per cent for those outside SEZs </li></ul><ul><li>Emphasis on wafer fabrication and ancillary manufacturing plants </li></ul>Here comes your footer  Page
  24. 24. Here comes your footer  Page National GDP share Forex earning Employment generation Spurring growth of first generation entrepreneurs Driving growth of other sectors Indirect employment generation Boosting India’s image in global markets Front runner in good corporate governance Contribution to Workforce development Overall talent development in the country <ul><li>Employment Diversity: </li></ul><ul><ul><li>Persons with diverse qualifications </li></ul></ul><ul><ul><li>Differently-abled </li></ul></ul><ul><ul><li>Women </li></ul></ul><ul><ul><li>Persons from small cities </li></ul></ul><ul><ul><li>Youth </li></ul></ul><ul><ul><li>Out of mainstream candidates </li></ul></ul>Education Health Livelihood Contribution to Community and Environment Direct economic impact Improving product/ service quality Indirect impact on Economic Scenario Skill enhancement within organisation Employee friendly work environment Environment Rural Development Women & Children Differently abled Sports and Arts Balanced Regional Growth Fuelling growth of PE/VC funding activity Impact on Economy and Society
  25. 25. Indirect Economic Impact Here comes your footer  Page Driving Growth of Other Sectors <ul><ul><li>Every Re 1 spent by IT/ITES sector results in Rs. 2 total output in the economy </li></ul></ul><ul><ul><li>In FY06, 15.85 bn USD spent by the sector in domestic economy generated total output of 31.35 bn USD </li></ul></ul><ul><ul><li>Multiplier effect more significant in sectors like housing/construction, transport services, communications, consumer durables, food items and clothing </li></ul></ul>Indirect Employment Generation <ul><ul><li>Every one new job in the sector, creates four additional jobs in the economy </li></ul></ul><ul><ul><li>Estimated indirect employment generated around 6.5 mn in FY07 </li></ul></ul><ul><ul><li>Indirect employment opportunities created for low skilled/less educated workers- 75% of indirect workforce are SSC/HSC or less educated </li></ul></ul>Balanced Regional Growth <ul><ul><li>Sector contributing to small city growth by hiring employees from these areas </li></ul></ul><ul><ul><li>Several IT/ITES Companies shifting to smaller cities, beyond traditional Tier I locations - Emerging pan India presence of the sector </li></ul></ul>
  26. 26. Socially Relevant Community Initiatives Here comes your footer  Page Education <ul><ul><li>68% of Companies undertaking socially relevant initiatives are involved in this sector </li></ul></ul><ul><ul><li>Top areas of contribution are infrastructure, primary education, scholarships, IT training and higher education </li></ul></ul><ul><ul><li>Initiatives by top 6 Companies impacted 17.5 lakh people in 2006-07 </li></ul></ul><ul><ul><li>Eg, WIPRO, Microsoft </li></ul></ul>Health <ul><ul><li>56% of Companies contribute to this sector </li></ul></ul><ul><ul><li>Initiatives are aimed at improving quality and availability of infrastructure, initiating and supporting tele-medicine projects and creating awareness about risk factors </li></ul></ul><ul><ul><li>Eg TCS-WebMedicine, Cummins, Satyam-EMRI </li></ul></ul>Environment <ul><ul><li>42% of Companies undertaking socially relevant initiatives are involved in this sector </li></ul></ul><ul><ul><li>Initiatives are aimed at conservation of resources and environmentally friendly practices in supply chain, awareness creation, tree plantation etc. </li></ul></ul><ul><ul><li>Eg, HP is collaborating with WWF to establish a climate witness project in Sunderbans </li></ul></ul>
  27. 27. Challenges for Indian IT/ITes Industry <ul><li>Dependency on the US </li></ul><ul><li>Indian IT firms outsourced and Off-shored ! </li></ul><ul><li>Rupee Appreciation and FII </li></ul><ul><li>IT SEZ’s </li></ul><ul><li>DTA (domestic Tariff Areas) </li></ul><ul><li>Diversification In Verticals </li></ul><ul><li>Telecom and 3G </li></ul>Here comes your footer  Page
  28. 28. Here comes your footer  Page