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Source: NASSCOM; Aranca Research
Note: BPM - Business Process Management, USP - Unique Selling Proposition
Strong growth
opportunities
• The IT-BPM sector in India is estimated to expand at a CAGR of 9.5 per cent to USD300
billion by 2020. The sector increased at a CAGR of 25 per cent over 2000–13, 3-4 times
higher than global IT-BPM spend
Leading sourcing
destination
• India is the world’s largest sourcing destination, accounting for approximately 52 per cent
of the USD124–130 billion market. The country’s cost competitiveness in providing IT
services, which is approximately 3-4 times cheaper than the US continues to be its USP in
the global sourcing market
Largest pool of ready to
hire talent
• India’s highly qualified talent pool of technical graduates is one of the largest in the world,
facilitating its emergence as a preferred destination for outsourcing
Most lucrative sector for
investments
• The sector ranks fourth in India’s total FDI share and accounts for approximately 37 per
cent of total Private Equity and Venture investments in the country
• The engineering sector is delicensed;
100 per cent FDI is allowed in the
sector
• Due to policy support, there was
cumulative FDI of USD14.0 billion into
the sector over April 2000 – February
2012, making up 8.6 per cent of total
FDI into the country in that period
Growing demand
Source: Nasscom, Aranca Research
Note: SEZ stands for Special Economic Zone, BFSI stands for Banking, Financial Services and Insurance; E stands for Estimate, F stands for Forecast
Growing demand
• Strong growth in demand for
exports from new verticals
• Expanding economy to propel
growth in local demand
Global footprints
• IT firms in India have delivery
centres across the world; as of
2012, IT firms had a total of
580 centres in 75 countries
• India’s IT & ITes industry is
well diversified across verticals
such as BFSI, telecom, retail
Policy support
• Tax holidays extended to the IT
sector
• SEZ scheme since 2005 to benefit
IT companies with single window
approval mechanism, tax
benefits,etc
Competitive advantage
• India has cost savings of 60– 70
per cent over source countries
• India remains a preferred
destination for IT & ITeS in the
world. With 52 per cent market
share, India continues to be a
leader in the global sourcing
industry
• The country has a huge talent
pool
2013E
Industry
value:
USD108
billion
2020F
Industry
value:
USD300
billion
Advantage
India
• By early 90s,
US-based
companies
began to
outsource work
on low-cost and
skilled talent
pool in India
• IT industry started to
mature
• Increased
investment in R&D
and infrastructure
started
• India increasingly
seen as a product
development
destination
• The number of firms
in India grew in size
and started offering
complex services
such as product
management and
go-to market
strategies
• Western firms set
up a number of
captives in India
Pre-1995
1995-2000
2000–05
2005 onwards
• Firms in India became
multinational companies
with delivery centres
across the globe (580
centres in 75 countries,
as of 2012)
• Firms in India make
global acquisitions
• The IT sector is expected
to employ about 3.0
million people directly
and around 9.5 million
indirectly, as of FY13
• India’s IT sector is at an
inflection point, moving
from enterprise servicing
to enterprise solutions
Source: Nasscom, Aranca Research
IT&ITeS sector
• Market Size: USD56.3 billion during FY13
• Over 78 per cent of revenue comes from the export market
• BFSI continued as the major vertical of the IT sector
• Market size: USD20.9 billion during FY13
• Around 85 per cent of revenue comes from the export market
Business Process
Management (BPM)
IT services
• Market size: USD17.9 billion during FY13
• Over 79 per cent of revenue comes from exports
• Market size: USD13.3 billion during FY12
• The domestic market accounts for a significant share
• The domestic market is experiencing growth as the penetration of
personal computers is rising in India
Hardware
Software products and
engineering services
Source: Nasscom, Aranca Research
Note: E - Estimates
Market size of IT industry in India (USD billion)India’s technology and BPM sector (including hardware) is
estimated to have generated USD108 billion in revenue
during FY13 compared to USD100.9 billion in FY12,
implying a growth rate of 7.4 per cent
The contribution of the IT sector to India’s GDP rose to
approximately 8 per cent in FY13 from 1.2 per cent in FY98
22 22 24 29 32 32
41 47 50
59
69 76
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E
Domestic Export
Source: Bloomberg, Aranca Research
Note: 2012 (calendar year) revenues were
considered for all the companies
Market share of IT players based on revenues (2012)TCS is the market leader, accounting for about 10.1 per
cent of India’s total IT & ITeS sector revenue
The top six firms contribute around 36 per cent to the total
industry revenue, indicating the market is fairly competitive
Company name Market share
TCS 10.7 per cent
Wipro 7.2 per cent
Cognizant 6.8 per cent
Infosys 6.3 per cent
HCL Tech 4.2 per cent
Tech Mahindra 1.1 per cent
Source: Nasscom, Aranca Research; Note: E stands for Estimate
Growth in export revenue (USD billion)
Total exports from the IT-BPM sector (excluding hardware) are estimated at USD76 billion during FY13; the industry rose
at a CAGR of 13.1 per cent during FY08-13E despite weak global economic growth scenario
Export of IT services has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding hardware)
BPM accounted for 23.5 per cent of total IT exports during FY13
Sector-wise breakup of export revenue FY13E
22.2 25.8 27.3
33.5
39.9 43.9
9.9
11.7 12.4
14.1
15.9
17.8
8.8
10 10.4
11.4
13.0
14.1
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E
IT services BPM Software products and engg. services
57.9%
23.5%
18.6%
IT services
BPM
Software products
and engg. Services
CAGR: 13.1%
Source: Nasscom, Aranca Research
Notes: C&U - Construction & Utilities, T&T - Travel and Tourism, T& M - Telecom & Media, BFSI - Banking, Financial Services and Insurance
The figures mentioned are for IT and BPM only and do not include engineering services and hardware exports
Export revenue growth across verticals (USD billion)
BFSI is a key business vertical for the IT-BPM industry. It generated export revenue of around USD31 billion during FY13,
accounting for 41.0 per cent of total IT-BPM exports from India
Approximately 85 per cent of total IT-BPM exports from India is across four sectors: BFSI, telecom, manufacturing and
retail. The hitherto smaller sectors are expected to grow
Distribution of export revenue across verticals (FY13)
28
13
11
7
3 2 2
31
14 12
8
4 2 2
BFSI
T&M
Manufacturing
Retail
Healthcare
T&T
C&U
FY12 FY13
41%
18%
16%
10%
5% 3%
3%
BFSI
T & M
Manufacturing
Retail
Healthcare
T & T
C & U
Source: Nasscom, Aranca Research
Note: ROW is Rest Of the World, APAC is Asia Pacific
Geographic breakup of export revenue (USD billion)
US has traditionally been the biggest importer of Indian IT exports; over 60 per cent of Indian IT-BPM exports were
absorbed by the US during FY13
Non US-UK countries accounted for just 21.0 per cent of total Indian IT-BPM exports during FY12
Europe, one of the fast growing IT markets in 2012, is expected to emerge as a potential market as higher inclination
towards offshoring firms would increase demand for IT services
Distribution of export revenue across geographies (FY13)
42
12
8
5
2
47
13
9
6
2
US UK Continental
Europe
APAC ROW
FY12 FY13
62%
17%
11%
8%
2%
US
UK
Continental Europe
APAC
ROW
Source: Nasscom, Aranca Research
Category
Number of
players
% of total export
revenue
% of total
employees
Work focus
Large sized 11 47-50% ~35-38%
• Fully integrated players offering full range of
services
• Large scale operations and infrastructure
• Presence in over 60 countries
Mid sized 85-100 32-35% ~28-30%
• Mid tier Indian and MNC firms offering services
in multiple verticals
• Dedicated captive centers
• Near shore and offshore presence in >30-35
countries
Emerging 450-600 9-10% ~15-20%
• Players offering niche IT-BPM services
• Dedicated captives offering niche services
• Expanding focus towards sub Fortune 500/
1000 firms
Small >4,000 9-10% ~15-18%
• Small players focussing on specific niches in
either services or verticals
• Includes Indian providers and small niche
captives
Global delivery
model
• The number of global delivery centres of IT firms in India reached 580, spreading out
across 75 countries, as of 2012
• As of 2009, over 150 centres were set up by various Indian IT firms in North America
Global sourcing hub
• India continues to maintain a leading position in the global sourcing market. Its market
share increased to 52.0 per cent in 2012 from 50.0 per cent in 2011
Engineering offshoring
• India is the most preferred location for engineering offshoring, according to a customer poll
conducted by Booz and Co
• Companies are now offshoring complete product responsibility
Patent filing
• Increased focus on R&D by IT firms in India resulted in rising number of patents filed by
them
• The number of patents filed by the top three IT companies increased to 858 in 2012 from
150 in 2009
Changing business
dynamics
• India’s IT market is experiencing a significant shift from a few large-size deals to multiple
small-size ones
• Delivery models are being altered, as the business is moving to capital expenditure
(capex) based models from operational expenditure (opex), from a vendor’s frame of
reference
Large players gaining
advantage
• Large players with a wide range of capabilities are gaining ground as they move from
being simple maintenance providers to full service players, offering infrastructure, system
integration and consulting services
New technologies
• Disruptive technologies, such as cloud computing, social media and data analytics, are
offering new avenues of growth across verticals for IT companies
Growth in non-linear
models
• India’s IT sector is gradually moving from linear models (rising headcount to increase
revenue) to non-linear ones
• In line with this, IT companies in India are focusing on new models such as platform-based
BPM services and creation of intellectual property
Consumerisation of IT
• Global outsourcing is being used to drive fundamental re-engineering of end-to-end
processes
• Increased emphasis on beyond cost benefits
• IT firms in the current phase have moved up the value chain, providing innovation-led
growth to clients from SLA satisfaction and RoI calculations
Emergence of Tier II
cities
• Tier II and III cities are increasingly gaining traction among IT companies, aiming to
establish business in India
• Cheap labour, affordable real estate, favourable government regulations, tax breaks and
SEZ schemes facilitating their emergence as a new IT destination
• Giving rise to the domestic hub and spoke model, with Tier I cities acting as hubs and Tier
II, III and IV as network of spokes
SMAC technologies, an
inflection point for
Indian IT
• Social, Mobility, Analytics and Cloud (SMAC), a paradigm shift in IT-BPM approaches
experienced until now, is leading to digitisation of the entire business model
• IT vendors in India to generate USD225 billion from SMAC-related revenue by 2020
Note: SLA - Service Level Agreement; RoI - Return on Invesmtnet
Note: STPI stands for Software Technology Park of India, SEZ stands for Special Economic Zone
Growth
drivers
Talent Pool
Domestic
growth
Infrastructure
Global
demand
Policy
support
• Computer penetration
expected to increase
• Government likely to become
a major contributor to domestic
demand by 2013–14
• 4.7 million graduates are estimated to have been
added to India’s talent pool in FY13
• Strong mix of young and experienced professionals
• Global IT offshore
spending is expected to
rise at a CAGR of 8.0 per
cent during FY11–13
• Global BPM spending is
estimated to expand at a
CAGR of around 7.0 per
cent during FY11–13
• Tax holidays for STPI and
SEZs
• Procedural ease and single
window clearance for setting
up facilities
• Robust IT infrastructure across
various cities in India such as
Bengaluru
• Delivery centres spread across
various countries
Source: Nasscom, Aranca Research
Note: Small and Medium Business; E indicates estimated numbers
Domestic IT market by customer segment
(FY2013E)
Large enterprises account for a significant share of the IT
market and added USD15bn to domestic revenue in FY13
Expansion of Indian firms in global markets is
leading to increasing spend on IT for efficient and
cost-effective operations
SMB, another potential demand pool for IT services in
domestic market
Adoption of technology for enhancing product
visibility, reach and operational efficiencies is
leading to higher demand for IT services from SMBs
With 46 million units, India has the second largest
SMB base in the world
47%
26%
15%
12%
Large enterprises
SMB
Governement
Consumers
Total market = USD32 billion
Source: Nasscom, Aranca Research
Note: UT - Union Territory
Domestic revenue from IT and BPM (USD billion)Introduction of large eGovernance projects to provide better
services through IT and focus on the formation of the cyber
policy led to higher demand for IT and hardware from the
government
The Central Government and State/UT Government
allocated 0.9–1.2 per cent and 2.8–3 per cent,
respectively, of total budget on IT spend under the
12th Five Year Plan
Strong consumer demand for IT service and products:
Advent of smartphones, tablets, iPads,
Rising computer literate population
Enhanced Internet and mobile penetration
Growing disposable income strengthening consumer
purchasing power
15.5
FY13 FY15F FY20F
~22-23
~90-100
Source: Nasscom, Aranca Research
Note: Ovals indicate CAGR
Export revenue from IT and BPM (USD billion)Global IT-BPM spending to grow 5–6 per cent to nearly
USD2 trillion by 2013
Global sourcing to rise at a faster pace of 9–11 per cent to
USD124–130 billion in 2013
Emergence of SMAC would provide USD1 trillion market by
2020
Emerging economies are likely to be a major contributor to
IT spend growth
IT spend in emerging economies to grow 3-4 times
faster than advanced economies
The BRIC IT market is estimated at USD380–420
billion by 2020
Emerging segments are expected to drive growth of Indian
IT-BPM exports
48
~106-111
FY11 FY14F
Core and non core segment’s growth prospects
22 11 1.2 7.6 3.2 3.1
35
15
2 13
5.5 5.5CADM
ER&D
ITconsulting
ISsourcing
Knowledge
services
Software
testing
FY13E FY16F
Core segments Emerging segments
17%
10%
19%
20%
20%
21%
Source: Nasscom, Aranca Research
Note: Graduates includes both graduates and post graduates
Graduates addition to talent pool in India
(in millions)
Availability of skilled English speaking workforce has been a
major reason behind India’s emergence as a global
outsourcing hub
India added around 4.7 million graduates to the talent pool
during FY13
Growing talent pool of India has the ability to drive the R&D
and innovation business in the IT-BPM space
3.2 3.5
3.7 4.0
4.4
4.7
FY2008 FY2009 FY2010. FY2011 FY2012 FY2013E
Source: Nasscom, Aranca Research
Training expenditure by Indian IT-BPO sectorAbout 2 per cent of the industry revenue is spent on training
employees in the IT-BPM sector
40 per cent of total spend on training is spent on training
new employees
A number of firms have forged alliances with leading
education institutions to train employees
24%
6%
13%
27%
19%
11%
Salaries for inhouse
training staff
External training (new
recruits)
External training (existing
employees)
Recruitment cost
Employee welfare
Other costs
Source: Nasscom, Aranca Research
Note: NAC - Nasscom Assessment of Competence, IIIT - Indian Institutes of Information Technology
Short term
Medium term
Long term
• Enhance over all yield of employees
• Improve employability
• Expand to tier 2 cities
• Lower skill dependence
Objectives Initiatives
• Industry to enhance investment in
training
• Use NAC and NAC – Tech to assess
employability of talent pool
• Identified new tier 2 locations
• Bring down investment on training
• Develop specialist and project
management expertise
• Launched the National Faculty
Development Programme to increase
suitability of Faculty
• Aiding industry access to specialist
programmes offered by independent
agencies
• Expand education capacity
• Promote reforms in education
• Expansion of higher education
infrastructure; 20 new IIITs to be set up
by the government
• Programme to increase PhDs in
technology
Source: Nasscom, Aranca Research, STPI
As of FY2011, 6,554 STPI units were operational, while
5,564 units have exported IT services and products. During
FY11, STPI units accounted for approximately 76.0 per cent
of total IT exports
IT-SEZs have been initiated with an aim to create zones
that lead to infrastructural development, exports and
employment
Characteristics of STPI and SEZ in India
Parameters STPI SEZ
Term 10 years 15 years
Fiscal benefits
• 100 per cent tax
holiday on export
profits
• Exemption from
excise duties and
customs
• 100 per cent tax
holiday on exports
for first five years
• Exemption from
excise duties and
customs
Location and
size restrictions
• No location
constraints
• 23 per cent STPI
units in tier II and
III cities
• Restricted to
prescribed zones
with a minimum
area of 25 acres
Source: Nasscom, E&Y, Aranca Research
IT sector employment distribution in Tier I and
Tier II/III cities
1,821 1,615
175
3,230
2008 2018E
Tier I locations Tier II/III locations
Trends in tier II and III cities
• 43 new tier II/III cities are emerging as IT delivery
location; this could reduce pressure on leading
locations
• Cost in newer cities is expected to be 28 per cent
lower than leading cities
• Lower cost and attrition, affordable real estate and
support from local government, such as tax breaks,
STPI and SEZ schemes, are facilitating this shift of
focus
• Over 50 cities already have basic infrastructure and
human resource to support the global sourcing and
business services industry
• Some cities are expected to emerge as regional hubs
supporting domestic companies
Source: Zinnov, Nasscom, Aranca Research
Number of GIC’s in India
2000 2005 2010 2012
~180
450+
700+
750+
Key highlights
• Global In-House Centers (GIC), also known as captive
centers, are one of the major growth drivers of the IT-
BPM sector in India
• As of FY2012, the captive segment accounted for 16-
18 per cent of the IT-BPM industry revenue
• The impact of the segment goes beyond revenue and
employment, as it helped in developing India as a R&D
hub and create an innovation ecosystem in the country
• Within the captive landscape, ER&D/SPD
(Engineering Research & Development /Software
Product Development) is the largest sub-segment
• Companies from North America and Europe are major
investors in the captive segment in India, accounting
for over 90 per cent of captives in the country
Source: Venture Intelligence, Nasscom, Aranca Research
PE-VC investments in IT & BPM (USD billion)
The IT & BPM sector continued to attract PE and VC investments in 2012, accounting for a significant proportion in terms
of volume (around 37 per cent) and value (approximately 40 per cent)
Value increased at an impressive 68.4 per cent over 2011
eCommerce accounted for 31 VC deals in 2012
About 64 per cent of VC deals in India were in the software, internet and mobile industry
Two of the largest PE deals in the sector during 2012 were:
JP Morgan’s buyout of M*Modal (USD1,100 million)
Bain Capital, GIC investment in Genpact (USD1,000 million)
In 1Q13, the industry attracted 26 deals at a value of USD105 million
Share of IT-BPM in PE-VC investments
0.8
1.9
3.2
2008 2011 2012
184
379
484
393
58
25 32 40
2009 2010 2011 2012
Number of deals Share of IT-BPM
Source: All the figures are taken from International Data
Corporation (IDC) and Nasscom and are FY10 estimates
Notes: SMB - Small and Medium Businesses
• BRIC nations, continental Europe, Canada and
Japan have IT spending of approximately
USD380–420 billion
• Adoption of technology and outsourcing is
expected to make Asia the second largest IT
market
• Government, healthcare, media and utilities have
IT spend of approximately USD190 billion, but
account just 8 per cent of India’s IT revenue
• A number of sectors are expected to depend on
technology and service providers to reduce the
cost to serve• SMBs have IT spend of approximately USD230–
250 billion, but contribute just 25 per cent to India’s
IT revenue
• The emergence of new service offerings and
business models would aid in tapping market
profitably and efficiently
New verticals
New
customer
segments
New geographies
Growth trend of traditional verticals
Traditional verticals i.e. BFSI, telecom and manufcaturing, continue to remain the largest in terms of IT adoption, and are
expected to grow at an average of 15%
Implementation of cloud environment and mobility way forward for traditional verticals
Emphasis on other emerging verticals (such as education, healthcare and retail) to aid growth in IT firms in India
Shift from IT adoption infrastructure, automation and digitisation to smart IT marks future trend of services in
emerging verticals
Growth trend of emerging verticals
128
80
339
195
126
506
243
193
595
BFSI Telecom Manufacturing
FY10 FY13E FY15F
17.2
11.6
4.4
34.5
17.5
8.7
39.5
24.8
9.7
Education Healthcare Retail
FY10 FY13E FY15F
Source: Nasscom, Aranca Research
Source: Nasscom, Aranca Research
Note: SMB - Small and Medium Business
Market size of other progressing verticals by 2020
(USD billion)
As IT is increasingly gaining traction in SMB’s business
activities, the sector offers impressive growth opportunities
and is estimated at approximately USD230–250 billion by
2020
In a bid to reduce cost, governments across the world are
exploring outsourcing and global sourcing options
Technologies, such as telemedicine, mHealth, remote
monitoring solutions and clinical information systems, would
continue to boost demand for IT service across the globe
IT sophistication in the utilities segment and the need for
standardisation of the process are expected to drive
demand
Digitisation of content and increased connectivity is leading
to a rise in IT adoption by media
250
90
58
25
17
SMB Government Healthcare Utilities Media
Source: Nasscom, Aranca Research
Note: Size of bubble indicates market size,
*CAGR and market size for Big data/analytics is till 2015
Growing technologies future growthEmerging technologies present an entire new gamut of
opportunities for IT firms in India
SMAC provide USD1 trillion opportunity
Cloud represents the largest opportunity under SMAC,
increasing at a CAGR of approximately 30 per cent to
around USD650–700 billion by 2020
Social media is the second most lucrative segment for IT
firms, offering a USD250 billion market opportunity by 2020
Cloud
Social Media
Enterprise
mobility
Big
data/analytics*
10%
20%
30%
40%
50%
60%
0 200 400 600 800
CAGRtill2020
Market size USD billion
Source: Nasscom, Aranca Research
Emerging geographies to drive the next growth phase for IT firms in India
BRIC provides USD380–420 billion opportunity by 2020
Focus on building local credible presence, high degree of domain expertise at competitive costs and attaining operational
excellence hold key to success in new geographies
Countries offering growth potential to IT firms
Country IT spend India’s penetration Key segments
Canada USD63 billion ~1.5 per cent Enterprise applications, cyber security, healthcare IT
Europe USD230 billion <1.5 per cent IT sourcing, BPM, IS outsourcing, CAD
Japan USD235 billion <1 per cent CRM, ERP, Salesforce automation, SI
Spain USD26 billion <1.5 per cent IT sourcing, SI
Mexico USD29 billion ~4 per cent IT sourcing, BPM
Brazil USD47 billion ~2 per cent Low level application management, artificial intelligence, R&D
China USD105 billion <1 per cent Software outsourcing, R&D
Australia USD48 billion ~4 per cent Procurement outsourcing, infrastructure software & CAD
Source: TCS website and Annual Report, Aranca Research
Segment-wise revenue breakdown (FY13)
66%5%
12%
3%
3%
13%
IT solutions and
services
Engineering and
industrial services
Infrastructure
services
Global consulting
Asset leverage
solutions
Business process
outsourcing
Tata Consultancy Services
Established in 1968, Tata Consultancy Services (TCS) is
an Information Technology (IT) services, consulting and
business solution company . It provides end-to-end
technology and technology-related services to global
enterprises. The company’s business is spread across
the Americas, Europe, Asia Pacific, and Middle East and
Africa (MEA).
Achievements:
• 2013: Won Best Performing Consultancy Brand award
in Europe
• 2013: Received Red Hat North America Awards for
System Integrator Partner of the Year
• 2012: TCS China ranked amongst the top 10 global
services providers in China
• 2012: TCS BaNCS won Xcelent Customer Base
Awards 2012
Source: TCS website and Annual Report, Aranca Research
Number of customersFinancial performance (USD billion)
6.0 6.3
8.2
10.2
11.6
1.4 1.7
2.3
2.8 3.1
FY09 FY10 FY11 FY12 FY13
Revenue Operating profit
214
76
42
25
5
458
208
143
81
27
8
522
245
170
99
43
14
556
277
196
115
48
16
USD1
million+
USD5
million+
USD10
million+
USD20
million+
USD50
million+
USD100
million+
FY5 FY11 FY12 FY13
1968 2001 2003 2005 2007 2009 2011 2013
Energy resources
& Utilities
Consolidation of
market position
through CMC
acquisition
Expansion of
geographic
presence
1968
India’s first
software service
company
Issue of an IPO in
the market in India
and raised USD1.2
billion in 2004
FY03
Became the first
software company
in India to cross
USD1 billion
revenue
FY13
USD11.6
billion revenue
Life Sciences &
Healthcare
Manufacturing
Media &
Entertainment
Retail and consumer
packaged goods
BFSI
Acquisition of IT
service firm Alti in
France in 2013
With a brand value of over
USD1 billion, TCS
consolidates position as
one of the largest IT
players
FY13
Active client
base: 1,156
New clients:
153
Source: TCS website and Annual Report, Aranca Research
Source: HCL Technologies website and Annual Report,
Aranca Research
Segment-wise revenue breakdown (FY13)
32%
24%
20%
19%
5%
Custom application
services
Infrastructure services
Enterprise application
services
Engineering & R&D
services
Business services
HCL Technologies
Established in 1991, HCL Technologies Ltd is an IT
services company providing enterprise and custom
application, business transformation, infrastructure
management, business process outsourcing and
engineering services. The company’s network of 26
offices is spread across the US, Europe and Asia Pacific
Achievements:
• 2013: Won IT Europa, European IT Excellence
Awards and Asia Pacific Enterprise Leadership Award
2013
• 2012: Received Market Facing Innovation award at the
NASSCOM Innovation Awards, 2011
• 2011: Received Operational Excellence & Quality
award at BPO Excellence Awards 2010–11
Source: HCL Technologies website and Annual Report,
Aranca Research
Number of customersFinancial performance (USD billion)
1,879
2,228
2,560
3,452
4,345
3,459
250 317 321 438 656
682
FY08 FY09 FY10 FY11 FY12 9MFY13
Revenue Operating profit
386
152
92
44
25 14 10
422
187
98
51
29 15 10
USD1
million+
USD5
million+
USD10
million+
USD20
million+
USD30
million+
USD40
million+
USD50
million+
31-Mar-12 31-Mar-13
1997 1998 1999 2000 2002 2004 2006 2008 2010 2011 2012 2013
Life Sciences &
Healthcare
Organic growth
through prudent
strategies
Diversification of
business and
geography mix
1997
Established with
spun-off HCL’s
R&D business
Adoption of non-
linear strategy;
formation of JVs and
alliances
FY06
Signed the
largest ever
software service
deal with DSG
FY12
Revenue
crossed USD4
billion
Media
Retail & Consumer
Packaged Goods
Telecom
Manufacturing
Financial Services
Acquisition of
Capitalstream and
AXON Group
USD100 million+
clients reached 5
FY09
Launch of
IPO
Source: HCL Technologies website and Annual Report, Aranca Research
Source: Infosys website and Annual Report,
Aranca Research
Segment-wise revenue breakdown (FY13)
34%
22%
20%
24%
Financial services &
Insurance
Manufacturing
Energy utilities,
Communication and
Services
Retail, Consumer
packaged goods,
Logistics and Life
Sciences
Infosys Limited
Established in 1981, Infosys Limited is engaged in
consulting, engineering, technology and outsourcing
services. The company’s end-to-end services include
consulting and system integration. It operates through 30
offices across India, the US, China, Australia, the UK,
Canada and Japan.
Achievements:
• 2013: Ranked first in the annual Euromoney Best
Managed Companies in Asia survey
• 2013: Received NASSCOM Business Innovation
Award 2013 for Infosys Edge
• 2012: Identified as an innovation leader in KPMG’s
Global Technology Innovation Survey 2012
Number of customersFinancial performance (USD billion)
5.0 4.8
6.0
7.0
7.4
1.7 1.6 1.8 2.0 1.9
FY09 FY10 FY11 FY12 FY13
Revenue Operating profit
399
190
132
233
97
16
448
213
137
231
84
15
USD1
million+
USD5
million+
USD10
million+
USD20
million+
USD50
million+
USD100
million+
2012 2013
Source: Infosys website and Annual Report,
Aranca Research
1981 1991 1993 1995 1997 1999 2002 2006 2010 2012
Logistics and
Distribution
Organic growth
Large client
acquisitions
1981
Founded in
Pune with an
initial capital of
USD250
Expansion across
the world and
offshore business
1993
Launched
IPO
FY13
USD7.4 billion
turnover
Industrial
manufacturing
Healthcare,
Pharmaceuticals &
Biotech
Financial service
Automotive
Aerospace, Defense
&
Airlines
Acquisition of
Lodestone Holding
AG
Strong diversified
client base of 798
clients
1999
Reached USD100
million and listed
on NASDAQ
Source: Infosys website and Annual Report, Aranca Research
National Association of Software and Services Companies
(NASSCOM)
Address: International Youth Centre Teen Murti Marg, Chanakyapuri,
New Delhi – 110 021
Phone: 91 11 2301 0199
Fax: 91 11 2301 5452
E-mail: info@nasscom.in
APAC: Asia Pacific
BFSI: Banking, Financial Services and Insurance
BPM: Business Process Outsourcing
CAGR: Compounded Annual Growth Rate
C&U: Construction & Utilities
FDI: Foreign Direct Investment
GOI: Government of India
INR: Indian Rupee
IT&ITeS: Information Technology-Information Technology Enabled Services
NAC: Nasscom Assessment of Competence
RoI: Return on Investment
ROW: Rest Of the World
SEZ: Special Economic Zone
SLA: Service Level Agreement
SMB: Small and Medium Businesses
STPI: Software Technology Parks of India
T&M : Telecom & Media
T&T: Travel and Transport
USD: US Dollar
USP: Unique Selling Proposition
UT: Union Territory
Wherever applicable, numbers have been rounded off to the nearest whole number
Year INR equivalent of one US$
2004-05 44.95
2005-06 44.28
2006-07 45.28
2007-08 40.24
2008-09 45.91
2009-10 47.41
2010-11 45.57
2011-12 47.94
2012-13 54.31
Exchange Rates (Fiscal Year)
Year INR equivalent of one US$
2005 45.55
2006 44.34
2007 39.45
2008 49.21
2009 46.76
2010 45.32
2011 45.64
2012 54.69
2013 54.45
Exchange Rates (Calendar Year)
Average for the year
India Brand Equity Foundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared
by Aranca in consultation with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The
same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium
by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in
any manner communicated to any third party except with the written approval of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this
presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief, the
content is not to be construed in any manner whatsoever as a substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in
this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of
any reliance placed on this presentation.
Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on
the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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India : IT & ITes Sector Report_August 2013

  • 1.
  • 3. Source: NASSCOM; Aranca Research Note: BPM - Business Process Management, USP - Unique Selling Proposition Strong growth opportunities • The IT-BPM sector in India is estimated to expand at a CAGR of 9.5 per cent to USD300 billion by 2020. The sector increased at a CAGR of 25 per cent over 2000–13, 3-4 times higher than global IT-BPM spend Leading sourcing destination • India is the world’s largest sourcing destination, accounting for approximately 52 per cent of the USD124–130 billion market. The country’s cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US continues to be its USP in the global sourcing market Largest pool of ready to hire talent • India’s highly qualified talent pool of technical graduates is one of the largest in the world, facilitating its emergence as a preferred destination for outsourcing Most lucrative sector for investments • The sector ranks fourth in India’s total FDI share and accounts for approximately 37 per cent of total Private Equity and Venture investments in the country
  • 4. • The engineering sector is delicensed; 100 per cent FDI is allowed in the sector • Due to policy support, there was cumulative FDI of USD14.0 billion into the sector over April 2000 – February 2012, making up 8.6 per cent of total FDI into the country in that period Growing demand Source: Nasscom, Aranca Research Note: SEZ stands for Special Economic Zone, BFSI stands for Banking, Financial Services and Insurance; E stands for Estimate, F stands for Forecast Growing demand • Strong growth in demand for exports from new verticals • Expanding economy to propel growth in local demand Global footprints • IT firms in India have delivery centres across the world; as of 2012, IT firms had a total of 580 centres in 75 countries • India’s IT & ITes industry is well diversified across verticals such as BFSI, telecom, retail Policy support • Tax holidays extended to the IT sector • SEZ scheme since 2005 to benefit IT companies with single window approval mechanism, tax benefits,etc Competitive advantage • India has cost savings of 60– 70 per cent over source countries • India remains a preferred destination for IT & ITeS in the world. With 52 per cent market share, India continues to be a leader in the global sourcing industry • The country has a huge talent pool 2013E Industry value: USD108 billion 2020F Industry value: USD300 billion Advantage India
  • 5. • By early 90s, US-based companies began to outsource work on low-cost and skilled talent pool in India • IT industry started to mature • Increased investment in R&D and infrastructure started • India increasingly seen as a product development destination • The number of firms in India grew in size and started offering complex services such as product management and go-to market strategies • Western firms set up a number of captives in India Pre-1995 1995-2000 2000–05 2005 onwards • Firms in India became multinational companies with delivery centres across the globe (580 centres in 75 countries, as of 2012) • Firms in India make global acquisitions • The IT sector is expected to employ about 3.0 million people directly and around 9.5 million indirectly, as of FY13 • India’s IT sector is at an inflection point, moving from enterprise servicing to enterprise solutions
  • 6. Source: Nasscom, Aranca Research IT&ITeS sector • Market Size: USD56.3 billion during FY13 • Over 78 per cent of revenue comes from the export market • BFSI continued as the major vertical of the IT sector • Market size: USD20.9 billion during FY13 • Around 85 per cent of revenue comes from the export market Business Process Management (BPM) IT services • Market size: USD17.9 billion during FY13 • Over 79 per cent of revenue comes from exports • Market size: USD13.3 billion during FY12 • The domestic market accounts for a significant share • The domestic market is experiencing growth as the penetration of personal computers is rising in India Hardware Software products and engineering services
  • 7. Source: Nasscom, Aranca Research Note: E - Estimates Market size of IT industry in India (USD billion)India’s technology and BPM sector (including hardware) is estimated to have generated USD108 billion in revenue during FY13 compared to USD100.9 billion in FY12, implying a growth rate of 7.4 per cent The contribution of the IT sector to India’s GDP rose to approximately 8 per cent in FY13 from 1.2 per cent in FY98 22 22 24 29 32 32 41 47 50 59 69 76 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E Domestic Export
  • 8. Source: Bloomberg, Aranca Research Note: 2012 (calendar year) revenues were considered for all the companies Market share of IT players based on revenues (2012)TCS is the market leader, accounting for about 10.1 per cent of India’s total IT & ITeS sector revenue The top six firms contribute around 36 per cent to the total industry revenue, indicating the market is fairly competitive Company name Market share TCS 10.7 per cent Wipro 7.2 per cent Cognizant 6.8 per cent Infosys 6.3 per cent HCL Tech 4.2 per cent Tech Mahindra 1.1 per cent
  • 9. Source: Nasscom, Aranca Research; Note: E stands for Estimate Growth in export revenue (USD billion) Total exports from the IT-BPM sector (excluding hardware) are estimated at USD76 billion during FY13; the industry rose at a CAGR of 13.1 per cent during FY08-13E despite weak global economic growth scenario Export of IT services has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding hardware) BPM accounted for 23.5 per cent of total IT exports during FY13 Sector-wise breakup of export revenue FY13E 22.2 25.8 27.3 33.5 39.9 43.9 9.9 11.7 12.4 14.1 15.9 17.8 8.8 10 10.4 11.4 13.0 14.1 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E IT services BPM Software products and engg. services 57.9% 23.5% 18.6% IT services BPM Software products and engg. Services CAGR: 13.1%
  • 10. Source: Nasscom, Aranca Research Notes: C&U - Construction & Utilities, T&T - Travel and Tourism, T& M - Telecom & Media, BFSI - Banking, Financial Services and Insurance The figures mentioned are for IT and BPM only and do not include engineering services and hardware exports Export revenue growth across verticals (USD billion) BFSI is a key business vertical for the IT-BPM industry. It generated export revenue of around USD31 billion during FY13, accounting for 41.0 per cent of total IT-BPM exports from India Approximately 85 per cent of total IT-BPM exports from India is across four sectors: BFSI, telecom, manufacturing and retail. The hitherto smaller sectors are expected to grow Distribution of export revenue across verticals (FY13) 28 13 11 7 3 2 2 31 14 12 8 4 2 2 BFSI T&M Manufacturing Retail Healthcare T&T C&U FY12 FY13 41% 18% 16% 10% 5% 3% 3% BFSI T & M Manufacturing Retail Healthcare T & T C & U
  • 11. Source: Nasscom, Aranca Research Note: ROW is Rest Of the World, APAC is Asia Pacific Geographic breakup of export revenue (USD billion) US has traditionally been the biggest importer of Indian IT exports; over 60 per cent of Indian IT-BPM exports were absorbed by the US during FY13 Non US-UK countries accounted for just 21.0 per cent of total Indian IT-BPM exports during FY12 Europe, one of the fast growing IT markets in 2012, is expected to emerge as a potential market as higher inclination towards offshoring firms would increase demand for IT services Distribution of export revenue across geographies (FY13) 42 12 8 5 2 47 13 9 6 2 US UK Continental Europe APAC ROW FY12 FY13 62% 17% 11% 8% 2% US UK Continental Europe APAC ROW
  • 12. Source: Nasscom, Aranca Research Category Number of players % of total export revenue % of total employees Work focus Large sized 11 47-50% ~35-38% • Fully integrated players offering full range of services • Large scale operations and infrastructure • Presence in over 60 countries Mid sized 85-100 32-35% ~28-30% • Mid tier Indian and MNC firms offering services in multiple verticals • Dedicated captive centers • Near shore and offshore presence in >30-35 countries Emerging 450-600 9-10% ~15-20% • Players offering niche IT-BPM services • Dedicated captives offering niche services • Expanding focus towards sub Fortune 500/ 1000 firms Small >4,000 9-10% ~15-18% • Small players focussing on specific niches in either services or verticals • Includes Indian providers and small niche captives
  • 13. Global delivery model • The number of global delivery centres of IT firms in India reached 580, spreading out across 75 countries, as of 2012 • As of 2009, over 150 centres were set up by various Indian IT firms in North America Global sourcing hub • India continues to maintain a leading position in the global sourcing market. Its market share increased to 52.0 per cent in 2012 from 50.0 per cent in 2011 Engineering offshoring • India is the most preferred location for engineering offshoring, according to a customer poll conducted by Booz and Co • Companies are now offshoring complete product responsibility Patent filing • Increased focus on R&D by IT firms in India resulted in rising number of patents filed by them • The number of patents filed by the top three IT companies increased to 858 in 2012 from 150 in 2009
  • 14. Changing business dynamics • India’s IT market is experiencing a significant shift from a few large-size deals to multiple small-size ones • Delivery models are being altered, as the business is moving to capital expenditure (capex) based models from operational expenditure (opex), from a vendor’s frame of reference Large players gaining advantage • Large players with a wide range of capabilities are gaining ground as they move from being simple maintenance providers to full service players, offering infrastructure, system integration and consulting services New technologies • Disruptive technologies, such as cloud computing, social media and data analytics, are offering new avenues of growth across verticals for IT companies Growth in non-linear models • India’s IT sector is gradually moving from linear models (rising headcount to increase revenue) to non-linear ones • In line with this, IT companies in India are focusing on new models such as platform-based BPM services and creation of intellectual property
  • 15. Consumerisation of IT • Global outsourcing is being used to drive fundamental re-engineering of end-to-end processes • Increased emphasis on beyond cost benefits • IT firms in the current phase have moved up the value chain, providing innovation-led growth to clients from SLA satisfaction and RoI calculations Emergence of Tier II cities • Tier II and III cities are increasingly gaining traction among IT companies, aiming to establish business in India • Cheap labour, affordable real estate, favourable government regulations, tax breaks and SEZ schemes facilitating their emergence as a new IT destination • Giving rise to the domestic hub and spoke model, with Tier I cities acting as hubs and Tier II, III and IV as network of spokes SMAC technologies, an inflection point for Indian IT • Social, Mobility, Analytics and Cloud (SMAC), a paradigm shift in IT-BPM approaches experienced until now, is leading to digitisation of the entire business model • IT vendors in India to generate USD225 billion from SMAC-related revenue by 2020 Note: SLA - Service Level Agreement; RoI - Return on Invesmtnet
  • 16. Note: STPI stands for Software Technology Park of India, SEZ stands for Special Economic Zone Growth drivers Talent Pool Domestic growth Infrastructure Global demand Policy support • Computer penetration expected to increase • Government likely to become a major contributor to domestic demand by 2013–14 • 4.7 million graduates are estimated to have been added to India’s talent pool in FY13 • Strong mix of young and experienced professionals • Global IT offshore spending is expected to rise at a CAGR of 8.0 per cent during FY11–13 • Global BPM spending is estimated to expand at a CAGR of around 7.0 per cent during FY11–13 • Tax holidays for STPI and SEZs • Procedural ease and single window clearance for setting up facilities • Robust IT infrastructure across various cities in India such as Bengaluru • Delivery centres spread across various countries
  • 17. Source: Nasscom, Aranca Research Note: Small and Medium Business; E indicates estimated numbers Domestic IT market by customer segment (FY2013E) Large enterprises account for a significant share of the IT market and added USD15bn to domestic revenue in FY13 Expansion of Indian firms in global markets is leading to increasing spend on IT for efficient and cost-effective operations SMB, another potential demand pool for IT services in domestic market Adoption of technology for enhancing product visibility, reach and operational efficiencies is leading to higher demand for IT services from SMBs With 46 million units, India has the second largest SMB base in the world 47% 26% 15% 12% Large enterprises SMB Governement Consumers Total market = USD32 billion
  • 18. Source: Nasscom, Aranca Research Note: UT - Union Territory Domestic revenue from IT and BPM (USD billion)Introduction of large eGovernance projects to provide better services through IT and focus on the formation of the cyber policy led to higher demand for IT and hardware from the government The Central Government and State/UT Government allocated 0.9–1.2 per cent and 2.8–3 per cent, respectively, of total budget on IT spend under the 12th Five Year Plan Strong consumer demand for IT service and products: Advent of smartphones, tablets, iPads, Rising computer literate population Enhanced Internet and mobile penetration Growing disposable income strengthening consumer purchasing power 15.5 FY13 FY15F FY20F ~22-23 ~90-100
  • 19. Source: Nasscom, Aranca Research Note: Ovals indicate CAGR Export revenue from IT and BPM (USD billion)Global IT-BPM spending to grow 5–6 per cent to nearly USD2 trillion by 2013 Global sourcing to rise at a faster pace of 9–11 per cent to USD124–130 billion in 2013 Emergence of SMAC would provide USD1 trillion market by 2020 Emerging economies are likely to be a major contributor to IT spend growth IT spend in emerging economies to grow 3-4 times faster than advanced economies The BRIC IT market is estimated at USD380–420 billion by 2020 Emerging segments are expected to drive growth of Indian IT-BPM exports 48 ~106-111 FY11 FY14F Core and non core segment’s growth prospects 22 11 1.2 7.6 3.2 3.1 35 15 2 13 5.5 5.5CADM ER&D ITconsulting ISsourcing Knowledge services Software testing FY13E FY16F Core segments Emerging segments 17% 10% 19% 20% 20% 21%
  • 20. Source: Nasscom, Aranca Research Note: Graduates includes both graduates and post graduates Graduates addition to talent pool in India (in millions) Availability of skilled English speaking workforce has been a major reason behind India’s emergence as a global outsourcing hub India added around 4.7 million graduates to the talent pool during FY13 Growing talent pool of India has the ability to drive the R&D and innovation business in the IT-BPM space 3.2 3.5 3.7 4.0 4.4 4.7 FY2008 FY2009 FY2010. FY2011 FY2012 FY2013E
  • 21. Source: Nasscom, Aranca Research Training expenditure by Indian IT-BPO sectorAbout 2 per cent of the industry revenue is spent on training employees in the IT-BPM sector 40 per cent of total spend on training is spent on training new employees A number of firms have forged alliances with leading education institutions to train employees 24% 6% 13% 27% 19% 11% Salaries for inhouse training staff External training (new recruits) External training (existing employees) Recruitment cost Employee welfare Other costs
  • 22. Source: Nasscom, Aranca Research Note: NAC - Nasscom Assessment of Competence, IIIT - Indian Institutes of Information Technology Short term Medium term Long term • Enhance over all yield of employees • Improve employability • Expand to tier 2 cities • Lower skill dependence Objectives Initiatives • Industry to enhance investment in training • Use NAC and NAC – Tech to assess employability of talent pool • Identified new tier 2 locations • Bring down investment on training • Develop specialist and project management expertise • Launched the National Faculty Development Programme to increase suitability of Faculty • Aiding industry access to specialist programmes offered by independent agencies • Expand education capacity • Promote reforms in education • Expansion of higher education infrastructure; 20 new IIITs to be set up by the government • Programme to increase PhDs in technology
  • 23. Source: Nasscom, Aranca Research, STPI As of FY2011, 6,554 STPI units were operational, while 5,564 units have exported IT services and products. During FY11, STPI units accounted for approximately 76.0 per cent of total IT exports IT-SEZs have been initiated with an aim to create zones that lead to infrastructural development, exports and employment Characteristics of STPI and SEZ in India Parameters STPI SEZ Term 10 years 15 years Fiscal benefits • 100 per cent tax holiday on export profits • Exemption from excise duties and customs • 100 per cent tax holiday on exports for first five years • Exemption from excise duties and customs Location and size restrictions • No location constraints • 23 per cent STPI units in tier II and III cities • Restricted to prescribed zones with a minimum area of 25 acres
  • 24. Source: Nasscom, E&Y, Aranca Research IT sector employment distribution in Tier I and Tier II/III cities 1,821 1,615 175 3,230 2008 2018E Tier I locations Tier II/III locations Trends in tier II and III cities • 43 new tier II/III cities are emerging as IT delivery location; this could reduce pressure on leading locations • Cost in newer cities is expected to be 28 per cent lower than leading cities • Lower cost and attrition, affordable real estate and support from local government, such as tax breaks, STPI and SEZ schemes, are facilitating this shift of focus • Over 50 cities already have basic infrastructure and human resource to support the global sourcing and business services industry • Some cities are expected to emerge as regional hubs supporting domestic companies
  • 25. Source: Zinnov, Nasscom, Aranca Research Number of GIC’s in India 2000 2005 2010 2012 ~180 450+ 700+ 750+ Key highlights • Global In-House Centers (GIC), also known as captive centers, are one of the major growth drivers of the IT- BPM sector in India • As of FY2012, the captive segment accounted for 16- 18 per cent of the IT-BPM industry revenue • The impact of the segment goes beyond revenue and employment, as it helped in developing India as a R&D hub and create an innovation ecosystem in the country • Within the captive landscape, ER&D/SPD (Engineering Research & Development /Software Product Development) is the largest sub-segment • Companies from North America and Europe are major investors in the captive segment in India, accounting for over 90 per cent of captives in the country
  • 26. Source: Venture Intelligence, Nasscom, Aranca Research PE-VC investments in IT & BPM (USD billion) The IT & BPM sector continued to attract PE and VC investments in 2012, accounting for a significant proportion in terms of volume (around 37 per cent) and value (approximately 40 per cent) Value increased at an impressive 68.4 per cent over 2011 eCommerce accounted for 31 VC deals in 2012 About 64 per cent of VC deals in India were in the software, internet and mobile industry Two of the largest PE deals in the sector during 2012 were: JP Morgan’s buyout of M*Modal (USD1,100 million) Bain Capital, GIC investment in Genpact (USD1,000 million) In 1Q13, the industry attracted 26 deals at a value of USD105 million Share of IT-BPM in PE-VC investments 0.8 1.9 3.2 2008 2011 2012 184 379 484 393 58 25 32 40 2009 2010 2011 2012 Number of deals Share of IT-BPM
  • 27. Source: All the figures are taken from International Data Corporation (IDC) and Nasscom and are FY10 estimates Notes: SMB - Small and Medium Businesses • BRIC nations, continental Europe, Canada and Japan have IT spending of approximately USD380–420 billion • Adoption of technology and outsourcing is expected to make Asia the second largest IT market • Government, healthcare, media and utilities have IT spend of approximately USD190 billion, but account just 8 per cent of India’s IT revenue • A number of sectors are expected to depend on technology and service providers to reduce the cost to serve• SMBs have IT spend of approximately USD230– 250 billion, but contribute just 25 per cent to India’s IT revenue • The emergence of new service offerings and business models would aid in tapping market profitably and efficiently New verticals New customer segments New geographies
  • 28. Growth trend of traditional verticals Traditional verticals i.e. BFSI, telecom and manufcaturing, continue to remain the largest in terms of IT adoption, and are expected to grow at an average of 15% Implementation of cloud environment and mobility way forward for traditional verticals Emphasis on other emerging verticals (such as education, healthcare and retail) to aid growth in IT firms in India Shift from IT adoption infrastructure, automation and digitisation to smart IT marks future trend of services in emerging verticals Growth trend of emerging verticals 128 80 339 195 126 506 243 193 595 BFSI Telecom Manufacturing FY10 FY13E FY15F 17.2 11.6 4.4 34.5 17.5 8.7 39.5 24.8 9.7 Education Healthcare Retail FY10 FY13E FY15F Source: Nasscom, Aranca Research
  • 29. Source: Nasscom, Aranca Research Note: SMB - Small and Medium Business Market size of other progressing verticals by 2020 (USD billion) As IT is increasingly gaining traction in SMB’s business activities, the sector offers impressive growth opportunities and is estimated at approximately USD230–250 billion by 2020 In a bid to reduce cost, governments across the world are exploring outsourcing and global sourcing options Technologies, such as telemedicine, mHealth, remote monitoring solutions and clinical information systems, would continue to boost demand for IT service across the globe IT sophistication in the utilities segment and the need for standardisation of the process are expected to drive demand Digitisation of content and increased connectivity is leading to a rise in IT adoption by media 250 90 58 25 17 SMB Government Healthcare Utilities Media
  • 30. Source: Nasscom, Aranca Research Note: Size of bubble indicates market size, *CAGR and market size for Big data/analytics is till 2015 Growing technologies future growthEmerging technologies present an entire new gamut of opportunities for IT firms in India SMAC provide USD1 trillion opportunity Cloud represents the largest opportunity under SMAC, increasing at a CAGR of approximately 30 per cent to around USD650–700 billion by 2020 Social media is the second most lucrative segment for IT firms, offering a USD250 billion market opportunity by 2020 Cloud Social Media Enterprise mobility Big data/analytics* 10% 20% 30% 40% 50% 60% 0 200 400 600 800 CAGRtill2020 Market size USD billion
  • 31. Source: Nasscom, Aranca Research Emerging geographies to drive the next growth phase for IT firms in India BRIC provides USD380–420 billion opportunity by 2020 Focus on building local credible presence, high degree of domain expertise at competitive costs and attaining operational excellence hold key to success in new geographies Countries offering growth potential to IT firms Country IT spend India’s penetration Key segments Canada USD63 billion ~1.5 per cent Enterprise applications, cyber security, healthcare IT Europe USD230 billion <1.5 per cent IT sourcing, BPM, IS outsourcing, CAD Japan USD235 billion <1 per cent CRM, ERP, Salesforce automation, SI Spain USD26 billion <1.5 per cent IT sourcing, SI Mexico USD29 billion ~4 per cent IT sourcing, BPM Brazil USD47 billion ~2 per cent Low level application management, artificial intelligence, R&D China USD105 billion <1 per cent Software outsourcing, R&D Australia USD48 billion ~4 per cent Procurement outsourcing, infrastructure software & CAD
  • 32. Source: TCS website and Annual Report, Aranca Research Segment-wise revenue breakdown (FY13) 66%5% 12% 3% 3% 13% IT solutions and services Engineering and industrial services Infrastructure services Global consulting Asset leverage solutions Business process outsourcing Tata Consultancy Services Established in 1968, Tata Consultancy Services (TCS) is an Information Technology (IT) services, consulting and business solution company . It provides end-to-end technology and technology-related services to global enterprises. The company’s business is spread across the Americas, Europe, Asia Pacific, and Middle East and Africa (MEA). Achievements: • 2013: Won Best Performing Consultancy Brand award in Europe • 2013: Received Red Hat North America Awards for System Integrator Partner of the Year • 2012: TCS China ranked amongst the top 10 global services providers in China • 2012: TCS BaNCS won Xcelent Customer Base Awards 2012
  • 33. Source: TCS website and Annual Report, Aranca Research Number of customersFinancial performance (USD billion) 6.0 6.3 8.2 10.2 11.6 1.4 1.7 2.3 2.8 3.1 FY09 FY10 FY11 FY12 FY13 Revenue Operating profit 214 76 42 25 5 458 208 143 81 27 8 522 245 170 99 43 14 556 277 196 115 48 16 USD1 million+ USD5 million+ USD10 million+ USD20 million+ USD50 million+ USD100 million+ FY5 FY11 FY12 FY13
  • 34. 1968 2001 2003 2005 2007 2009 2011 2013 Energy resources & Utilities Consolidation of market position through CMC acquisition Expansion of geographic presence 1968 India’s first software service company Issue of an IPO in the market in India and raised USD1.2 billion in 2004 FY03 Became the first software company in India to cross USD1 billion revenue FY13 USD11.6 billion revenue Life Sciences & Healthcare Manufacturing Media & Entertainment Retail and consumer packaged goods BFSI Acquisition of IT service firm Alti in France in 2013 With a brand value of over USD1 billion, TCS consolidates position as one of the largest IT players FY13 Active client base: 1,156 New clients: 153 Source: TCS website and Annual Report, Aranca Research
  • 35. Source: HCL Technologies website and Annual Report, Aranca Research Segment-wise revenue breakdown (FY13) 32% 24% 20% 19% 5% Custom application services Infrastructure services Enterprise application services Engineering & R&D services Business services HCL Technologies Established in 1991, HCL Technologies Ltd is an IT services company providing enterprise and custom application, business transformation, infrastructure management, business process outsourcing and engineering services. The company’s network of 26 offices is spread across the US, Europe and Asia Pacific Achievements: • 2013: Won IT Europa, European IT Excellence Awards and Asia Pacific Enterprise Leadership Award 2013 • 2012: Received Market Facing Innovation award at the NASSCOM Innovation Awards, 2011 • 2011: Received Operational Excellence & Quality award at BPO Excellence Awards 2010–11
  • 36. Source: HCL Technologies website and Annual Report, Aranca Research Number of customersFinancial performance (USD billion) 1,879 2,228 2,560 3,452 4,345 3,459 250 317 321 438 656 682 FY08 FY09 FY10 FY11 FY12 9MFY13 Revenue Operating profit 386 152 92 44 25 14 10 422 187 98 51 29 15 10 USD1 million+ USD5 million+ USD10 million+ USD20 million+ USD30 million+ USD40 million+ USD50 million+ 31-Mar-12 31-Mar-13
  • 37. 1997 1998 1999 2000 2002 2004 2006 2008 2010 2011 2012 2013 Life Sciences & Healthcare Organic growth through prudent strategies Diversification of business and geography mix 1997 Established with spun-off HCL’s R&D business Adoption of non- linear strategy; formation of JVs and alliances FY06 Signed the largest ever software service deal with DSG FY12 Revenue crossed USD4 billion Media Retail & Consumer Packaged Goods Telecom Manufacturing Financial Services Acquisition of Capitalstream and AXON Group USD100 million+ clients reached 5 FY09 Launch of IPO Source: HCL Technologies website and Annual Report, Aranca Research
  • 38. Source: Infosys website and Annual Report, Aranca Research Segment-wise revenue breakdown (FY13) 34% 22% 20% 24% Financial services & Insurance Manufacturing Energy utilities, Communication and Services Retail, Consumer packaged goods, Logistics and Life Sciences Infosys Limited Established in 1981, Infosys Limited is engaged in consulting, engineering, technology and outsourcing services. The company’s end-to-end services include consulting and system integration. It operates through 30 offices across India, the US, China, Australia, the UK, Canada and Japan. Achievements: • 2013: Ranked first in the annual Euromoney Best Managed Companies in Asia survey • 2013: Received NASSCOM Business Innovation Award 2013 for Infosys Edge • 2012: Identified as an innovation leader in KPMG’s Global Technology Innovation Survey 2012
  • 39. Number of customersFinancial performance (USD billion) 5.0 4.8 6.0 7.0 7.4 1.7 1.6 1.8 2.0 1.9 FY09 FY10 FY11 FY12 FY13 Revenue Operating profit 399 190 132 233 97 16 448 213 137 231 84 15 USD1 million+ USD5 million+ USD10 million+ USD20 million+ USD50 million+ USD100 million+ 2012 2013 Source: Infosys website and Annual Report, Aranca Research
  • 40. 1981 1991 1993 1995 1997 1999 2002 2006 2010 2012 Logistics and Distribution Organic growth Large client acquisitions 1981 Founded in Pune with an initial capital of USD250 Expansion across the world and offshore business 1993 Launched IPO FY13 USD7.4 billion turnover Industrial manufacturing Healthcare, Pharmaceuticals & Biotech Financial service Automotive Aerospace, Defense & Airlines Acquisition of Lodestone Holding AG Strong diversified client base of 798 clients 1999 Reached USD100 million and listed on NASDAQ Source: Infosys website and Annual Report, Aranca Research
  • 41. National Association of Software and Services Companies (NASSCOM) Address: International Youth Centre Teen Murti Marg, Chanakyapuri, New Delhi – 110 021 Phone: 91 11 2301 0199 Fax: 91 11 2301 5452 E-mail: info@nasscom.in
  • 42. APAC: Asia Pacific BFSI: Banking, Financial Services and Insurance BPM: Business Process Outsourcing CAGR: Compounded Annual Growth Rate C&U: Construction & Utilities FDI: Foreign Direct Investment GOI: Government of India INR: Indian Rupee IT&ITeS: Information Technology-Information Technology Enabled Services NAC: Nasscom Assessment of Competence RoI: Return on Investment ROW: Rest Of the World
  • 43. SEZ: Special Economic Zone SLA: Service Level Agreement SMB: Small and Medium Businesses STPI: Software Technology Parks of India T&M : Telecom & Media T&T: Travel and Transport USD: US Dollar USP: Unique Selling Proposition UT: Union Territory Wherever applicable, numbers have been rounded off to the nearest whole number
  • 44. Year INR equivalent of one US$ 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 Exchange Rates (Fiscal Year) Year INR equivalent of one US$ 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 54.45 Exchange Rates (Calendar Year) Average for the year
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