8/9/2019 IT Industry Revised
1/22
IT/ITeS IndustrySubmitted to
G.V.Sandeep
Cygnus Business Consulting and Research Pvt Ltd.
Submitted By
Karan Arora (09ESHYD018)
Mordwaj Pal (09ESHYD022)
Phaneesh Mashetty (09ESHYD029)
Saurabh Vyas (09ESHYD036)
8/9/2019 IT Industry Revised
2/22
Agenda
Industry overview
IT/ITeS sector: Value Chain
Industry Segments
IT services KPO
Engineering services outsourcing
Major Players and Competition
Porters 5-forces
Technology Growth Drivers
Issues & Concerns
Outlook
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Industry overview
The total revenues for the Indian IT industry were estimated to touch US$71.7 billion in 2008-09.
The Indian IT industry has been growing at a compound annual growthrate (CAGR) of 27 per cent for the last five years.
Contribution of IT industry to Indias gross domestic product (GDP) has
grown from 1.2 per cent in 1997-08 to an estimated 5.8 per cent in 2008-09.
The total revenues from export were expected to reach US$ 47.3 billion in2008-09.
The total exports have been growing at a CAGR of 28.7 per cent over thelast five years.
During this period 2008-2009, direct and indirect employment wasexpected to reach 2.23 million and eight million, respectively.
Domestic market revenues were expected to touch US$ 24.3 billion in2008-09.
Domestic market revenues have been growing at a CAGR of 24 per cent forthe last five years.
Source: NASSCOM
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IT/ITeS sector: Evolution
Source: IT: Industry profile, July 2009, CRIS INFAC
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IT/ITeSCompanies
HW Vendors
InfrastructureProviders
Value AddedServices
AcademicInstitutions
Boutique Firms
SW providers
Government
R&D
Value Chain
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Industry Segments
Services
BPO
Consulting
Infrastructure
Engineering & Industrial Services
Application Development & Maintenance
Enterprises Services
Products
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Industry Segments - Domain
BFSI
Telecom
Manufacturing
Retail & Distribution Hi-Tech
Life Sciences and Health Care
Transportation
Energy & Utilities
Media & Entertainment
E- Governance
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Industry Segments Region wise
North America
Ibero America
UK Continental Europe
India
Asia Pacific Middle East & Africa
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IT services
The Indian IT services market grew by 23 per cent between 2005-06 and2008-09 and the revenues are estimated at nearly US$ 8.3 billion in 2008-09.
The banking, financial services and insurance (BFSI) vertical continues toaccount for the largest share of IT/ITeS services at 41 per cent.
Hi-Tech/ telecom vertical accounts for the second-largest share of the pieat 20 per cent.
Other verticals such as manufacturing, retail, media and healthcare arerapidly gaining pace.
Domestic IT-ITeS market revenues have been growing at a CAGR of 23 percent between 2005-2006 and 2008-09 and were expected to reach US$24.3 billion in 2008-09.
Domestic IT-BPO revenues grew by 24 per cent in and were expected totouch US$ 2 billion in 2008-09.
Hardware accounted for about 49 per cent of the total domestic IT-BPOspends in 2008-09.
Source: IT: Industry profile, July 2009, CRIS INFAC
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IT services - Segments
IT services export revenues
(2008-2009 Estimates) US$ bn
Project oriented 12.9
IT consulting 0.65
Systems integration 0.75
Custom application development 11.12
Network consulting and integration 0.32
IT O ts rci g 11.02
Application management 7.21
Infrastructure management 3.80
Support and training 1.96
Total 25.88
41
20
17
8
59
Sector Wise Revenue (Percentage)
BFSI Hi-tech/Telecom
a
fact ri g etail
edia,P blishi g a d E tertai me t Others
So rce: IT: I d stry profile, J ly 2009, C IS INFAC
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Knowledge Process Outsourcing (KPO) The genesis of KPO followed BPO
services in India, however KPO is nowgrowing at a rapid pace with MNCssetting up third party captive units fordata analytics, data modeling, etc.
CRISIL estimates that the Indian KPO
export market constitutes about eightpercent of Indian ITeS revenues andemploys nearly three percent of thework force
Growth drivers for this business includehigh productivity of Indian resourcesand growing adoption of KPO by Small
and Medium Enterprises (SMEs). Opportunities span across several
service offerings: legal processoutsourcing (LPO), financial and marketresearch and engineering servicesoutsourcing, which are considered fastmoving service offerings.
Sources: Global Offshore Outsourcing Summit, EY-IACC, 2006.
ITeS: Industry profile, April 2009, CRIS INFAC
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Engineering services outsourcing Global engineering services spend estimated at US$ 750 billion
which is expected to increase to more than US$1 trillion by 2020 Indias share is about US$ 4.9 billion of the US$ 12.8 billion
outsourced services in 2008-09; India is estimated to garner a shareof about US$ 50 billion by 2020
Range of services include engineering and designing solutionsacross diverse industry verticals like
telecommunications, automotive, construction, aerospace, utilitiesand industrial design
Labour cost arbitrage in this sector is about 60 per cent of the UScounterparts
Bechtel, General Motors, Ford, John Deere, Caterpillar, SiliconAutomation Systems, John Brown Engineering are a few global
giants that have set up their engineering services divisions in India
Source:Global Offshore Outsourcing Summit, EY-IACC, 2006.
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Major Players and Competition
Herfindahl Index:
HI = 1771
It can be said that theindustry is operating in
competitive environment
Company Sales Turnover (Rs. cr.)
TCS 22,404.00
Infosys 20,264.00
Wipro 20,987.30
HCL Tech 4,675.09
Oracle Financ 2,212.62
Mphasis 3,405.02
Mahindra Satyam 8,137.28
Tech Mahindra 4,357.76
Financial Tech 334.32
Patni Computer 1,751.33
MindTree 1,561.00
Polaris 1171.34
Sonata 243
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Porters 5-forces
Low-High
Large supply at low cost from around the world
Matured education/ training freely available
Small players for support services
Bargainingpower of
Suppliers
High
Large players Technology is commoditized
Supply has significantly increased
Bargaining
Power ofBuyers
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High
Numerous players
Difficult to differentiateCompetition
Low-MediumProduct differentiation is harder
Brands established
Much higher switching costs
Easier in low value services
Barriers toEntry
Low
Must haveThreat of
Substitutes
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Technology Infrastructure
Data Centers CISCO
Data Connectivity Ericsson, Nokia-Siemens, Alcatel-Lucent
Optical, Microwave etc
Ethernet, SDH etc
Hardware Servers Intel and AMD
Product ERP & CRM SAP, Oracle, BAN etc
OS Linux, Unix, Microsoft etc Databases Oracle, Sybase etc
Programming Languages Java, C++ etc
Grid Computing
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Established IT/ITeS SEZs in India
Source: "Formal approvals granted SEZs as on 15 January 2009", SEZ India website, www.sezindia.nic.in, accessed 20 September 2009
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Growth Drivers
Availability of Large Human Resources
Indian Education System
Quality Manpower
Government Policies
Cost of Labor and resources
Long term profitability
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Issues and Concerns
Need for Management expertise Presently only 30000 professionals; needed 2.5L (Source: NASSCOM)
Ex. Employees and expatriates: -Management experience and niche skills
Top IT companies have used Economies of Scale and Scope to the full
extent Industry revenues- majorly Export Led
Need to penetrate in domestic market
Create more awareness for SMBs
Exchange Rate Fluctuations
Open Source Software is eating the revenues
Talent Pool Need for Proper Background Check
Bias towards service business
Lack of funding, esp. in early phase: key limitation for entrepreneurs Source of funds: VC, PE firms, HNIs
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Outlook
Software products CAGR of 44% for past 3 years.
Software products: Global Potential by 2015 Financial & Accounting: USD 30.3bn
BI: USD 15bn
Storage: USD 26.2
Security: USD 17.3bn ERM: USD 59.8bn
Telecom: USD 33.1bn
Gaming: USD 25bn
Search engine : USD 60.4bn
Other: Retail, Mobile application
KPMG report: 31 emerging global destinations Ahmedabad Jaipur
Nagpur
Sources: NASSCOM Newsline April 2009
NASSCOM Software product Study
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Outlook
Extend Global recognition: key challenge
Focused branding and trade development
Need for Academic and Industry collaboration is large
Need to establish presence higher up in the valuechain.
2-Tyre City growth and distribution of IT companiesacross cities spread out within the state.
Industry Consolidation through M&As Growth of Domestic Industry
UID Project throws up lot of opportunities in e-Governance
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Thank You