Indian IT-BPM Industry

FY16 Performance and FY17 Outlook

February 2016

Agenda

• Global IT-BPM industry- Key highlights

• The Indian IT-BPM industry: Growth sectors

and changing landscape

• Outlook for FY2017

• Challenges

3 Source: NASSCOM

Highest relative share in national GDP >9.3%

Indian IT-BPM industry: Unparalleled contribution to

India CONTRIBUTION TO INDIA

Largest share in total services exports >45%

USD >7 billion

EMPLOYER OF CHOICE

Largest private sector employer

Ardent promoter of diversity

3.7 mn

~1.3 mn Women

3X Indirect employment >10 mn

TECHNOLOGY, SERVICES & START-UP HUB

56%

4,200+

Leading global sourcing

destination

3rd Largest startup hub in the

world; 9 unicorns

2nd largest base of internet users

Highest FDI investment sector (includes USD 5 bn startup investments)

>350 mn*

* mobile+fixed

Source: NASSCOM

ECONOMY POLITICAL

Uncertain macro-economic environment impacting

global tech spending

SOCIAL TECHNOLOGY

• Political instabilities in Europe, Middle

East

• Upcoming elections in major

geographic markets

• Protectionist stances in developed

economies

• World economic growth slowed down

to 2.4 per cent in 2015

• Volatility in equity & investment

markets, inflation, currency,

unemployment

• 2016 GDP forecast at 2.9 per cent

• Ageing populations in developed

economies

• Younger, connected demographics in

Asia and Africa

• Opportunity for tech enabled

solutions

• Technology adoption increasing,

though implementation models

changing

• Currency movement negating tech

spending growth

• Digital tech business outpacing

traditional business growth

Source: World Bank, IMF, ILO, NASSCOM

4

5

Worldwide IT-BPM spend

Source: IDC, Everest, Strategy&, NASSCOM

Global sourcing market size

234-239

88-91

60-62

~9%

• Global IT-BPM spend grew 0.4 per cent in reported USD in 2015

• Currency volatility impacting growth; tech spending grew 4 per cent in constant USD in 2015

• India continues to gain market share, accounts for 56 per cent of global sourcing sector

USD billion

652

181

385

1,440

1,008

650

186

386

1,498

1,075

2014 2015

USD billion

IT Services BPM Software

products

USD 1.2

Trillion

2015

ER&D

215-221

Growth

0.4%

[VALUE]-91

97-99

60-62 65-67

67-68

2014 2015

IT Services BPM ER&D

72-73

Hardware

Tech spending trend flat in 2015; India continues to

gain market share

Trends that defined the year

6

Indian tech players helping create smart enterprises

through confluence of Digital technologies- Cloud,

Mobility, IOT, Social, Big Data

Industry players adopting multiple business models

(partnerships/collaboration/ M&A) to address the

digital opportunity

Rapidly growing start-up ecosystem redefining

innovation

Indian service providers going bimodal- growth in both

traditional and digital markets

India’s consumer economy, Government’ initiatives for

digitisation of India - driving activity in the domestic

market Source: NASSCOM

Indian IT-BPM industry: Growth and Diversification

Source: NASSCOM

IT-BPM revenue break-up1

• Industry revenues (excluding eCommerce)

total at USD 143 billion; growth reflects

variable impact of currency

• Exports cross USD 100 billion, doubled

over last 6 years

• IT services ~USD 75 billion

• Global hub for high value added

services- ER&D and Product Development

revenues ~USD 26 billion

• World’s biggest BPM destination-

Revenues of USD 28 billion

• ~USD 17 billion eCommerce industry,

growing at 20 per cent boosting digital

consumption

• Diverse industry structure-

>16,000 firms; 1,000+ GIC/MNCs; 4,200+

tech startups

7

1 NASSCOM has begun to report eCommerce market as part of domestic IT-BPM; historical numbers have been changed to reflect addition of this segment E: Estimate, includes hardware

87 98

108

20

21 22

Exports Domestic e-Comm

USD billion

143 132

14 17

FY2015 FY2016E FY2014

11

119 35

Hardware

13 13

12 34

32

• Industry employee base reaches 3.7

million, addition of 2 lakh in FY2016

• eCommerce industry - 40,000 employees

• 1.1 million jobs added in last 5 years

• Annual talent output: 6.2 million

• >1 million technical graduate pool

• ~36-38 per cent share of global

employable talent pool for IT

• Indian IT industry a Global talent

powerhouse – representative of

millennials, showcasing diversity, and

leadership in digital skills

• Talent hunt shifting from ‘Qualification’ to

‘skill based’; hiring ‘knowledge and

expertise’

Source: NASSCOM

Direct employment *

6%

1730 1,840

1,040 1,090

720 760

FY2015 FY2016E

IT exports** BPM exports IT-BPM Domestic***

3,490

3,690

* Excluding Hardware ** includes IT services, Software products, ER&D and product development *** excludes eCommerce

Industry hiring levels steady; specialized skill sets in

demand

(‘000)

IT-BPM exports cross USD 100 billion milestone

IT-BPM export revenues

55.2 61

22.5 24.4

20 22.4

FY2015 FY2016E

IT Services BPM S/W prod and ER&D

97.7

107.8

• Robust Industry growth meets

NASSCOM guidance

• Fastest growing export sector; Added

~USD 50 billion in 5 years

• Digital business growing 1.5X

traditional business

• Segmented exports growth-

o IT services : 10.3 per cent;

o BPM : 8.8 per cent;

o ER&D and product development

highest, at 12.6 per cent

o Software products : 10.3 per cent

• Outperforming Segments:

o ER&D and product development,

IS outsourcing, software testing,

F&A

o Digital solutions

o US, manufacturing and emerging

verticals

FY2016E* Y-o-Y Growth

INR 17%

Constant currency USD 12.3%

Reported currency USD 10.3%

10.3%

(USD billion)

Source: NASSCOM E: Estimate, excludes hardware

Domestic IT-BPM: Ecommerce boosting growth

IT-BPM domestic revenues

• Increased consumer adoption of digital

tech coupled with a technology focused

Government growth agenda

• Aadhar enrolment crossing 950 million

• Large projects like GSTN awarded

• Electronic transactions related to eGov

doubled in 2015 – 7 billion

• Segmented domestic revenue growth in

INR terms

o IT Services : 10.2 per cent

o BPM : 10 per cent

o Software products : 11 per cent

o eCommerce : 27 per cent

• BFSI, Retail and Government verticals

driving uptake

• Ecommerce and startups helping drive

domestic tech adoption

FY2016E1 Y-o-Y Growth

INR 10%

INR – including eCommerce 16.5%

INR billion

E: Estimate, 1 excludes hardware

815 895

215 235

255 280

860 1,084

800 870

IT Services BPM S/W products Ecommerce Hardware

FY2015 FY2016E

1,285

10% 1,410

Source: NASSCOM, IAMAI, MAIT, IMRB

Source: BMR, NASSCOM

Digitally skilled employees

83

2010 2015

2,400

Digital M&A deal value

11

FY2010 FY2016E

30

250

USD mn

28X

8X

FY2010 FY2016E

4

11-14

3X

Digital revenues*

% of industry export revenues

India racing ahead to become the Digital Solutions

partner

• Key digital skill sets Big data, IoT/M2M,

Cloud/Platforms, Social Media, Mobility

• Top vertical adopters - BFSI, Retail, Travel,

Healthcare, Government

• Digital M&A deals spike in volume and

value crossing USD 2 billion, 3X growth

over last year

• Infosys (USD 390 mn) – Panaya, Skava,

Noah Consulting

• Wipro (USD 303 mn) – Designit, Cellent,

Viteos

• Automation platforms and Digital Business

Units

• Increased emphasis on design, creativity,

agility, customer experience

• Partnership with startups in India, US, Israel

and EU

* for top 15 IT firms in India

‘000 nos

India 3rd largest technology start up base

Start-ups created every year

Funding; 125 per cent Y-o-Y growth

Active VC/PEs in 2015

Incubators & Accelerators

4,200+

$4.9

bn

1200+

Start-ups in India….

110+

156+

Startups are boosting India’s next wave of tech

growth ….emerging in high impact areas

Industry pursuing multifaceted startup collaboration strategy

$500M for investing in technology start-ups

'5/50 initiative' to promote in-house disruptive

ideas

31 academic alliances and 21 R&D partners

820+

200+

400+

120+

100+

75+

eCommerce1

Analytics

Edu-tech

Health-Tech

Consumer Services

IoT

$100M initial corpus for venture fund

'Value-portal' and 'MAD Jam' to foster

employee-led ideas

100 Big Data and Internet of Things startups tie-

ups

Illustrative

Source: NASSCOM McKinsey Perspective 2025

Aspiration to reach USD 350 billion by 2025;

digital revenues to spearhead growth

Traditional tech

Digital tech

India technology and services revenue pool

USD billion

77%

23%

2014

119

2020E

225 ~11% p.a.

2025P

350

62%

38%

• Global enterprise tech spend will rise to

USD 4 trillion by 2025, 80 per cent of

incremental tech spending will be digital

• Indian technology services revenues

projected to reach USD 350 billion by

2020, CAGR of 11 per cent

• Successful Indian companies will have to

fundamentally transform their business

models, solution offerings, organization

and capabilities to establish leadership

• Revenue growth not the only indicator of

India’s tech leadership; factors such as

investment, valuations etc may need to

be considered

FY2017 Outlook: Double digit growth story set to

continue

Worldwide IT-BPM services spending growth

4.0%

2.9%

-0.2%

3.0%

5.2%

3.0%

ER&D

BPM

IT

2016P 2015

• Global technology spending expected to regain growth in

2H2016

• FY2017P: Exports** growth:10-12 per cent

• FY2017P: Domestic* growth:11-13 per cent

• Expected Net Employment* addition ~2 lakh

Source: Forrester, Gartner, IDC, Strategy&, NASSCOM

IT-BPM export revenues**

Growth of 10-12%

IT-BPM domestic revenues*

Growth of 11-13%

108

119-121

FY2016E FY2017P

1,410

FY2016E FY2017P

1,560-1,590

USD billion

INR billion

* excludes hardware and eCommerce

**constant currency figures

Industry working to mitigate key issues

Protectionist policies

by different countries-

restrictions on data

and skilled talent

Cyber security-

mitigating internal

threats and building

cybersecurity as a

business segment

Need for speedy

implementation of

policies and initiatives

announced

1 2 3

4 5 6

15

Changing face of

provider landscape and

new business models

Global Headwinds

(Economic slowdown,

currency volatility,

inflation, terrorism etc)

Rapid changes in skill

demand; Re-skilling

current workforce

Source: NASSCOM

To Summarize

Amid sluggish growth in global tech spending, Indian IT-BPM industry

continues to grow in double digits

India continues to gain market share in the global sourcing arena

India becoming a global digital hub- rapid building of capabilities and

offerings

Start-ups redefining India’ innovation capabilities

Domestic market growth is steady, accelerated implementation of

announced initiatives will fast track growth

Indian IT-BPM industry is well on track to achieve its 2025 aspirations

Multiple indices (direct and indirect) may needed in future to reflect growth,

diversity and impact of Indian IT industry

16

THANK YOU