IT/ITES SECTOR IN INDIA PRESENTED BY: SABITAVO DAS

TABLE OF CONTAINT

01 SECTOR OVERVIEW

02 REVENUE BREAKUP

03 EMPLOYMENT STATISTICS

04 GOVERNMENT INITIATIVES

05 STRENGTH & WEAKNESS

06 CONCLUSION

Global scenario of IT & ITES…….

The worldwide information technology

industry, comprising hardware, software,

information technology (IT)services and BPO, is

estimated to have clocked aggregate revenues of $1,800 billion in 2012, an

increase of 5.0 per cent over the previous year.

IT & ITeS account for a major chunk of IT

revenues close to 45 percent, followed by

hardware and software, which contribute

around 38 percent and 18 per cent, respectively.

In the next 3-4 years, total spending on IT is

expected to grow at a CAGR of 5.5 per cent

globally.

At 8.2 per cent, IT-ITeS spend is likely to grow faster as compared to

other segments

Source: National Association of Software and Services Companies (Nasscom )data base

Indian IT sector’s overview …….

9% 3.1 mn

55%

38%

$2.4bn

9945%

>60

Sector’s share in

GDP

Largest private sector

employer

Share in global offshoring

market

Largest share in total services

exports

IT-BPM share: 47% Highest attractor of

PE/VC investments5

Cross border M&A, 28%

share in total M&As

Offsets nearly half of

India’s oil imports bill

Operational IT-SEZs; 30% in Tier II/III

cities35

Source :Nasscom

Evolution of Indian IT & ITES industry

The software industry was literally nonexistent in India until 1960.

Despite the government initiatives, the software exports were not picking up because of two reasons mainly:The exports of software, was heavily dependent on the imports of hardware, which was costly as well as the procedure for obtaining the same was very cumbersome. Secondly, there was a lack of infrastructural facilities for software development.

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 startedIndia increasingly seen as a product development destination

Firms in India became multinational companies with delivery centers across the globe (580 center's 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.

Prior to

1980

1980-1990

1990-2000

2000-onwards

Localization of IT industry…..

• India’s first it hub.• Good infrastructure • The idea of SEZ. Karnataka was among the first to setup tax free SEZ to support technology companies. This further encouraged IT companies to set shop in Bangalore.

Bangalore

• After Bangalore, Hyderabad has been dubbed as the Silicon Valley of India, mainly in light of the fact that more and more firms have set up their operations there.

• Hyderabad’s IT exports exceeded $1 billion in 2004

Hyderabad

Tamil nadu • Global leader for business process

outsourcing.(BPO)• Tamil Nadu was one of the first states in

the Indian Union to formulate an IT policy• Third largest it exporter from India

Maharashtra

• Maharashtra has reached the number two spot in IT exports in the country and Pune region is the leading source of IT exports

• The total software exports out of Maharashtra amount to Rs 51,760 crore, second only to Karnataka (Rs 80,000 crore).

• Beginning to be recognized as a fastest growing it destination

West Bengal

• One the fastest growing it export hub.

• Export it software 2000crore,its tenth largest exporter .Orissa

Source : The hindu,Livemint.

Indian IT sector broadly classified into four segment

IT

IT services

Business process management

Software products and engineering

services

Hardware

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

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 is experiencing growth as the penetration of personal computers is rising in India

The sector has recorded a CAGR of 12% since 2010 to reach USD118 billion in FY14, primarily driven by exports and IT services segment

IT 54%BPM

20%

SOFTWARE SER-VICES 15%

HARDWARE 11%

REVENUE BY SEGMENT FININANCE YEAR(14E)

IT BPMSOFTWARE SERVICES HARDWARE

FY10 FY11 FY12 FY13 FY140

20406080

100120140

50.1 59.4 69.2 76.5 86.424.1

2931.7 32.7

31.6

REVENUE BY YEARS

EXPORTS DOMESTIC

Export revenue grew by 13% year on year to USD 86.4 billion in14E,highest in five year.Domestic revenue declined by 1.3% in year FY 14 from FY 13 due economic uncertainties,

currency fluctuation, slow down in GDP and near election 2014 ,all these are main reason for decline.

Among revenue segments, it was highest 54 % contributor, its growth is driven by IT consulting, soft ware testing.

Domestic revenue break up

Manufacturing

Govermnt

Consumer

Health care

Retail

0% 5% 10% 15% 20% 25% 30% 35%

Domestic revenue by verticals (FY14)

IT BPM S/W PRODUCTS0

200

400

600

800

1000

1200

1400

IT –BPM REVENUE IN (IRN BILLON)

FY2012 FY2013E

Domestic: Y-o-Y growth 14.1 per cent, fastest growing IT market in the world

Segments: IT services fastest growth 14.5 per cent, BPM grew at 12.7 per cent

Services: Managed services, unified communications, collaborative applications,

integration of core enterprise applications

IT services, export account for 75 %of Indian it services industry, IT services exports have grown from $17.1 billion in FY 2007 to around $39.8 billion in FY 2012, a CAGR for 18.5% and in FY13 it grew at $43.9$....

28

13

11

7 3 2 2

31

14

12

8 4 2 2

35

15

14

9 4 2 2

EXPORT REVENUE GROWTH VERTI-

CAL(USD BILLION)

FY12 FY13 FY14

Growth in BFSI sector from year FY13 to FY14 is increasing by12.9%,USD35billion ,growth in

manufacturing sector ,retail, and t&m (telecom media) also increased by

16.6%,7.142%,7.142%.Growth in retail, healthcare, travel was led by demand for

mobility ,analytics, government mandated and green technology and digitalization .

Source:nasscom, Note: t&m- Telecom media, c&u:construction and utilities

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY20140

40

80

IT -BPM -EXPORT REVENUE

IT SERVICE BPM

S/W PRODUCTS AND ENGINNIERING

IT services revenue was increasing from FY2008 to FY 2014 by USD 29.7 billion. IF closely looking at the

graph it clearly understand that IT service growth at ~10 per cent; BPM growth faster at 12.2 per cent

from FY 2012TO FY 2013.Business Drivers for the year- •New verticals and geographies •SMAC based services •Transformation and innovation •Restructured business mod

•Growth Service lines: RIM, software testing, knowledge services and F&A services

Export revenue by Geography.The US accounted for nearly two-thirds of India’s total IT exports, while UK experienced the highest growth in revenues

US UK CONTINENTIAL EUROPE

APAC ROW0

10

20

30

40

50

60

GEOGRAPHIC BREAKUO OF EXPORT REVENUE (USD BILLION)

FY12 FY13 FY14

63%17%

11%6%2%

61%17%

12%

7% 2%

USUKCONTINENTIAL EUROPEAPACROW

TheUS,witha61%shareoftotalITexports,continuestobetheleadingcontributortoITsectorrevenues.ITexportstoUSincreased13%YoYinFY14.TheUKandEuropearewitnessingincreaseddemand,asobservedfromthehigherYoYgrowth.TheAPACmarketisrelativelyunder-penetrated while Row is an emerging market with growing IT adoption.SOURCE:NASSCOM

IT services revenue recorded a CAGAR of9.5% during FY-12-14 led by exports

FY12 FY13 FY14

12.1

7

12.1

8

12.0

8

41.1

4

45.4

2

51.9

2

IT SERVICES REVENUE DOMESTIC EXPORT

48%

17%

3%

7%

25%

EXPORTS REVENUE MIX

CUSTOM APPLICATION IT outsourcing ITCONSULTING

SOFTWARE OTHER

TotalITservicesrevenuesincreasedataCAGRof9.5%toreachUSD64billioninFY14.DomesticITservicesmarketdeclinedataCAGRof0.5%.ITservicesexportrevenuesgrewat14%YoYfromUSD45.4billionto~USD51.9billioninFY14.ThegrowthcanbeascribedtorevivalindemandfromtheUSandEurope.

BPM revenues registered a CAGR of 10.5% during FY12–14 with exports having a 85% share (USD20 billion); CIS was the largest contributor to export revenues

FY12 FY13 FY14

0.0307 3.22 3.24

0.1592 17.88 19.92

Bpm revenuesDOMESTIC EXPORT

40%

19%

23%

14%2%1%1%

Export revenue mix

customer interac-tion services

knodledge services

finance & accounting

verical specific BPM services

HR consulting Procurement and logistic

other

TotalBPMrevenuesgrewataCAGRof10.5%totaling~USD23billioninFY14;theBPMdomesticrevenuesincreasedataCAGRof2.8%.BPM export revenues rose at~11%YoY over FY13 to reach~USD20 billion inFY14,accounting for nearly one-fourth of total IT exports. The revenue growth was driven by knowledge services(data analytics ,legal services)and vertical-specific BPM Services.

SOURCE: Nasscom

Software product and ER&D revenues

FY12 FY13 FY14

3.7 3.8

3.7

11.7 12.8 14.1

DOMESTIC EXPORT

1

0% 5% 10% 15% 20% 25% 30% 35% 40%

SOFTWARE-USD1.7BILLION

RETAIL EDUCATION

MANUFACTURING PHARMA HEALTH CARE

BFSI TECHNOLOGY

OTHER

OTHER

TELECOME

SEMICONDUCTOR

AUTO

AERO

ENERGY

CONSUMER ELECTRONICS

MEDICAL DEVICES

0% 5% 10% 15% 20% 25% 30% 35%

ER&D-USD12.4BILLION

Software products &ER&D revenues grew steadily at a CAGR of 7.5% to reach~USD18billion FY14.Software product revenues were driven by increased proliferation of mobile devices, advanced technologies, cloud computing, greater uptake of software product by small and medium businesses(SMBs)and enterprises ER&D revenues were driven by engineering solutions(accountingfor55%ofrevenues) and embedded systems(accountingfor45%ofrevenues).

STARTUPS ARE INCREASING IN THE FIELD OF CLOUD,BIG DATA,DATA ANALYSIS ,SOCIAL MEDIA, ECOMMERCE, seeing significant vc and angel investor

2005 2009 2011 2012 2013

162

335400

450500

NUMBER OF START UPS

VC INVESTOR ANGEL INVESTOR

437

48

32

NUMBER OF ACTIVE IN-VESTOR

2006 2012

VC INVESTOR ANGEL INVESTOR

43 13

180

80

NUMBER OF DEALS

2007 2012

CLOUD /BIGDATA

MOBILE

BUSINESS

ECOMMERCE

WEBSITE& ONLINE

DEVICE/HARDWARE

0% 5% 10% 15% 20% 25% 30% 35%32%

29%21%

18%18%18%

14%14%14%

11%11%

DOMAIN FOCUS BY STARTUP

CLOUD/BIGDATA is growing faster

than other domain ,account

32% in the segment followed

by mobile(29%),ecommerce(14%).

Number of startups are

increased by162 to 500 from 2005

to 2013.Source :

NASSCOM,LIVEMINT

It-BPM service dominated by large players but majority of It-BPM firms are small which contribute to18% of total employment and 10% to the revenue

Company size Number of players

%of total export revenue

% of total employees

Work focus

Large 11 47-50% 35-38% Full range of service proving.Presence over 60 countries.Large scale of operation and infrastructure .

Mid size 85-100 32-35% 28-30% Mid size players offering services in multiple verticals Near shore and off shore presence in>30-35 countries.

Emerging 450-600 9-10% 15-20% Players offering niche it-bpm services

Small >40000 9-10% 15-18% Small players focusing on specific services in niche segment

Top players in IT-BPM services Top players in IT SERVICES TOP PLAYERS IN ITES SERVICES TOP IT SECTOR EMPLOYERS

Tata Consultancy Services Ltd Genpact India Pvt. Ltd. Tata Consultancy Services Ltd.

Infosys Ltd. Tata Consultancy Services Ltd Infosys Ltd

Wipro Ltd. Serco Global Services Cognizant Technology Solutions India Pvt.

Ltd.

HCL Technologies Ltd. Aegis Ltd. Wipro Ltd.

iGATE Wipro BPO HCL Technologies Ltd.

Mphasis Ltd. Infosys BPO Tech Mahindra Ltd.

L&T Infotech Ltd. Firstsource Solutions Ltd. Genpact

Syntel Ltd. WNS Global Services (P) Ltd. Serco Global Services

CSC, India Aditya Birla Minacs Worldwide Ltd.

Cap Gemini India Pvt. Ltd.

Genpact India Pvt.Ltd. EXL Mphasis Ltd

Robert BOSCH Engineering and Business Solutions Ltd.

Hinduja Global Solutions Ltd. Aegis Ltd.

KPIT Technologies Ltd. HCL Technologies Ltd. -Business Services

iGATE Global Solutions Ltd

Polaris Financial Technology Ltd.

Tech Mahindra Limited CSC IndiaSOURCE :NASSCOM

EMPLOYEEMENT REVIEW

IT EXPORTS BPM EXPORTS IT -BPM EXPORTS

1296879 601

1407

917640

DIRECT EMPLYOEES(OOO)2012 2013E

Industry employs ~3 million professionals directly, and ~9.5 million indirectly Employee growth supplemented by non linear model. Over > 100,000 foreign nationals employed by

the industry~30 per cent (800,000+) women employees. World’s largest talent pool: ~ 4.7 million

graduates and post graduates………………………………………………………………………………………………...

SOURCE :NASSCOM

FUTURE PROSPECT IN IT-ITES

Cloud ComputingMarket is expected to reach USD650- 700 billion globally and USD15–18 billion in India by 2020.Cloud penetration in hardware is expected to show a major shift from 8–10% in 2012 to 22–24% in 2016.

Big Data/AnalyticsThe global market is estimated to grow 45% annually to reach USD25billionby2015.Indian Big Data industry is expected to grow from USD 200 million in 2012 to USD 1billionin 2015,aCAGR of over 83%.Emergence of niche start-up s and technological developments would foster growth.

Social Media AnalyticsAn explosive growth opportunity for Enterprise Social Software with the global market exceeding USD6.4 billion by 2016.According to v Forrester Research ,spending on social business software is expected to grow at a CAGR of 61% during 2013–16.

Enterprise Mobility (EM)Global revenues are estimated to reach around USD140billion by 2020, a CAGR of~15%.North America is expected to remain the largest market while APAC is expected to grow the fastest at~21%.Existing spend of less than 5% on EM is expected to grow to 10-12% by 2020.

SMBsSMBs are emerging as key stake holders for India’s IT sector.Despite being large (47millionunits) and highly unorganized, this segment is witnessing rapid IT adoption.The key to exploiting the SMB opportunity is to offer cloud models(SaaS ,PaaS,IaaS),bundled end-to-end offerings, bundled pricing, and intuitive solutions.

Source : NASSCOM

IT-ITES INDUSTRY OVERVIEW FOR NEAR FUTURE

India has the potential to build a US$ 100 billion software product industry by 2025, according to Indian Software Product Industry Roundtable (iSPIRT).

The software products market in India, which includes accounting software and cloud computing-based telephony services, is expected to grow at 14 per cent in 2014.

The IT services sector accounted for the largest share of the IT and ITeS industry, with a total market size of US$ 56.3 billion during FY13, followed by BPM sector (US$ 20.9 billion), and software products and engineering services (US$ 17.9 billion); the market size for hardware was US$ 13.3 billion during FY12.

The Indian IT-BPM industry is expected to add revenues of US$ 13–14 billion to the existing revenues by FY15, according to National Association of Software and Services Companies (NASSCOM).

Total exports from the IT-BPM sector (excluding hardware) were estimated at US$ 76 billion during FY13, Export of IT services has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding hardware) in FY13.

The IT outsourcing sector is expected to see exports growing by 13–15 per cent during FY15.

GOVERNMENT INITIATIVES FOR IT INDUSTRY

20 km free Wi-Fi zone in Patna

US$ 6.4 billion

ESDM PROJECT SET UP

IN BANGAL

ORE

An investment of Rs

500 crore (US$ 83.24

million)

Central Government and the respective State Governments are expected to collectively spend on it product &services in 2014,an increase over 4.3% in 2013.

The longest across the planet, making a strong impression on the world's

InfoTech map.

The ESDM project will come up on a 1.16 acre of land at an investment of approximately Rs 85

crore (US$ 14.16 million)

More than 20 small and medium enterprises (SMEs) in the IT sector have recently received land allotment letters from the Government of Punjab to set up their units.

SOURCE : NASSCOM,GARTNER,

SEZ FOR IT /ITES IN INDIA

2008 2010 2012

303

532 5

89

IT SEZ UNIT GROWTH

SEZs have grown at a CAGR of ~18% during 2008-12 totaling 589 units in 2012. Around30%ofalloperationalITSEZsarepresentinTierII/ III cities.Tier II/III cities offer advantages such as low attrition, affordable real-estate, local government support, and access to untapped SMB market that are rapidly adopting technology.

SOURCE: NASSCOM

The strengths of the Indian IT sector: Highly skilled human resource;

Low wage structure;

Quality of work;

Initiatives taken by the Government

English-speaking professionals;

Cost competitiveness;

Quality telecommunications infrastructure.

The weaknesses of the IT sector

Absence of practical knowledge

Dearth of suitable candidates

Less Research and Development;

Contribution of IT sector to India’s GDP is still rather small

IT development concentrated in a few cities

Road Ahead For Indian IT Sector

Most preferred location for engineering offshoring by poll conducted by Booz and Co. • Companies are

now offshoring complete product responsibility and increased focus on R&D.

India’s IT sector is gradually

moving from linear models

(rising headcount to

increase revenue) to non-linear

ones.

IT companies in the country are focusing

on new models such as platform-based BPM

services and creation of intellectual property.

Tier II & III cities are

increasingly gaining

attraction among IT

companies.

Cheap labor, affordable real

estate, favorable

government regulations, tax

breaks and special

economic zone (SEZ) schemes are facilitating

their emergence as

new IT destinations.

Indian insurance

companies also plan to spend

Rs 12,100 crore (US$ 2.01

billion) on IT products and services in

2014, according to Gartner.

CONCLUSION :

Hence, IT sector is attracting considerable interest not only as a vast market but also as potential production base by international companies.

Also, it is one of the fastest growing segments

of the Indian industry both in terms of production and exports.