ITFT Education Group

The information technology industry has truly transformed the way the world looks at India. Rapidly capturing global imagination, the success of its IT industry has placed India at the forefront of the emerging global knowledge economy. According to the National Association of Software and Service

Companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector has grown from 1.2 per cent of the gross domestic product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2008. The net value added by this sector, to the economy, is estimated to be 3.3 to 3.9 per cent for FY 2008.

India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. The government expects the exports turnover to touch US$ 80 billion by 2011, growing at an annual rate of 30 per cent per annum, from the earlier few million dollars worth exports in early 1990s.

Indian IT-BPO sector grew by 33 per cent in FY 2008 to reach US$ 64 billion in aggregate revenue (including hardware). Of this, the software and services segment accounted for US$ 52 billion, growing by 28 per cent over FY 2007.
Software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$ 40.4 billion, contributing nearly 63 per cent to the overall IT-BPO revenue aggregate.
IT-BPO exports (including hardware exports) grew by 28 per cent from US$ 31.8 billion in FY 2007 to US$ 40.9 billion in FY 2008.
While the US (61 per cent) and the UK (18 per cent) remained the largest IT-BPO export markets in FY 2007, the industry is now making a mark in other countries as well - with exports to Continental Europe in particular, growing at a compound annual growth rate (CAGR) of more than 55 per cent over FY 2004-2007.
Domestic IT market (including hardware) reached US$ 23.1 billion in FY 2008 as against US$ 16.2 billion in FY 2007, a growth of 43 per cent. Hardware remained the largest segment of the domestic market with a growth rate of 44 per cent in FY 2008. Software and services spending grew by over 41 per cent during the year.
The industry's vertical market exposure was well diversified across several mature and emerging sectors. Banking, financial services and insurance (BFSI) remained the largest vertical market for Indian IT-BPO exports, followed by high-technology and telecom. These sectors together accounted for nearly 60 per cent of the Indian IT-BPO exports in FY 2007.
Manufacturing, retail, media, healthcare, airlines and transportation, and utilities were the other key segments.

Moreover, according to a study by Springboard Research, the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.

A research by Gartner forecasts India as the undisputed leader in the outsourcing space in the year 2008. The Outsourcing Service Provider Performance Study 2007, undertaken by sourcing advisory firm Equa Terra, reported that the majority of UK businesses offshore all or parts of their IT functions to India and plan to continue with this strategy as India continued to be the favourite outsourcing destination for businesses in UK in terms of satisfaction.

India's most prized resource is its readily available technical work force. India has the second largest English-speaking scientific professionals in the world, second only to the US. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. According to a Gartner study, India remains the undisputed leader in offshore services and tops the list of 30 countries on criteria's such as language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property, security and privacy.

Twenty-nine India-based companies including Tata Consultancy Services, HCL Technologies, Genpact, and WNS Global Services amongst others, have been listed among the best 100 IT service providers in a new survey carried out with a view to assist business heads of major outsourcers identify reliable, innovative and tech-savvy partners.

Information technology has been a promising sector for India, generating revenues both for the domestic as well as the global market. India's IT potential and markets with very high returns have attracted multinationals to grab a share of the pie and cash in on the IT boom. Also, the increase in purchasing power and the rapid business expansion of the small and medium enterprises (SMEs) holds promise for global IT giants who look at a 100 per cent year-on-year growth in their small and medium businesses (SMBs) market in India. In fact, the total IT spend of Indian SMBs is expected to touch US$ 10 billion this year, of which US$ 1.1 billion is expected to be spent on IT services alone.

Also, according to a study by consulting firm Zinnov, India's IT spending is likely to grow between 17.6-24 per cent by 2010 from the current IT spending totalling US$ 17 billion.

Capgemini, Europe's largest consulting and computer services firm is gradually moving its internal support services to India.
Intel, the globally renowned chip maker, is looking to invest more than US$ 1 billion in India over the next three years in partnership with Indian and foreign hardware firms to prepare light weight personal computers.
Cisco posted over 100 per cent year-on-year growth in its SME business in India in FY2008.
Oracle is expecting over 100 per cent growth in India for its CRM business on the back of increased technology awareness and need for cost-effective customer servicing.
Yahoo! Inc and Tata Sons' subsidiary firm Computational Research Laboratories (CRL) have entered into a joint agreement to make available-EKA, a supercomputer (the fourth fastest) in the world- for cloud computing research in India.
Dell, which not only manufactures and sells hardware in India but also has a service and support arm, saw a volume growth of 99 per cent year-on-year in the first quarter of 2008. It had ended the year 2007 with revenues of US$ 638.96 million and expects to touch the billion dollar mark next year.
World's leading chip designer firm, ARM, is expanding its India design centre to make it the largest outside Britain.
US-based, US$ 1-billion dollar-chip maker, Microchip Technology, will invest US$ 65 million in its India development centre over the next five years.

India's domestic market has also become a force to reckon with, as the existing IT infrastructure evolves both in terms of technology and depth of penetration. Global as well as domestic IT companies like IBM, Accenture, HP, TCS, HCL and Wipro have witnessed a remarkable growth in their business. The domestic information technology business has become far too attractive to ignore. India Inc's demand for IT services and products has bolstered growth in the domestic sector with deal sizes going up remarkably and contracts worth US$ 50 million-100 million up for grabs.

Such growth in the software and services sector has been achieved because of spectacular growths in some segments. For instance, 680,000 notebooks were sold in the first half of 2007-08, registering an increase of 59 per cent. In the next couple of years, global market intelligence and consulting firm, IDC, sees a higher local demand driven by growth of broadband, expansion of Software-as-a-Service (SaaS), service oriented architecture, virtualisation as also networking projects. The net margins in the domestic market are at about 9-11 per cent which has improved considerably in recent years. Of late IT service providers, MNC's and domestic firms have developed strategies exclusively for the domestic market according to a research by Gartner.

Further, India's homegrown IT mammoths are looking at buying companies abroad. In one of the biggest acquisitions ever, HCL Technologies has proposed to acquire UK-based Axon with a US$ 811-million bid at 650 p per share.

The Indian information technology sector continues to be one of the sunshine sectors of the Indian economy showing rapid growth and promise. Though worldwide IT budgets are expected to increase by 3.3 per cent in 2008, slightly higher than 2007, the Indian firms would report stronger-than-average IT budget increases of around 13 per cent, according to Gartner.

According to NASSCOM, the Indian IT-BPO sector is on track to reach a target of US$ 60 billion in exports and US$ 73-75 billion in overall software and services revenues by 2010.
With small and mid-sized businesses driven by the increased use of technology India's information and communication technology market is estimated to grow 20.3 per cent annually to reach US$ 24.3 billion by 2011.
According to the global infotech analyst, International Data Corporation, the Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to become a US$ 132 billion industry, significantly, the domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4 per cent. Simultaneously, the IT and ITeS exports are estimated to more than double to US$ 78.62 billion by 2012.