Indian IT-BPM Industry FY2013 Performance Review, FY2014 Outlook

Mumbai, 12th February 2013

AGENDA

AGENDA

Where is the global economy heading How is the Indian IT-BPM Industry evolving Which are the new growth markets/ emerging verticals The year that went by, and the year ahead What challenges lie before us

2 Source: NASSCOM

GLOBAL IT-BPM SPEND & SOURCING

Global sourcing continues to outperform IT-BPM spend

Worldwide IT-BPM Spend USD billion IT Services 164 156 278 USD 1.9 trillion* 648 627 44-46 48-50 2012 2011 Global Sourcing Market size USD billion ~9% 114-118

124-130

Business Process Management

Packaged Software

269
70-72 797 748
1,350-1,400

76-80

Hardware

ER&D
* 2012

1,311

2011 2012 IT Sourcing Business Process Sourcing

Global sourcing continues to outpace global technology and services spend; growing ~2X as fast as global IT spend Cost remains a key driver of outsourcing; along with simplification and standardisation
3

Global IT- BPM market recorded growth of 4.8 per cent in 2012 APAC recorded highest growth of 6 per cent, ~1.6X Global ITBPM spend; driven by BPM services (~9 per cent)
Source: Everest, Forrester, Gartner, IDC

IT-BPM FACTS

IT-BPM: Highest impact sector for India

~8%
GDP Share Contribution to Indias GDP grew ~3X in the last 10 years Total exports share IT-BPM exports share grew > 5X in the last 10 years

~24%

3 mn

Direct Employment
One of largest organized private sector employers in India

>52%

Global Sourcing Share

Indias share of the global sourcing market

Domestic Market Growth Outperforms exports-fastest growing IT market in the world

14.1%

450+*

Start-up companies Vibrant start-up community grew ~3X over the last 5 years
4

Source: NASSCOM

* funded startups

IT-BPM REVENUES

IT-BPM Industry resilient, growing, evolving

IT-BPM revenue break-up USD billion 108 13.0 13.2
H/W Growth in INR= 8.5%

Growth figures reflect variable impact of currency Highest value add sector for India 60-70 per cent Exports mainstay of the industry - >70 per cent Indian IT-BPM exports offsets 50% of Indias oil imports

100.9 88.1 74.2 10.2

12.2

76.3

87.7

95.0

64.0

IT services today is a USD 50+ billion dollar industry BPM is a USD 20 billion segment ER&D and products segment closing in on the USD 20 billion mark too

FY2010

FY2011
Hardware

FY2012
Services

FY2013E

E: Estimate Source: NASSCOM

IT-BPM EXPORTS

IT-BPM exports logs double digit growth in FY2013

FY2013E INR Constant USD USD IT-BPM Export revenues* (USD billion) 68.8 13.0 15.9 17.8 New verticals and geographies SMAC based services Transformation and innovation Restructured business models Y-o-Y Growth 21.4% 10.9% 10.2% Exports: Y-o-Y growth 10.2 per cent, over 2X greater in INR terms Segments: IT service growth at ~10 per cent; BPM growth faster at 12.2 per cent Business Drivers for the year Industry growth in constant currency terms meets NASSCOM guidance

75.8 14.1

39.9

43.9

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

FY2012 IT Services
E: Estimate Source: NASSCOM

FY2013E BPM S/W prod and Engg

* Excluding Hardware 6

IT-BPM DOMESTIC

Domestic market outperforms exports at 14.1 per cent

IT-BPM Domestic revenues* (INR billion) 1,047 14.1% 918 205 180 167 148
Services: Managed services, unified communications, collaborative applications, integration of core enterprise applications Key Enablers: Mobile apps, cloud environment ,SMB out reach Government accelerating economic reforms, IT seen as a critical enabler for inclusive growth and transformation Internet and Ecommerce companies driving adoption Meets NASSCOM guidance 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

589

674

FY2012
IT Services
Source: NASSCOM

FY2013E
BPM S/W products
* Excluding Hardware

INR/USD rate used for calc Q4FY13- 53.5 FY13E-54.2

IT-BPM KNOWLEDGEBASE

Industry continues to be a net hirer- Adding 188,300 jobs in FY2013

Direct Employment (000)*
7%
2,776 2,964 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

640

601

879

917

1,296

1,407

Worlds largest talent pool: ~ 4.7 million graduates and post graduates
Faster role progression and development, structured training programs

FY2012
IT exports** BPM exports

FY2013E
IT-BPM Domestic***

Sustained investment in structured training programs, in-house universities and affiliations with academia

Source: NASSCOM

* Excluding Hardware

** includes IT services, ER&D and Products *** includes S/w products

Industry unique differentiator- business, service and delivery model evolution

Number of global centers
End to End delivery Moving up the Value Chain Integrating SMAC Transformation

M&A deal value, USD bn 1.4 2009

460 FY2009 CAGR 2008-13E

580 FY2012

3.3 2012

M&A for domain and skill

Rev/employee (Indexed to FY08=100) 12.8% 100 Revenue FY2008 121

Initiate Non Linear Play

Products, Platforms, Software assets, Solution Accelerators

8.6%

Pricing models Outcome based

Employee

FY2013E

Domain Specialists as a % of total employees

Extend Cost Advantage Changing employee mix

Tier-II/III: Share in employees

11-12% 9-10%

10%
Tier 2/3 movement Future-ready workforce

12%

FY2009
Source: NASSCOM

FY2012

FY2008

FY2012
9

Operational metrics driving flexibility for clients and efficiency for providers
CAPACITY UTILISATION* ATTRITION (IT SERVICES)

INDICATIVE SG&A (% of revenue)

EFFICIENCY

73.9%
71.8% 72.4%

18%

14.1% 15% 13% 14.0% 13.8%

2010

2011

2012

2010

2011

2012

2010

2011

2012

FIXED PRICE CONTRACTS (% of revenue)

Utilization levels increasing

ONSITE EFFORT

46.6%

FLEXIBILITY

Attrition remained lower; employee investments are paying off SG&A lower due to operational efficiency

26.1%

26.2% 25.2%

44.7%

45.0%

2010

2011

2012

Firms re-engineering, adopting innovative operating models Offshore higher than onsite

2010

2011

2012

*: Excluding trainees Source: NASSCOM

Note: Data of top 4 companies as of December ending

10

India a preferred destination: Five pronged value proposition

SCALE & MATURITY - 25+ years of outsourcing - 5000+ companies, 750+ MNCs - 580 ODCs in 75 countries

STRONG ECOSYSTEM - Largest no delivery locations: 50 - Training & certification - Secure environment

UNLIMITED TALENT - Annual tech talent output :1ibllion - Established training engine: 2-3% - Industry revenues spent on training

INDIA VALUE PROP

CUSTOMER CENTRIC - 30-32% revenues from verticalised BPM services - Domain experts:12% Consultative selling

COMPETITIVE -60-70% more cost efficient than source countries -15-20% lower than next lowest offshoring destination

Source: NASSCOM

11

GLOBAL IT-BPM OUTLOOK

Global tech spend set to improve grow over 5 per cent in 2013
Worldwide IT-BPM services spending growth
Global IT-BPM spend expected to be on the surge; growth of over 5 per cent in 2013 to touch USD 2 trillion Rate of introduction of disruptive technologies will continue to be faster; SMAC technologies over USD 1 trillion by 2020 IT shifting from traditional process automation to strategic BI, collaboration, customer facing technologies Future of industry is beyond just services -- a complete blend of services, products, solutions and platforms Expanding focus on unsung markets APAC, SMBs, domestic - the next big spenders

5.3% 4.9%

5.4%

4.6%

4.2%
3.3%

2012 IT

2013E BPM

2014P

Source: Forrester, Gartner, IDC, NASSCOM

12

INDIAN IT-BPM OUTLOOK

FY2014: Optimistic outlook, industry expected to add USD 12-15 billion

IT-BPM Export revenues*
USD billion

Growth of 12-14%

Indian IT-BPM industry transitioning from enterprise services to a enterprising solutions Outsourcing models changing- driven by new technologies, reinvented business models, new buyer segments and solutions for emerging markets Technology changes cloud, mobility, analytics, social media creating new opportunities New vertical, customer and geographic markets will continue to gain importance Focus on greater efficiencies and flexibilities reengineer internally; diversify; non-linearity; transforming customer business Internet and mobile expansion will encourage entrepreneurship in products and content
13

69

76

85-87

FY2012

FY2013E

FY2014P

IT-BPM Domestic revenues*

INR billion

Growth of 13-15%

918

1,047

1,180-1,200

FY2012

FY2013E

FY2014P
* Excluding Hardware

Source: NASSCOM E: Estimate, P: Projected

Imagineering the Future Journey to the next 100 billion

21st edition 3 power packed days 120+ speakers 50+ sessions 1400+ delegates 35+ country representations Thought Leadership Future of Technology Customer Speak Emerging Markets India opportunity Reinvented business models

12-Feb-13

14

Future of Technology and Leadership Keynotes

Consumerism: Responsible businesses focus on needs not wants Stephen Lu University of Southern California
Transactional to transformational: Corelating business to hidden intelligence Manoj Singh, Deloitte

Imagineering: Seeding the field of the Future!

Mike Walsh

Leading in Uncertain Times

Ram Charan, Business Advisor & Author

Playing to Win: How Strategy really works Roger Martin Rotman School

Customer Speak

Karenann Terrell Wal-Mart

Shohreh Abedi Farmers Insurance

Roger Gurnani
Verizon

Adriana Karaboutis Dell

Darryl West Lloyds

Sue McKinney
Pitney Bowes

Christoph Baeck Hilti

Sanjay Mirchandani EMC

Aditya Ghosh,
IndiGo

Creative Keynotes

Reinvention of Self: The Real Comeback!

Amitabh Bachchan

Storytelling: Transforming through tales! Devdutt Pattanaik, Chief Belief Officer, Future Group

Emotional intelligence & bottomline Valedictory Session Dr Travis Bradberry, Emotional Intelligence Expert Rahul Dravid

Various formats
Analysts corner: interactive session to discuss changes in the sourcing sector
Vendor consolidation & strategic partnerships - through the customers eyes - Chris Andrews, Forrester Generation Y: New Users, New Expectations, New Challenges - Frank Ridder, Gartner Transformation agendas & how they are driving two different market segments - Peter Bendor Samuel, Everest The Changing Dynamics of the G2000 - Paul Reynolds, ISG [R]evolution - Six trends that will drive business transformation and competitive advantage in 2013 - Ben Towbridge, Alsbridge Theme: Global IT Outsourcing Market Forecast: 2012-2016 - Rachael Stormonth, NelsonHall

Country sessions
Analyzing Japan Conundrum: Is there an IT market Master Class workshops Outside In: Customer centricity Build a "Lean" Robot!
12-Feb-13 18

Global Participation Delegates from across 35+ countries

Americas - US, Canada, Colombia Europe - Belgium, France, Germany, Netherlands, Sweden, UK APAC & Middle East - Australia, New Zealand, China, Japan, Hong Kong, Malaysia,Philippines, Sri Lanka, Singapore, Pakistan, Bangladesh Africa - South Africa, Kenya, Nigeria

12-Feb-13

19

Executive Presence

Anand Sharma, Honble Union Minister of Commerce and Industry Prithviraj Chavan, Honble Chief Minister of Maharashtra Sachin Pilot, Honble Minister for Corporate Affairs Milind Deora, Honble Minister for Communications and IT Jack Markell, Governor, Delaware US Takeshi Yagi, Ambassador of Japan to India Nandan Nilekani, Chairman, UIDAI

12-Feb-13

20

Structured Networking
Country Delegations partnership opportunity Social Media groups Twitter, Facebook, Slideshare, You tube

Peer-to-Peer networking at focused sessions

NILF
NASSCOM Connect Enables delegates to connect and set up meetings
21

The social platform Entertainment evening, Awards night and more

12-Feb-13

Questions