An Overview of Indian IT Sector

Group 3

Content
IT Sector- Definition- Saurabh srivastava Indian Economy Sumit kumar Contribution of it sector with respect to
Contribution to gdp- yogeswar Employment
Direct employment- sunil kumar Indirect employment-- -- rakesh ranjan

Export maheep R&D /Technolgogy upgradation- Shashank kumar FDI and FII- Ritesh/Shailesh

Characterstics of indian It setor- pawan yadav Basic constituent of it sector--- naveen List of Companies- kadir Performance of sector as whole- maharath/Manish kumar arya Issues related to it sector- aditi Contribution and linkages to world economy Anuj jha Strength- Gargi Weakness-Prachi Threat-Prateek Opportunity-Bhoomika
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Definition
Information Technology

The collection of technologies that deal specifically with processing, storing, and communicating information, including all types of computer and communications systems as well as reprographics methodologies.

(Martin et al., 1999 )

Any technology that help to produce, manipulate, process, store communicate, and/or disseminate information. (William&Sawyar,2005)

 Information Technology Association Of America (ITAA)

IT is the study, design, development implementation , support or management of computer based information system particularly software's applications & computer hardware

Indian Economy-Overview
Industry grew at 7.9% in 2010-11. Projected to grow at 7.1% in 2011-12 Services grew at 9.4% in 2009-10. Projected to grow at 10.0% in 2011-12 Investment rate projected at 36.4% in 2010-11 and 36.7% in 2011-12 Domestic savings rate as ratio of GDP projected at 33.8% in 2010-11 & 34.0% in 2011-12 Current Account deficit is $44.3 billion (2.6% of GDP) in 2010-11 and projected at $54.0 billion (2.7% of GDP) in 2011-12

Merchandise trade deficit is $ 130.5 billion or 7.59% of the GDP in 2010-11 and projected at $154.0 billion or 7.7% of GDP in 2011-12 Invisibles trade surplus is $ 86.2 billion or 5.0% of the GDP in 2010-11 and projected at $100.0 billion or 5.0% in 2011-12 Capital flows at $61.9 billion in 2010-11 and projected at $72.0 billion in 2011-12 FDI inflows projected at $35 billion in 2011/12 against the level of $23.4 billion in 2010-11 FII inflows projected to be $14 billion which is less than half that of the last year i.e $30.3 billion Accretion to reserves was $15.2 billion in 2010-11. Projected at $18.0 billion in 2011-12 Inflation rate would continue to be at 9 per cent in the month of July-October 2011. There will be some relief starting from November and will decline to 6.5% in March 2012
Economic Outlook 2011-12

Contribution of IT sector
Contribution

to GDP GDP is the market value of all officially recognized final goods and services produced within a country in a given period. The sector revenues have grown from 1.2 per cent in FY1998 to an estimated 7.5 per cent in FY2012 (proportion to GDP)

EMPLOYMENT
Responsible for creating significant employment opportunities in the economy. Direct employment within the IT-BPO sector is expected to grow by over 9 per cent to reach 2.77 million, with over 230,000 jobs being in in 2011-12 The IT-ITES sector has been the biggest employment generator and has spawned the mushrooming of several ancillary industries and is responsible for enabling employment to an additional 8.9 million people in various associated sectors Catering Security Transportation Housekeeping, etc many of whom belong to rural areas

Working Population as a percentage of Total population

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R&D /Technology up gradation

The primary objectives of the Research and Development programmes supported by the Information Technology is to Facilitate production and absorption of emerging technologies in the IT sector Facilitate capacity building Creating the right infrastructure Making the existing technologies, affordable to the citizens of the country

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 Two sets of players in India who perform R&D activities

large domestic players subsidiaries of multinationals

Large domestic players undertake two kinds of innovative activities

Internal External

Two-thirds of the R&D outsourcing work in India are towards MNC captive centers, while one-third is to R&D service providers
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Trend in growth of R&D Centers and Talent Pool

Source: Annual Report 2011-12 Government of India Ministry of Communications & Information Technology, Department of Electronics and Information Technology.

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Source : Infosys Annual Report 2010

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 The department of electronics & information technology supports Research and Development and coordinates the technical activities of the respective Scientific Societies of the Department Media Lab Asia Centre for Development of Advance Computing (C-DAC) Free and Open Source Software (FOSS) Bio-infomatics Innovation Promotion CSIR Labs

Private Players:
Wipro: HCL TCS Infosys Patni Sasken
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Source: Annual Report 2011-12 Government of India Ministry of Communications & Information Technology, Department of Electronics and Information Technology.

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Export
80 68.7 70 59 50 50 40.4 40 33.5 30 23.1 20 10.9 10 11.7 12.4 14.5 15.9 47.1 19% 39.8 IT Sector IT Sevices BPO 23% 58% Software Products/Engg. Services BPO IT Services

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25.8

27.3

0 2007-08 2008-09 2009-10 2010-11 2011-12

Source: Annual Report 2011-12,2010-09 Government of India Ministry of Communications & Information Technology, Department of Electronics and Information Technology.

Revenue
120 100 100 88.1 80 69.4 64 60

73.9

Revenue
Domestic Revenue

40

20

11.7

12.8

14

17.1

19

0 2007-08 2008-09 2009-10 2010-11 2011-12

Source: Annual Report 2011-12 Government of India Ministry of Communications & Information Technology, Department of Electronics and Information Technology.

Sources of Revenue
Sector Wise Revenue Revenue By Geography

Source : Infosys Annual Report 2010

FDI and FII

FDI is the investment made by Foreign Multinational companies in India. The Economy high and low depends on the FDI's Investment . At present India is the leading country pertaining to the IT industry in the Asia Pacific region. The IT sector has witnessed the third largest of FDI inflow from April 2000 to Jan 2012 with amount of 49626.45 cr. behind service sector and telecommunication sector. Percentage of total FDI inflows are 6.94 of IT sector.
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 FII is Foreign Institutional Investment , is investment made by foreign Mutual Funds in the Indian Market. The Stock market fluctuations are generally because of FII FIIs investing into Indian companies through the FDI route face a cap of 10%. Under the portfolio route FIIs can individually acquire up to 10 percent equity in an Indian company though the aggregate FII limit is pegged at 24 percent
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Financial Attractiveness of Top 5 Global Services Locations on a scale of 4

Source : Infosys Annual Report 2010

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Constituent of IT Sector
IT- Software These companies help in developing and implementation of different software for their clients worldwide. These software could be for documentation, security services, banking softwares etc. ITeS Business process outsourcing (BPO) Major Corporations across the world outsource their back-office operations to some companies. E.g. Employee payroll for a US companys global workforce is maintained by an Indian BPO. Slowly the definition is expanding to Human resources, accounting, logistics, legal processes etc.

Contd..

Source: http://www.ficci.com// accessed on 27 Aug 2012

Contd..
IT- Hardware and peripherals - The stuff you can actually see and touch, and would likely break if you threw it out a fifth-story window, is hardware. This would include laptops, desktops, Storage devices, Networking devices, LCD, printers etc. IT- Education- This segment provides training for employment in the other segments. This would include companies providing various certification courses, like Java, Oracle etc. These companies also provide training for employees in corporate sector

Source: http://www.ficci.com// accessed on 27 Aug 2012

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Characteristics of Indian IT sector

More service oriented than manufacturing Export based industry Focus on IT-enable services Customer Interaction Services Business Process Outsourcing / Management Back Office Operations Insurance Claims Processing Legal Databases Web site Services Cost effectiveness Skilled human capital as competitive advantage Strong customer-relationship in US and EUROPEAN market
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Source : Infosys Annual Report 2010

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IT Companies

Source : Nasscom Website

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Source : Nasscom Website

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Top 20 Indian IT/ITES companies(2010)

Source : Nasscom Website

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Top 5 India-Based IT Services Providers' Worldwide Revenue, 2011 (Millions of Dollars)

Company 2010 Global Rank 21 26 30 31 48 2011 2010 2011 2010-2011 2010 2011 Global Revenue Revenue Growth Market Market Rank Rate (%) Share (%) Share (%) 16 26 27 31 46 6,980 5,328 4,408 4,752 2,627 9,031 6,279 5,875 5,335 3,316 29.4 17.8 33.3 12.3 26.2 0.9 0.7 0.6 0.6 0.3 1.1 0.7 0.7 0.6 0.4

TCS Infosys Cognizant Wipro HCL Technologi es Total

24,095

29,836

23.8

3.1

3.5

Source : Infosys Annual Report 2010 : strategic analysis

Performance of Sector
The Indian IT-BPO Industry (including hardware) reached a significant milestone in the year 2011-12 by aggregating revenue of US $ 101 billion, a growth of about 14.7 per cent over 2010-11. Aggregate IT software and services revenue (excluding hardware) is estimated at USD 88 billion. IT industrys share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to about 25 per cent in FY2012
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 The Indian software and services exports including BPO exports is estimated at US $ 68.7 billion in 2011-12, compared to US $ 59 billion in 2010-11, an increase of 16.4 per cent. Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011.
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Impact on India's Growth

Source : Nasscom Website

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Indian IT-BPO Industry

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Exports & Employment

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Domestic IT-BPO

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IT Services

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IT services exports is the fastest growing segment, growing by 19 per cent in FY2012, to account for exports of USD 40 billion

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Software Products

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Offshore Software Product Development (OSPD)

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Issues related to IT sector

Rising salaries & weak Infrastructure (resulting in frequent power shortages) Low level of PC use and Internet Penetration Low level of domestic technology development Limited Bandwidth Inadequate availability of venture capital Limited domestic market technology and products for knowledge based

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Contribution and linkages to world economy

The Americas and Europe continues to be the key market for the Indian IT sector

Source : Infosys Annual Report 2010

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Global Footprints of Indian IT/ITES Companies

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Source : Infosys Annual Report 2010

Source : Infosys Annual Report 2010 : Strategic Analysis

Source : Infosys Annual Report 2010 : Strategic Analysis

Strength
Large Pool of Knowledge Workers High Quality & Price Performance Management experience State-of-the-art Technologies Flexibility, Adaptability and Reliability Government encouragement Global Research & Development

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Weaknesses
Bureaucracy Brand India Security concerns. Excessive dependence on USA for revenues Excessive dependence on BFSI sector for revenues High rates of attrition Decreasing competitive advantage.
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Opportunities
Increased off-shoring Under-penetrated geographies and verticals Greater scope for product innovation Increased focus on high end work like consulting and KPO Greater scope to service domains other than BFSI such as Transportation, Infrastructure, etc. Satyam fiasco Likely to have positive impact on business considering corporate governance, possibility of shifting of business, getting higher incremental business from overlapped clients, and winning new business from new clients
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Threats
Competition: Philippines, Malaysia, South Africa Increasing public opposition to off-shoring in higher-wage Reducing margins Global economic slowdown. US Govt. against outsourcing Shrinking margins due to rising wage inflation Rupee-dollar movement affects revenue and hence margins Increased competition from foreign firms like Accenture, IBM etc. Increased competition from low-wage countries like China, Indonesia etc
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References
Annual Report 2011-12 Government of India Ministry of Communications & Information Technology, Department of Electronics and Information Technology. Nasscom annual report 2010-11,2009-10 Nasscom website Ficci Website Asian Development Outlook 2012Confronting Rising Inequality in Asia, Asian Development Bank
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