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![Page 1: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/1.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian Information Technology Sector andthe Domestic User Industry:
An Uneasy Partnership?
Sachin Garg1 Rashmi Sarita2 Lokesh V.3
1Navankur
2FICCI
3Larsen & Toubro
21st November, 2009
![Page 2: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/2.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 3: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/3.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 4: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/4.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 5: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/5.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 6: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/6.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 7: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/7.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 8: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/8.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Introduction
Issue: Indian Companies in the Information TechnologyServices Sector do not play much in the DomesticSector
Impact: Domestic IT user companies are unable to tap theexpertise the IT Service companies possess,making them uncompetitive in the long run
Contribution: We hypothesize that Tax Incentives to ExportOriented Software Units play a big role in makingthe domestic IT user community unattractive tothe IT Services Companies.
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 10: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/10.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - Phases
Time
Val
ue
Ad
dit
ion
Body Shopping
Onsite
Offshore
Projects
Consulting
IP Focused Development
![Page 11: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/11.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 12: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/12.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT-BPO Industry
NASSCOM data (2009)
• Indian IT-BPO industry FY2009 estimated revenues:USD 71.7 bn
• IT software and services industry: USD 60 bn
• Employment: Direct: 2.23mn, Indirect 8mn
• 1.2% of GDP (FY1998) – 5.8% of GDP (FY2009)
• Share of Total Exports: < 4% (1998) – ≈ 16% (2008)
http://www.nasscom.org/Nasscom/templates/NormalPage.aspx?id=55816
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Exports
NASSCOM data (2009)
• Revenues are estimated to gross USD 47.3 bn in FY2009,accounting for 66% of the total IT-BPO industry revenues.
• US is the largest market with 60% share.
• European market driving incremental growth—UK (CAGR41.4%), Continental Europe (CAGR 51.4%)(FY2004-FY2008)
• Banking, Financial Services and Insurance segment (BFSI)remains the biggest sector with over 41% of total revenues
http://www.nasscom.org/Nasscom/templates/NormalPage.aspx?id=55816
![Page 14: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/14.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Outline
1 Introduction
2 Indian IT Services SectorEvolution of the SectorMarket SizeStrengths, Weaknesses, Opportunities & Threats
3 Domestic IT Users
4 Tax Incentives to the IT Sector
5 Net Foreign Exchange Earner vs. Non-NFE
6 Future Work
![Page 15: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/15.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
![Page 16: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/16.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
![Page 17: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/17.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
![Page 18: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/18.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
![Page 19: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/19.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
Weaknesses
![Page 20: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/20.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
![Page 21: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/21.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
![Page 22: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/22.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
![Page 23: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/23.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
![Page 24: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/24.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
![Page 25: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/25.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
H Leapfrog opportunities. These
require strategic direction and
long-term thinking
![Page 26: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/26.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
H Leapfrog opportunities. These
require strategic direction and
long-term thinking
H Bottom of Pyramid Innovation
![Page 27: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/27.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
Threats
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
H Leapfrog opportunities. These
require strategic direction and
long-term thinking
H Bottom of Pyramid Innovation
![Page 28: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/28.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
Threats
H Rising factor costs resulting in
lowering advantages on the
cost-arbitrage alone
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
H Leapfrog opportunities. These
require strategic direction and
long-term thinking
H Bottom of Pyramid Innovation
![Page 29: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/29.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Indian IT Sector - SWOT Analysis
Strengths
H Mature Industry — sub-
stantially high on the Value
Chain
H Strong and Vibrant domestic IT
market
Threats
H Rising factor costs resulting in
lowering advantages on the
cost-arbitrage alone
H Emerging Competition:
LatAm, East Europe, China
WeaknessesH Productivity is not keeping
the desired pace
H Skewed structure — small
number of large firms
H Manpower supply constraints
Opportunities
H Global vendors playing in
the domestic market
H Leapfrog opportunities. These
require strategic direction and
long-term thinking
H Bottom of Pyramid Innovation
![Page 30: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/30.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Domestic Market Potential
NASSCOM data (2009)
• Presents a significant opportunity as IT spending in India isgrowing at a pace faster than any other country in the AsiaPacific region.
• Domestic IT-BPO revenues expected to grow ≈ 20% toreach INR 1,113 bn (> INR 1 lakh crores) in FY2009
• Hardware spend (the largest segment) growth moderated
• Domestic IT services are expected to grow by 20% inFY2009, driven by
• increased acceptance of IT as a growth enabler, and• a competitive tool for Indian corporations looking to
compete in an increasingly globalised environment.
• 35 mn strong SMB segment expected to drive future growth
http://www.nasscom.org/Nasscom/templates/NormalPage.aspx?id=55816
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Domestic Market – Harsh Reality“IT firms looking for more domestic share”Mint, (11th May, 2009)http://www.livemint.com/2009/05/10235219/IT-firms-looking-for-more-dome.html
Figure: Focusing on India(Source: http://www.livemint.com/2009/05/10235219/
74126915-36CA-4A6F-9C56-41AA8A26A9F1ArtVPF.pdf)
Next: Tax Incentives to the IT Sector
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
“IT firms looking for more domestic share”Mint, (11th May, 2009)http://www.livemint.com/2009/05/10235219/IT-firms-looking-for-more-dome.html
Figure: Focusing on India(Source: http://www.livemint.com/2009/05/10235219/
74126915-36CA-4A6F-9C56-41AA8A26A9F1ArtVPF.pdf)
Next: Tax Incentives to the IT Sector
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
“IT firms looking for more domestic share”Mint, (11th May, 2009)http://www.livemint.com/2009/05/10235219/IT-firms-looking-for-more-dome.html
Figure: Focusing on India(Source: http://www.livemint.com/2009/05/10235219/
74126915-36CA-4A6F-9C56-41AA8A26A9F1ArtVPF.pdf)
Next: Tax Incentives to the IT Sector
![Page 34: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/34.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
“IT firms looking for more domestic share”Mint, (11th May, 2009)http://www.livemint.com/2009/05/10235219/IT-firms-looking-for-more-dome.html
Figure: Focusing on India(Source: http://www.livemint.com/2009/05/10235219/
74126915-36CA-4A6F-9C56-41AA8A26A9F1ArtVPF.pdf)
Next: Tax Incentives to the IT Sector
![Page 35: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/35.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
“IT firms looking for more domestic share”Mint, (11th May, 2009)http://www.livemint.com/2009/05/10235219/IT-firms-looking-for-more-dome.html
Figure: Focusing on India(Source: http://www.livemint.com/2009/05/10235219/
74126915-36CA-4A6F-9C56-41AA8A26A9F1ArtVPF.pdf)
Next: Tax Incentives to the IT Sector
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Tax Incentives to the IT Sector
Software Technology parks of India (STPI) is a scheme for NetForeign Exchange Earners (NFEs). Some of the tax exemptionsavailable under this scheme are:
• 100% Income Tax Holiday as per section 10A of the IT Act.
• 100% Customs duty exemption on imports
• 100% Excise Duty Exemptions
• Non-payment of Service Tax
• Non-payment of Value Added Tax
• Central Sales Tax reimbursement on indigenous purchases.
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example –Assumptions
Example of an NFE and NNFE who wish to do similardevelopment.
Assumption NFE NNFEClient Foreign DomesticTeam Size 20 20Billing Rate USD 3,500 USD 3,500Overheads USD 100 USD 100Bulge Mix (years ofexperience)
1(7+), 2(5+), 6(3+),7(1+), 4(0+)
1(7+), 2(5+), 6(3+),7(1+), 4(0+)
Customs/ExciseDuties
0% ≈ 8%
VAT 0% 4%Corporate IncomeTax
0% ≈ 30%
Service Tax 0% ≈ 10%
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example –Income/Expenditure
Assumptions
Entity Number Rate (USD) Total (USD)Computers 20 500 10,000Employees 20 1,000 20,000Billing Rate 20 3,500 70,000Overheads 20 100 2,000
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 42: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/42.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 43: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/43.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 44: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/44.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 45: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/45.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 46: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/46.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 47: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/47.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – Returns
Gross Margin = Billing − (Employee Cost +Overheads)
Cost NFE NNFECapitalEquipment USD 10,000 USD 11,200 (Cus-
toms + VAT)Gross Mar-gin USD 48,000 USD 48,000
Margin afterService Tax USD 48,000 USD 41,000
Net Mar-gin afterIncome Tax
USD 48,000 USD 28,700
![Page 48: Indian Information Technology Services Sector and the Domestic User Industry – An Uneasy Partnership?](https://reader033.fdocuments.net/reader033/viewer/2022052822/554f9886b4c90586258b46b3/html5/thumbnails/48.jpg)
IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
NFE vs. NNFE Example – ReturnsComparison
NNFE Returns are
∆Returns = ReturnsNNFE −ReturnsNFE
ReturnsNFE×100
≈
−40%
of NFE returns for similar work and client profiles.
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Future Work
This hypothesis based on empirical evidence and authors’experiences would need to be substantiated by more primaryand secondary data. Some of this data could be:
• Revenues generated by the IT services companies in thedomestic market
• Comparison of• Employee salaries, experience levels and profiles between• Billing Rates between• Taxes paid on incomes earned in
the export and domestic markets
• Customer profiles — how many and of what profile foreignSMBs do the IT services companies serve versus domestisSMBs
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IndianInformationTechnology
Sector and theDomestic User
Industry:An Uneasy
Partnership?
Sachin,Rashmi,Lokesh
Introduction
Indian ITServices Sector
Evolution of the Sector
Market Size
SWOT Analysis
Domestic ITUsers
Tax Incentivesto the IT Sector
Net ForeignExchangeEarner vs.Non-NFE
Future Work
Thank You
Questions?
Also see the blog post:“Indian Domestic IT—inspite of the government”
http://sachingarg.org/blog/2009/04/indian-domestic-it-inspite-of-the-government/