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  • 1. I.T & I.T.E.S

2. texttext Add your title in hereMARKET OVERVIEWIT/ITeS industry: On a steady growth trackn Exports n DomesticRevenue segmentation of IT/ITeS sectorin 2008 (US$ billion)23.240.8Sources: IDC, NASSCOMThe Indian IT-ITeS industry grew at a rateof 25-33 % per cent in FY2008-2011 byclocking total revenue of 96.1 billionUSD.Remember the total revenue in the year2000 is only 6 billion USD Contribution of IT/ITeS industry to IndiasGDP has grown from 1.2 per cent in FY1998estimated 5.5 per cent in FY2008 and% in FY2011ential size of Indias offshore IT/BPO industry015 is estimated at US$ 120 to 180 billiono 12 per cent of GDP 3. Revenues by segment Indian IT industryRevenues by segment2008 (E)2007200620052004031.023.517.813.510.46.55.3 7.23.8 5.2 21.72.9 5.010 20 30 40 50 60 70US$ billionn IT Servicesn BPOn Engineering services, software products and R&Dn HardwareSource: NASSCOM Strategic Review 2008Note: E - estimatesA study by National Association of Software and Service Companies (Nasscom)-Deloitte shows that the contribution of the IT/ITesindustry to the countrys GDP has gone up to a share of 5% in 2007 from a meagre 1.2% in 1998. Software exports from Indiahave increased and account for about 60% of Indias total software revenue.It is estimated that IT exports from India will touch around US$175 billion and the total revenue of the sector will be US$225 billionin 2020. Besides being a key driver of global economic growth, the industry has been continuously providing massive employmentopportunities to millions of people across the country.MA R K E T OVERVIEW 4. India maintains lead in IT/ITeS Indian IT/ITeS sector has matured considerablywith its- expansion into varied verticals- well differentiated service offerings- increasing geographic penetration Indias importance among emerging economies,both as a supply and demand centre, is fuellingfurther growth of the sector Continues to be one of the fastest growingindustries in India, while India maintains itsposition as a strategic off-shoring destinationfor MNCs worldwide IT/ITeS sector contributed to over 5.4 per centof Indias GDP in 2006-07, an increase fromer cent in 2005-06 and 6.4% from 2011-2011India topped A.T. Kearney Global Services Location Index,beating 49 other countries of the world, emerging as thedestination of choice as an off-shoring location of globalIT/ITeS powerhouses1www.ibef.orgMARKET OVERVIEW 5. MARKET OVERVIEWIT services:Anchor segment for the sector Hardware accounted for about 49 per centof the total domestic IT-BPO spend in FY2007 Domestic hardware revenues grew by20 per cent in FY2006 and are expected toexceed US$ 7.5 billion, growing at about 17 per centby FY2008 Software exports expected to reachUS$ 40.8 billion, while the domestic market isexpected to touch US$ 23.2 billion by FY2008 Increasing traction in offshore product developmentand engineering services is supplementing Indiasefforts in Intellectual Property (IP) creation; thesegment has grown by 23 per cent to reportUS$ 4.9 billion in exports in 2006-2007IT Services Export RevenuesProject OrientedIT consultingSystems integrationCustom application developmentNetwork consulting and integrationSoftware testingOutsourcingApplication managementIS outsourcingOthersSupport and TrainingSoftware deployment and supportHardware deployment and supportIT education and trainingTotalUS$ billion7.710.350.376.540.170.284.361.590.841.941.230.990.080.1713.31 6. ITeS-BPO: Outsourcing growth story Services exports account for nearly two-thirdof the total IT/ITeS sector exports. Indian IT-BPO sector grew at an estimatedent in 2007 and 19% increase in 2010-2011 Total revenue aggregate for the sector is expectedto exceed US$ 76 billion, nearly a sixteen-foldincreaseover the aggregate revenue of US$ 4.8 billion,reported in 1998, and direct employment is likelyto cross 1.6 million The concept of outsourcing is increasinglygaining acceptance even in the more conservativemarkets around the worldITeS Sector Revenues0.544.62004-052005-060.96.32006-071.18.40 2 4 6 8 10US$ billionn Domesitc Market n ExportsSource: NASSCOMMARKET OVERVIEW 7. ITeS-BPO: Outsourcing growth story Industry has graduated to providing a highproportion of voice-based services and a wide rangeof back-office processing activities Scope of services has expanded in the last(three to four) years, to include increasinglycomplex processes involving rule-based decisionmaking and research services requiring informedindividual judgmentRevenue by Segments10%11%13%66%n Customer Interactionn Human Resourcen Finance and Accountingn OthersSource: NASSCOMMARKET OVERVIEW 8. INDIAS ADVANTAGESINDIAS ADVANTAGES 9. India:Value propositionBreadth of service offering Service offerings have evolved from low-endapplication development to high-end integratedIT solutions Range of services offered by leading players spansa wide spectrum cutting across multiple verticalsQuality/maturity of processes Host to more than 55 per cent of globalSEI CMM Level 5 firms Expected to host the highest numberof ISO certified companiesINDIAS ADVANTAGES 10. NDIAS ADVANTAGESIT & ITeS December 2008India:Value propositionCost advantage Cost of an engineer is about 20 40 per centof comparable cost in European Union (EU) Selling, general and administrative costsapproximately 80 per cent of comparable cost in EU Average offshore billing rate of US$ 20 to 35per hour; about 50 to 70 per cent lower than EUEase of scalability 6,75,000 technical graduates per annum,of which 4,00,000 are engineers Over 50,000 MBAs graduating per annum Leading firms add more than 10,000 newemployees per annumGlobal and 24/7 delivery capability 11. India: Strong offshoring credentialsKey offshoring destination Indias share in the global market has increasedby 3 per cent in the IT segment and by 6 .1per centin ITeS from 2009-11 India has maintained its position as the preferredoutsourcing destination; Indian IT/ITeS companiesare now offering a global delivery model, at par withthe highest global standards India offers low costs, technical and languageskills, abundant skilled pool, mature industryplayers and supportive government policiesTop five Global Services LocationsCountryIndiaChinaMalaysiaThailandBrazilIndex on a scale of 77.006.566.126.025.89NDIAS ADVANTAGES 12. India: Strong offshoring credentialsQuality of Services Demonstrated process quality, adherenceto standards and expertise have been keyto Indias overall value proposition.Majority of Indian companies have alignedtheir operations to meet internationalstandards, in order to establish credibilityin the global market Currently 55 per cent of the worlds CMMLevel 5 companies are based out of India;India is host to the second-highest numberof ISO certified companies in the worldNDIAS ADVANTAGES 13. Global economicslowdownand its impact on theIndianIT industryGlobal economicslowdownand its impact on theIndianIT industry 14. A recent study by Forrester reveals that 43% of Western companies are cutting back their ITspend and nearly 30% are scrutinizing IT projects forbetter returns. Some of this can lead to offshoring,but the impact of overall reduction in discretionary ITspends, including offshore work, cannot be denied The slowing U.S. economy has seen 70% of firmsnegotiating lower rates with suppliers and nearly 60%cutting back on contractors. With budgets squeezed,just over 40% of companies plan to increase their useof offshore vendors The IT services and outsourcing market is currentlyundergoing a structural transformation that will havea profound effect on how IT service providers willhave to conduct their businessCustomers have started to reduce project scope and /or postpone new development. However, they arealso trying to move more work to lower cost offsitelocations, which could increase IT budgets towardstangible cost saving measures. 15. CompaniesCognizantInfosysTCSWiproBFSIshare(%) *46344225ExposureofBFSI(inUSDmillion)Jan-Mar 2008292.4387.1664.4256.8Apr-Jun 2008314.2398.5648.2271.1Change(%)7.462.94-2.445.57KeyBFSIclientAmerican Express ,Citigroup, Credit Suisse ,JPMorgan,MetlifeABNAmro,BankofAmerica,JPMorgan,Washington Mutuals ,UBSAIG, American Express ,Bank of America, Citigroup,DeutschBank,Fortis,JPMorgan,MerrillLynchCreditSuisse,LehmanBrothers,UBS*As a percentage of total revenue; BFSI contribution sourced from company reports ,BFSI clients from equity analystsInfosys - The revenues from BFSI that were at 37% inJune2003havestayedmoreorlessunchangedasapercentage of total revenues. In the December 2007quarter, Infosys got close to 37% of its revenues fromBFSI. This slipped to 34% of revenues in the March2008 quarter. In the quarter ending December 2008,BFSI showed a sequential growth of 4% in volumeWipro - Indias third-biggest software exporter, andCognizant, ranked sixth, have seen revenue from thekey Banking, Financial Services and Insurance (BFSI)vertical rise by about a fifth between Oct-Dec 2007andJuly-Sept2008April-June2008,Cognizant recorded the highestgrowth from financial services vertical among theoffshore peers. This was mainly due to the type offinancial services clients in the portfolio and themultiple operating levels (table above)TataConsultancyServices, for example, earned 42%of its revenue in the second quarter of CY 2008 fromthe BFSIImpact of exchange rate on revenuesIn IT sector, the margins are likely to be challengedon account of the slowing growth in the US. Rupeedepreciation seems to be the only tailwind that thesector enjoys. This can be evident from the fact that theout of the increase in the IT export revenues for FY 2008over FY 2007, almost half of the increase could beattributed to the rupee depreciation during the sameperiod.Pricing poised for decline in favour of volumesPricing has been difficult in this sector compared toother sectors: On an average, the US financial sector hasdriven b