Service Management

Project Report on

IT/ITES Industry

Submitted By

Rahul Mittal 6503858

Abhishek bagaria 6503860

Piyush Jindal 6503863

Sudeep Mandal 6503864

Kunal Kapoor 6503865

Table of Contents

Sr. No. Content Page No.

1 Introduction 3

a. Define the industry 3

b. Evolution/Growth of Industry 3

c. Target customers/users 5

d. Related Industry 5

2 Industry perspective 7

a. Global Industry perspective 7

b. Indian Industry perspective 12

c. functional perspective of the industry 14

3. Economic Impact 15

a. Economic Status 15

b. Current Trends 17

c. Return on Investment 21

4. Developing a blueprint for the service business 22

a. customer knowledge 22

b. Management issues in services 25

c. Competitive advantage 26

5. Capacity Management in service 29

a. Demand Management or creating Demand 29

b. Supply or distribution of service from different locations 30

c. Problems in managing demand and its solutions 32

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1. Introduction

a) Defining Industry

ITES, Information Technology Enabled Service, is defined as outsourcing of processes that can be enabled with information technology and covers diverse areas like finance, HR, administration, health care, telecommunication, manufacturing etc. Armed with technology and manpower, these services are provided from e-enabled locations. This radically reduces costs and improves service standards. In short, this Internet service provider aims in providing B2B e-commerce solutions. In recent times , Software development and information technology enabled services (ITeS) including business process outsourcing (BPO)/ knowledge process outsourcing services (KPO) industry in India has emerged as one of the most dynamic and vibrant sectors in India’s economy. With a small beginning in early 80s, it has now grown into a broad based comprehensive industry.

The government of India has announced promotion if IT as one of the vie priorities of the country. India has embarked on a policy agenda, which aims to restructure its economy with enhanced global participation. The foreign Director Investment (FDI) to supplement domestic investment for achieving a quantum jump in growth rate is now an integral part of Government of India policy initiatives imparting greater transparency to business procedures and integration with the global market place are seen as the hallmark of new industrial, trade and fiscal policies.

Today, India’s competence in IT, more significantly in computer software and information technology enabled services recognized globally. Indian IT firms and IT professionals have won world-wide recognition in terms of their technical competence, domain knowledge, experience and expertise for offering quality IT services, and their exposure to working on various platforms and systems.

b) Evolution / Growth of the industry

Evolution of the industry

ITES evolution can be divided into four phases as follows:

First Phase of Evolution: In the first phase of Evolution of the ITES industry in India, many MNCs established captive units in India for customer support and transaction processing. General Electric Capital Service was the first MNC to pioneer ITES in India when it opened on India based international call centre in 1997 to perform tasks such as money collection, credit card servicing, and data management. Other multinationals followed, establishing their own captive wholly owned offshore facilities. These included British Airways, HSBC, and Swissair.

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Second Phase of Evolution: in the second phase, third party units were set up in India by MNCs (for outsourcing activities), non resident Indians (NRIs), Indian Independents, and Indian IT Companies. Established software services such as Infosys, Wipro, and Satyam ventured into the ITES business in 2002 by establishing subsidiaries. Quite few of these third party start ups were small ventures with 50-200 seats (workers), and they generally focused on low-skill, routine activities, competing primarily on the basis of cost. More developed IT outsourcing firms tended to move towards higher value added products competing to a greater extent on specialized talent.

Third phase of Evolution: the third phase of Evolution of IT Industry in India has been characterized by the increasing trend towards geographical dispersion of activities; mergers and acquisitions (M&As) have also taken place within the industry in this phase. Industry observers reported 574 M&As in 2003, and 353 in 2004. With the process, many smaller ITES companies found it difficult to survive, and the M&As activity has continued. Going forward, competing small and medium sized firms with complementary skills are likely to merge their operations to compete with larger global firms.

Fourth phase of Evolution: In the current and fourth phase of Evolution of ITES industry in India, there is an increasing trend towards Indian companies acquiring small to medium sized companies in overseas locations. These foreign acquisitions mark a contrast to the practice of foreign MNCs setting up BPO units in India to take advantage of lower costs here. Also, the acquisitions are probably in the nature of market energy strategy. There is also growing trend of niche players in industry verticals or specific business processes setting up BPO businesses. Many of these players have had long experience in the domestic market and are now offering offshore BPO services.

Evolution in IT Software:

• 1968: The Tata industrial conglomerate forms software services unit Tata Consultancy Services.

• Mid-1970s: IBM exits India. Import duties of 150 percent or more mean that VCRs cost $3,000 and TVs cost $6,000. Wipro starts to create India's first homegrown PC.

• 1991: National financial crisis causes government to introduce major reforms.

• 1993: A group of IT leaders determines plan for IT industry. Professor Deepak Phatak predicts India's IT output will hit $100 billion by 2010. "Everyone thought that sounded crazy, so we changed it to $50 billion by 2008," he said. The latter figure is on track.

• 1994: Telecom liberalized.

• 1995: TCS determines that its Case Pac tool developed for IBM can be used to scan software for Y2K problems. An industry is born.

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• 1999: Y2K contracts pile into India.

• 2002: Indian companies expand hiring. Massive layoffs in US

• 2003: Led by service conglomerates such as Wipro and Infosys, India becomes a primary destination for offshore outsourcing as foreign companies seek to lower cost

c) Target customers/Users

The target customers of the ITES industry are businesses like software industries, Finance, Healthcare, schools, universities, manufacturing industry, etc. But the ultimate customer or user of the ITES industry is the people who has knowledge and interest in the software like students, employees etc.

d) Related Industries

Following are the industries related to IT/ITES industry for which software and services are provided:

• Human Resources

• Customer Care

• Content development

• Administration

• Research and Development

• Financial Consultancy Services

• Advanced Web Applications

• Business and Technical Analysis

• Learning Solutions

• Animation & Design

• Business & Market Research

• Pharmaceuticals and Biotechnology

• Medical Services

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• Writing & Content Development

• Legal Services

• Intellectual Property (IP) Research

• Data Analytics

• Network Management

• Training & Consultancy

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2. Industry Perspectives

a. Global Industry perspective

The software industry has become one of the most important industries in the world with the software companies holding a huge portion of the world stock exchange. The software companies generally provide software solutions to their clients. Software may be either proprietary or open sources software. The software companies develop software and sell it for commercial purposes. Most of the times, the commercial software are proprietary software but open source or free software are also used for commercial purposes.

The primary task of these software companies is to develop software for various purposes depending on the requirement of the clients. The domain that the software companies serve may be banking, stock market, medical, customs, retail, game, traveling, publishing, and legal or government administration.

Just like software development market, the software outsourcing or offshore software development is also a growing industry in many countries. Outsourcing refers to the distribution of non-core software operations to some external companies that are specialized in handling such software development. Offshore software development is unique to this new technology era. The software teams are well equipped with proficient employees and now developing software is a global business with offshore developing.

i) Top 10 software companies in the world

Software Magazine's Top 10 ranking of 2009 is as follows

1. IBM

2. Microsoft

3. HP

4. Accenture

5. Oracle Corporation

6. Computer Sciences Corporation

7. SAP

8. Cap Gemini

9. Lockheed Martin Corporation

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10. Hitachi

Top 10 BPO companies in the world

1. IBM Global / Daksh

2. Accenture

3. Hewlett Packard

4. MphasiS

5. Ernst & Young/Capgemini

6. Wipro Spectramind

7. ICICI One Source

8. eFunds Global Outsourcing

9. Convergys

10. Affiliated Computer Systems

ii) Industry functioning globally

Following are the processes covered under IT/ITES product development and in providing service:

Market Research

A market study is made to identify a potential customer's need. This process is also known as market research. Here, the already existing need and the possible and potential needs that are available in a segment of the society are studied carefully. The market study is done based on a lot of assumptions. Assumptions are the crucial factors in the development or inception of a product's development. Unrealistic assumptions can cause a nosedive in the entire venture. Though assumptions are abstract, there should be a move to develop tangible assumptions to come up with a successful product.

Research and Development

Once the Market Research is carried out, the customer's need is given to the Research & Development division(R&D) to conceptualize a cost-effective system that could potentially solve the customer's needs in a manner that is better than the one adopted by the competitors at present.

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Once the conceptual system is developed and tested in a hypothetical environment, the development team takes control of it. The development team adopts one of the software development methodologies that is given below, develops the proposed system, and gives it to the customer.

The Sales & Marketing division starts selling the software to the available customers and simultaneously works to develop a niche segment that could potentially buy the software. In addition, the division also passes the feedback from the customers to the developers and the R&D division to make possible value additions to the product.

While developing a software, the company outsources the non-core activities to other companies who specialize in those activities. This accelerates the software development process largely. Some companies work on tie-ups to bring out a highly matured product in a short period.

Popular Software Development Models

The following are some basic popular models that are adopted by many software development firms

A. System Development Life Cycle (SDLC) Model

B. Prototyping Model

C. Rapid Application Development Model

D. Component Assembly Model

A. System Development Life Cycle (SDLC) Model

This is also known as Classic Life Cycle Model (or) Linear Sequential Model (or) Waterfall Method. This model has the following activities.

1. System/Information Engineering and Modeling

As software is always of a large system (or business), work begins by establishing the requirements for all system elements and then allocating some subset of these requirements to software. This system view is essential when the software must interface with other elements such as hardware, people and other resources. System is the basic and very critical requirement for the existence of software in any entity. So if the system is not in place, the system should be engineered and put in place. In some cases, to extract the maximum output, the system should be re-engineered and spruced up. Once the ideal system is engineered or tuned, the development team studies the software requirement for the system.

2. Software Requirement Analysis

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This process is also known as feasibility study. In this phase, the development team visits the customer and studies their system. They investigate the need for possible software automation in the given system. By the end of the feasibility study, the team furnishes a document that holds the different specific recommendations for the candidate system. It also includes the personnel assignments, costs, project schedule, target dates etc.... The requirement gathering process is intensified and focussed specially on software. To understand the nature of the program(s) to be built, the system engineer or "Analyst" must understand the information domain for the software, as well as required function, behavior, performance and interfacing. The essential purpose of this phase is to find the need and to define the problem that needs to be solved .

3. System Analysis and Design

In this phase, the software development process, the software's overall structure and its nuances are defined. In terms of the client/server technology, the number of tiers needed for the package architecture, the database design, the data structure design etc... are all defined in this phase. A software development model is thus created. Analysis and Design are very crucial in the whole development cycle. Any glitch in the design phase could be very expensive to solve in the later stage of the software development. Much care is taken during this phase. The logical system of the product is developed in this phase.

4. Code Generation

The design must be translated into a machine-readable form. The code generation step performs this task. If the design is performed in a detailed manner, code generation can be accomplished without much complication. Programming tools like compilers, interpreters, debuggers etc... are used to generate the code. Different high level programming languages like C, C++, Pascal, Java are used for coding. With respect to the type of application, the right programming language is chosen.

5. Testing

Once the code is generated, the software program testing begins. Different testing methodologies are available to unravel the bugs that were committed during the previous phases. Different testing tools and methodologies are already available. Some companies build their own testing tools that are tailor made for their own development operations.

6. Maintenance

The software will definitely undergo change once it is delivered to the customer. There can be many reasons for this change to occur. Change could happen because of some unexpected input values into the system. In addition, the changes in the system could directly affect the software operations. The software should be developed to accommodate changes that could happen during the post implementation period.

B. Prototyping Model

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This is a cyclic version of the linear model. In this model, once the requirement analysis is done and the design for a prototype is made, the development process gets started. Once the prototype is created, it is given to the customer for evaluation. The customer tests the package and gives his/her feed back to the developer who refines the product according to the customer's exact expectation. After a finite number of iterations, the final software package is given to the customer. In this methodology, the software is evolved as a result of periodic shuttling of information between the customer and developer. This is the most popular development model in the contemporary IT industry. Most of the successful software products have been developed using this model - as it is very difficult (even for a whiz kid!) to comprehend all the requirements of a customer in one shot. There are many variations of this model skewed with respect to the project management styles of the companies. New versions of a software product evolve as a result of prototyping.

C. Rapid Application Development (RAD) Model

The RAD models a linear sequential software development process that emphasizes an extremely short development cycle. The RAD model is a "high speed" adaptation of the linear sequential model in which rapid development is achieved by using a component-based construction approach. Used primarily for information systems applications, the RAD approach encompasses the following phases:

1. Business modeling

The information flow among business functions is modeled in a way that answers the following questions:

What information drives the business process? What information is generated? Who generates it? Where does the information go? Who processes it?

2. Data modeling

The information flow defined as part of the business modeling phase is refined into a set of data objects that are needed to support the business. The characteristic (called attributes) of each object is identified and the relationships between these objects are defined.

3. Process modeling

The data objects defined in the data-modeling phase are transformed to achieve the information flow necessary to implement a business function. Processing the descriptions are created for adding, modifying, deleting, or retrieving a data object.

4. Application generation

The RAD model assumes the use of the RAD tools like VB, VC++, Delphi etc... rather than creating software using conventional third generation programming languages. The RAD model

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works to reuse existing program components (when possible) or create reusable components (when necessary). In all cases, automated tools are used to facilitate construction of the software.

5. Testing and turnover

Since the RAD process emphasizes reuse, many of the program components have already been tested. This minimizes the testing and development time.

b. Indian Industry perspective

i) TOP Players of Software in India

1. Tata Consultancy services

2. Infosys Technology

3. Wipro Technology

4. Tech Mahindra

India’s Top 10 BPO firms

1. Genpact

2. WNS

3. Wipo BPO

4. HCL BPO Services

5. ICICI One Source

6. IBM Daksh

7. Progeon

8. Aegis BPO Services

9. EXL Service Holdings

10. 24/7 Customer

Presence of Global IT players in India

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There are a large number of multinational IT enterprises operating in India in sectors such as: Integrated Chip Design, System software, communication software, R&D Centres, Technology Support sector, captive support sector, BPO Sector etc reaping the cost and quality advantages.

These multinationals include Siemens/ Philips, Intel, Texas Instruments etc. (Chip Design); Siemens, Motoraola, Lucent Technologies, Sony, Nortel etc. (Communication Software); Google, Yahoo etc. (R&D Centres); Axa Business Services, Swiss Shared Services, Siemens Shared Services etc. (BPO Sector); Accenture, DELL, HSBC, GE Capital, Fidelity etc. (Captive Support Sector).

ii) Industry functioning in INDIA

The industry is also operated same as globally operated as described above. Apart from it following are the striking points about IT industry in India

Spectrum of IT services from India

India has already established her brand equity in the global IT market. Indian IT software and services firms offer software product/packages; a wide spectrum of IT services including system management and maintenance, consultancy services, system integration, chip design, E-Governance, E-Commerce, IT enabled services covering banking/financial/insurance sector. Their IT enabled services also include CAD/CAM Multimedia, animation work, BPO (Business Process Outsourcing) assignments, Call centre related assignments, as well as Knowledge Process Outsourcing (KPO) / Legal process Outsourcing (LPO), medical lab, diagnostic and dental services, medical transcription services, e-publishing data conversion or digitization, type-setting, copy editing, content and design, graphics etc.

The software industry is not only growing exponentially, it is moving up the value chain. It is evolving, from the initial staffing to software development

- where it is currently the worlds major supplier of engineers

- to integration and IT business consulting.

Strengths of Indian IT Industry

One of the largest pool of technically qualified high class IT manpower

Enormous skilled human resource compared to developed countries leading to lower manpower cost nearly one tenth of those in developed nations, thus giving India a comparative advantage.

Offers a wide range of services from support / data processing to sophisticated software systems etc.

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Rich experience of working with large global companies and enjoy high credibility

Expertise on a wide variety of platforms

Accommodating nature of Indian IT workforce

Quality of Indian IT expertise

Today the world recognizes India as a source of high quality IT manpower. 151 out of total 379 SEI CMM level 5 certified companies worldwide are Indian. The Capability Maturity Model (CMM) for Software describes the principles and practices underlying software process maturity and is intended to help software organizations improve the maturity of their software processes in terms of an evolutionary path from adhoc, chaotic processes to mature, disciplined software processes.

Over 300 Indian computer software and services have already obtained ISO 9000 or CMM level 2 certification. It is because of this high quality of Indian IT sector that the majority of multinational companies in IT have either their software development or research center in India. One third of the e-commerce start-ups in the Silicon Valley continue to be lead by Indian. Over half of the Fortune 500 companies are outsourcing their software requirements to India.

c. Functional Perspective of the Industry

Major resources needed to set up a business under ITES industry

i. Human Resource: the first and foremost important resource required to set up a business skilled IT professionals are required to get achieve the successful business. They should also understand, speak and write English language.

ii. Technological resources: Technology changes everyday. If the company makes the software on the old technology then there would be no buyer of this software or any other services provided by the company. So, the ITES industry is technology intensive.

iii. cash or some capital: cash needed to set up a business like to set up infrastructure where the firm can be operated. Cash is needed to purchase computers, software, other equipments like telephones, printers, stationary, working capital to run day to day business, Apart from it, cash needed to register the company and cost to take a project and build it.

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3. Economic Impacts

a. Economic Status

Worldwide technology products and related services spend is estimated to cross USD 1.6 trillion in 2008, a growth of 5.6 per cent over 2007. IT-BPO services (including software products) touched USD 967 billion, an above average growth of 6.3 per cent in 2008, underscoring its increasing importance. Worldwide BPO spending in 2008 grew by 12 per cent, which was the highest among all the segments. BPO today is an integral part of the global delivery chain and is increasingly involved in mission critical applications. Within IT-BPO, outsourcing emerged as a key driver, accentuated by shifts in regional spending as emerging markets such as CEMA (Central and Eastern Europe, Middle East and Africa), Latin America, and Asia Pacific (excluding Japan) increased their share.

Steady growth in outsourcing spend was driven by increased adoption of global sourcing. While the global sourcing market size has increased threefold in the period 2004-2008, the addressable market is more than five times the current market size, signifying the immense opportunity at hand.

Offshore IT-BPO service providers continued to build their global delivery footprint, expanding service lines and also growing inorganically by acquiring firms in the US and Europe to build skills and “nearshore” delivery capabilities. Therefore, though the established players dominated the market, Indian heritage service providers gained ground and market share.

The performance of the Indian IT-BPO industry

The Indian IT-BPO industry is estimated to achieve revenues of USD 71.7 billion in FY2009, with the IT software and services industry accounting for USD 60 billion of revenues. During this period, direct employment is expected to reach nearly 2.23 million, an addition of 226,000 employees, while indirect job creation is estimated to touch 8 million. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 5.8 per cent in FY2009. Net value-added by this sector, to the economy, is estimated at 3.5-4.1 per cent for FY2009. The sector’s share of total Indian exports (merchandise plus services) has increased from less than 4 per cent in 1998 to almost 16 per cent in 2008.

Exports market: The Export revenues are estimated to gross USD 47.3 billion in FY2009, accounting for 66 per cent of the total IT-BPO industry revenues. Cross currency movement during the year, led by the strengthening (and high volatility) of the US dollar versus some of the major invoicing currencies (Euro, Pound), suppressed volume growth in the European market by about 2.2 per cent at an industry level. Software and services exports (including BPO) are

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expected to account for over 99 per cent of total exports, employing over 1.76 million employees.

• Geographic focus: While the US with a 60 per cent share remains the largest export market for Indian IT-BPO services, incremental growth is being driven by the European market, with UK and Continental Europe growing by a CAGR of 41.4 per cent and 51.4 per cent in the period FY2004-FY2008.

• Vertical Markets: The industry’s vertical market mix is well balanced across several mature and emerging sectors. While the Banking, Financial Services and Insurance segment (BFSI) remains the biggest sector with over 41 per cent of total revenues, verticals like Hi-tech /Telecom, Manufacturing and Retail are increasingly gaining share.

• Service Lines: The IT Services segment aggregated export revenues of USD 26.9 billion, accounting for 57 per cent of total exports. Indian IT service providers have evolved from application development and maintenance companies, to full service players providing testing services, infrastructure services, consulting and system integration. Within these segments, it was IT outsourcing that exhibited strong growth, in line with global trends. Remote infrastructure management, expected to deliver almost 30 per cent net savings to customers, continued its robust performance, with an above average growth of 25 per cent expected in FY2009. BPO is the fastest growing segment of the industry and is estimated to reach USD 12.8 billion in FY2009, growing at 17.5 per cent. Additionally, the engineering, R&D, and software products segment is also expected to grow by 14.4 per cent in the current fiscal, to touch USD 7.3 billion, which highlights the strong impetus and renewed focus on improving IP driven service capabilities in India.

Industry Structure: The industry is dominated by large integrated players consisting of both Indian and international service providers. During the year, the share of Indian providers went up to 65-70 per cent due to the emerging trend of monetisation of captives. MNCs however, continued to make deeper inroads into the industry and strengthened their Indian delivery centres during 2008.

Domestic market: The domestic market presents a significant opportunity as IT spending in India is growing at a pace faster than any other country in the Asia Pacific region. The demand for offshoring is driven by specialised skill sets and not just labor arbitrage. Domestic IT-BPO revenues are expected to grow at almost 20 per cent to reach INR 1,113 billion in FY2009, driven by increased IT-BPO adoption. While growth in the hardware spend (the largest segment) has moderated, the domestic BPO segment remained the stellar performer, with a growth of 40 per cent during FY2008, and revenues of INR 88.7 million. Domestic IT services are expected to grow by 20 per cent in FY2009, driven by increased acceptance of IT as a growth enabler, and a competitive tool for Indian corporations looking to compete in an increasingly globalised

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environment. Increased IT adoption in not only the large/mid-sized companies, but also the 35 million strong small and medium business (SMB) segment is expected to drive growth in the future.

b. Current Trends

SHARE IN GDP

Computer Software/Services production accounts for a share of 6.1 percent in India’s GDP at current prices during the year 2009-10.

PRODUCTION

Production of Computer Software and Services during the year 2008-09 is estimated to be Rs. 285064 crore (US$ 61.98 billion) registering a growth of 28.40 percent (12.40 percent in US$ terms) over the year 2007-08 when the total production of Computer software / Services was estimated to be Rs. 222010 crore (US$ 55.14 billion).

Production of Computer Software / Services has been growing at an annual average growth rate of 30.87 percent during the past five years.

DOMESTIC SOFTWARE AND SERVICES INDUSTRY

During the year 2008-09 India’s domestic computer software / services market is estimated to be Rs. 57230 crore (US$ 12444 million) registering a growth of 21.74 percent (6.57 percent in US$ terms) over the year 2007-08 when the domestic software / services industry was estimated at Rs. 47010 crore (US$ 11676 million).

Production 2007-08 2008-09 % Growth

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Rs. Cr. US$ Mln. Rs. Cr. US$ Mln. Rs. Term US$ Term

Domestic 47010 11676.60 57230 12444.01 21.74 6.57

Software for export

175000 43467.46 227834 49539.90 30.19 13.97

Total 222010 55144.06 285064 61983.91 28.40 12.40

EXPORT OF COMPUTER SOFTWARE / SERVICES INCLUDING ITeS / BPO

Out of the total production of computer software / services 79.92 percent is exported and only 20.08 percent is consumed by the domestic market.

Export of Computer Software / Services (including ITeS / BPO) registered a growth of 30 percent (14 percent in US$ terms) during the year 2008-09 over the year 2007-08. In value terms, export of this sector during 2008-09 is estimated to be Rs. 227834 crore (US$ 49.54 billion) up from Rs. 175000 crore ( US$ 43.46 billion) estimated in the year 2007-08.

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EXPORT OF IT SOFTWARE SERVICES

Export of IT Software / Services estimated at Rs. 164828 crore (US$ 35.84 billion) during 2008-09 registered a growth of 31 percent (15 percent in US$ terms) over the year 2007-08 when the export of IT software and services was estimated at Rs. 125500 crore (US$ 31.17 billion).

ITES / BPO EXPORT

India today with its English speaking skilled manpower, high quality of services, very high productivity and a conducive policy environment with strong government support is the most preferred destination for ITeS. India is a popular choice for customers seeking outsourced services because it is able to offer a 24X7 service and reduction in turnaround times by leveraging time zone differences. While customers are initially attracted by low costs, they stay on and expand because of the quality and productivity that India offers. India will remain a popular off shore Country.

Outsourcing to India is turning out to be a blessing for the top companies. India s edge in quality and cost benefit is what is drawing organizations towards her. The level of excellence India has attained in this field has not come overnight. Government policies, infrastructure, large number of people who can speak fluent English, who can adapt to western accents, have all played a pivotal role in Indias success.

During the year 2008-09, export of ITeS/BPO registered a growth of 27 percent (11 percent in US$ terms) over the year 2007-08. In value terms, export of ITeS/BPO is estimated to be Rs. 63006 crore (US$ 13.70 billion) up from Rs. 49500 crore (US$ 12.29 billion) estimated in the year 2007-08.

MAJOR DESTINATIONS FOR SOFTWARE AND SERVICES EXPORTS DURING 2008-09

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North America remains the top destination for Indias export of Computer Software / Services during the year 2008-09 as well. Although there has been a decline of 5 percent in percentage share of computer software and services exports, there has been a growth of 23.67 percent ( 8.26 percent in US$ terms) in export to North America during the year 2008-09 over the year 2007-08. In value terms, export to North America increased from Rs. 107625 crore (US$ 26.73 billion) estimated in 2007-08 to Rs. 133100 crore (US$ 28.94 billion) in the year 2008-09.

Export to EU Countries registered a growth of 48.72 percent (30.19 percent in US$ terms) during the year 2008-09. In value terms, export of software and services from India to EU countries during 2008-09 is estimated to be Rs. 69489 crore (US$ 15.11 billion) up from Rs. 46725 crore (US$ 11.60 billion) estimated in the year 2007-08. With a high growth of 198 percent ( 161 percent in US$ terms) Middle East countries have emerged as 3rd top destination for Indias software and services exports during the year 2008-09. Export to this region increased from Rs. 2292 crore (US$ 569 million) estimated in 2007-08 to Rs. 6835 crore (US$ 1486 million) in the year 2008-09.

There has been decline in export to Singapore, Hong Kong & other South Asian countries, Japan, Korea and other Far East countries and Latin America during the year 2008-09.

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c. Return on Investment

Analyzing the return on an IT investment (ROI) is typically more complex than other projects because of the intangible nature of some of the costs and benefits associated with its use. This difficulty in measurement often leads considerations of ROI in IT to involve issues of the relative effectiveness of ICT decisions for organizations as well as the appropriateness of various ICT projects.

Researchers like Diane Rezendas, 2001, whose studies revealed an absence of positive returns on IT spending by more than half of the IT managers she surveyed are of the opinion that the correlation between success and failure in IT investments have little to do with the overall amount spent and everything to do with how IT dollars are spent? Others like Chris F. Kemerer, the David M. Roderick Chair in Information Systems at the University of Pittsburgh and the editor of Information Technology and Industrial Competitiveness have a very future oriented concept of return on investment in IT. He is of the view that "many IT investments are likely to provide their organizations with significant potential opportunities in addition to their estimated direct benefits. He believes that using real-options modeling (which considers the cost of projects in terms of financial securities which have value in the future) provides a way to quantify these opportunities and may help justify projects in circumstances where vague claims of intangible benefits may not".

Thus these numerous discussions on the return on investments in information technology attempt to identify the ways in which the use of Information technology increases the productivity of workers and minimizes the cost of the organization or firm. Many call for an understanding of the way the use of IT involves the re engineering of activities. It is said that the return on investment (ROI) from information technology investments varies directly with the degree to which the technology transforms core operations of a firm or institution.

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4. Developing the Blueprint for the service Business

a. Customer knowledge

Requirements Analysis is the process of understanding the customer needs and expectations from a proposed system or application and is a well-defined stage in the Software Development Life Cycle model.

Requirements are a description of how a system should behave or a description of system properties or attributes. It can alternatively be a statement of ‘what’ an application is expected to do.

Given the multiple levels of interaction between users, business processes and devices in global corporations today, there are simultaneous and complex requirements from a single application, from various levels within an organization and outside it as well.

The Software Requirements Analysis Process covers the complex task of eliciting and documenting the requirements of all these users, modeling and analyzing these requirements and documenting them as a basis for system design.

A dedicated and specialized Requirements Analyst is best equipped to handle the job. The Requirements Analysis function may also fall under the scope of Project Manager, Program Manager or Business Analyst, depending on the organizational hierarchy.

Software Requirements Analysis and Documentation Processes are critical to software project success. Requirements Engineering is an emerging field which deals with the systematic handling of requirements.

Why is Requirements Analysis necessary?

Studies reveal that inadequate attention to Software Requirements Analysis at the beginning of a project is the most common cause for critically vulnerable projects that often do not deliver even on the basic tasks for which they were designed. There are instances of corporations that have spent huge amounts on software projects where the end application eventually does not perform the tasks it was intended for.

Software companies are now investing time and resources into effective and streamlined Software Requirements Analysis Processes as a prerequisite to successful projects that align with the client’s business goals and meet the project’s requirement specifications.

Steps in the Requirements Analysis Process

I. Fix system boundaries

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This initial step helps in identifying how the new application integrates with the business processes, how it fits into the larger picture and what its scope and limitations will be.

II. Identify the customer

In more recent times there has been a focus on identifying who the ‘users’ or ‘customers’ of an application are. Referred to broadly as the ‘stake holders’, these indicate the group or groups of people who will be directly or indirectly impacted by the new application.

By defining in concrete terms who the intended user is, the Requirements Analyst knows in advance where he has to look for answers. The Requirements Elicitation Process should focus on the wish-list of this defined group to arrive at a valid requirements list.

III. Requirements elicitation

Information is gathered from the multiple stakeholders identified. The Requirements Analyst draws out from each of these groups what their requirements from the application are and what they expect the application to accomplish.

Considering the multiple stakeholders involved, the list of requirements gathered in this manner could run into pages. The level of detail of the requirements list is based on the number and size of user groups, the degree of complexity of business processes and the size of the application.

a) Problems faced in Requirements Elicitation

Ambiguous understanding of processes

Inconsistency within a single process by multiple users

Insufficient input from stakeholders

Conflicting stakeholder interests

Changes in requirements after project has begun

A Requirements Analyst has to interact closely with multiple work-groups, often with conflicting goals, to arrive at a bona fide requirements list. Strong communication and people skills along with sound programming knowledge are prerequisites for an expert Requirements Analyst.

b) Tools used in Requirements Elicitation

Traditional methods of Requirements Elicitation included stakeholder interviews and focus group studies. Other methods like flowcharting of business processes and the use of existing documentation like user manuals, organizational charts, process models and systems or process specifications, on-site analysis, interviews with end-users, market research and competitor analysis were also used extensively in Requirements Elicitation.

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However current research in Software Requirements Analysis Process has thrown up modern tools that are better equipped to handle the complex and multilayered process of Requirements Elicitation. Some of the current Requirements Elicitation tools in use are:

Prototypes

Use cases

Data flow diagrams

Transition process diagrams

User interfaces

IV. Requirements Analysis Process

Once all stakeholder requirements have been gathered, a structured analysis of these can be done after modeling the requirements. Some of the Software Requirements Analysis techniques used are requirements animation, automated reasoning, knowledge-based critiquing, consistency checking, analogical and case-based reasoning.

V. Requirements Specification

Requirements, once elicited, modeled and analyzed should be documented in clear, unambiguous terms. A written requirements document is critical so that its circulation is possible among all stakeholders including the client, user-groups, the development and testing teams. Current requirements engineering practices reveal that a well-designed, clearly documented Requirements Specification is vital and serves as a:

Base for validating the stated requirements and resolving stakeholder conflicts, if any

Contract between the client and development team

Basis for systems design for the development team

Bench-mark for project managers for planning project development lifecycle and goals

Source for formulating test plans for QA and testing teams

Resource for requirements management and requirements tracing

Basis for evolving requirements over the project life span

Software requirements specification involves scoping the requirements so that it meets the customer’s vision. It is the result of collaboration between the end-user who is often not a technical expert, and a Technical/Systems Analyst, who is likely to approach the situation in technical terms.

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The software requirements specification is a document that lists out stakeholders’ needs and communicates these to the technical community that will design and build the system. The challenge of a well-written requirements specification is to clearly communicate to both these groups and all the sub-groups within.

To overcome this, Requirements Specifications may be documented separately as

User Requirements - written in clear, precise language with plain text and use cases, for the benefit of the customer and end-user

System Requirements - expressed as a programming or mathematical model, addressing the Application Development Team and QA and Testing Team.

Requirements Specification serves as a starting point for software, hardware and database design. It describes the function (Functional and Non-Functional specifications) of the system, performance of the system and the operational and user-interface constraints that will govern system development.

b. Management issues in services

In software architecture there are many layers between the hardware and end user. Each can be spoken of as having a front end and a back end. The front is an abstraction, simplifying the underlying component by providing a user-friendly interface.

In software design the model-view-controller for example, provides front and back ends for the database, the user, and the data processing components. The separation of software systems into front and back ends simplifies development and separates maintenance.

For major computer subsystems, a graphical file manager is a front end to the computer's file system, and a shell interfaces the operating system — the front end faces the user and the back end launches the programs of the operating system in response.

Using the CLI (command-line interface) requires the acquisition of special terminology and memorization of commands, so a GUI (graphical user interface) acts as a front end desktop environment instead. In the Unix environment, ncurses is a simpler, semi-graphical front end to the CLI. At the level of the Unix CLI itself, most commands are filters — standalone commands that can also serve as front ends and back ends to other commands. (They function by piping data between themselves, mostly for text processing. For example: CLI-prompt> cmd1 | cmd2 | cmd3 | cmd4 )

In network computing front end can refer to any hardware that optimizes or protects network traffic. It is called application front-end hardware because it is placed on the network's outward-

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facing front end or boundary. Network traffic passes through the front-end hardware before entering the network.

In compilers, the front end translates a computer programming source language into an intermediate representation, and the back end works with the internal representation to produce code in a computer output language. The back end usually optimizes to produce code that runs faster. The front-end–back-end distinction can separate the parser section that deals with source code and the back end that generates code and optimizes; some designs (such as GCC) offer choices between multiple front ends (parsing different source languages) or back ends (generating code for different target processors).

In speech synthesis, the front end refers to the part of the synthesis system that converts the input text into a symbolic phonetic representation, and the back end converts the symbolic phonetic representation into actual sounds.

In the context of WWW applications, a mediator is a service that functions simultaneously as a server on its front end and as a client on its back end.

c. Competitive advantage w.r.t.

1. Price (including promotional pricing e.g. Discounts offered)

India is becoming a hot destination for the offshore software outsourcing. India will continue to support Information Technology, taking the most advantage from the business of software development services. But with the big bunch of IT companies’ coming into play everyday it’s really difficult for offshoring companies to decide among various offerings. Deciding the right price between the diverse ranges becomes a tricky stake. Here is a brief go through of where actually this cost cut comes from to help you decide the raw price of offshore software development in India.

Low tariffs: What good about the country is that even after having an impeccable IT infrastructure and well knit telecommunication infrastructure the utility cost is low. Firstly, rental and real estate costs are far lower in India than in the developed countries. Additionally the administrative cost also makes it easy to operate office in India. Furthermore the low cost of basic amenities such as electricity and water is also adding up to the offshore software development advantage.

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Low technology cost: The highly competitive environment in India has ensured low pricing of mobile services, Internet, cable TV services, E-Commerce, and other forms of Information Technology. In terms of long distance calls; India telecom infrastructure has made remarkable progress. Latest technologies, like use of fiber-optic cables has enhanced call-clarity and reduced call-costs to a large extent.

Low cost of human resource: Labor costs are a large part of the total costs of a company’s products or services. Since they are such a major part of what makes up the selling price, these costs must absolutely be kept down in order for a company to survive. Due to lower per capita income the cost of labor in India is times lower than that in US.

Here again the bigger advantage is the skill and education of the labor force in India. And lastly the productivity of labor is also great because of the work culture and technology available. Therefore the offshore software development with India is not only cost cutting but value adding advantage as well.

2. Services offered

India has competitive advantage over other countries to provide more and better services due to following factors:

• Maintenance

• 24*7 support due to time zone advantages.

• Provide training and consultancy services

• Online support to customers

• Human Resources

• Customer Care

• Research and Development

• Financial Consultancy Services

• Advanced Web Applications

• Business and Technical Analysis

• Animation & Design

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• Business & Market Research

• Pharmaceuticals and Biotechnology

• Medical Services

• Legal Services

• Network Management

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5. Capacity management in services

a. Demand management

A traditional rationale for outsourcing IT systems involves applying economies of scale to application operation, i.e., an outside service provider can offer better, cheaper, more reliable applications. SaaS-based application use has grown dramatically. A Gartner survey in July 2009 found that customers are "somewhat satisfied".]Several important changes to the way people work have facilitated this rapid acceptance:

Fast, low-cost broadband is available.

Computers have become widespread—most information workers have at least basic computer skills.

Computing has become a commodity. In the past, corporate mainframes were jealously guarded as strategic advantages. More recently, applications were viewed as strategic. Today, people know it’s the business processes and the data itself (customer records, workflows, pricing information) that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.

In sourcing IT systems requires expensive overhead including salaries, health care, liability, and physical building space.

Applications have tended to standardize. With notable, industry-specific exceptions, most people spend most of their time using standardized applications. An expense-reporting page, an applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.

Parametric applications are usable. In older applications, one could often only change a workflow by modifying the code. In more recent applications, particularly web-based ones, significantly new applications can be created from parameters and macros. This allows organizations to create different kinds of business logic on a common application platform. Many SaaS providers allow a wide range of customization within a basic set of functions.

A specialized software provider can target global markets. A company that made software for human resource management at boutique hotels might once have had a hard time finding enough of a market to sell its applications. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn

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means SaaS providers can often deliver products that meet specific market needs better than traditional "shrinkwrap" applications.

Web systems demonstrate reliability. Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.

Security is sufficiently well trusted and transparent. With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.

Enablement technology (tools, libraries, etc,) is available. According to IDC

Organizations developing enablement technology that allow other vendors to quickly build SaaS applications will play an important role in driving the adoption of SaaS. Because of SaaS' relative infancy, many companies have either built enablement tools or platforms or are in the process of engineering enablement tools or platforms. A Saugatuck study shows the industry will most likely converge to three or four enablers that will act as SaaS Integration Platforms (SIPs).

Wide-area network bandwidth has grown drastically, following Moore's Law (more than 100% increase each 24 months), and is about to reach slow local networks bandwidths. Added to network quality improvement, this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.

SaaS has "democratized" software, allowing small and medium businesses to access functionality formerly the domain of large enterprises. Many analytical software tools have been released as SaaS applications on a monthly subscription basis.

SaaS facilitates data aggregation. Instead of collecting data from multiple data sources with different database schemas, all data for all customers is stored in a single database schema (i.e., multi-tenant). This simplifies running queries across customers, mining data, and looking for trends.

The rise of third-party SaaS data escrow services has reduced some security concerns by allowing application data to be held with an independent third party.

b. Supply or distribution of service from different locations

Top Eight IT Hubs in India

Today, Bangalore is known as the Silicon Valley of India and contributes 33% of Indian IT Exports. India's second and third largest software companies are head-quartered in Bangalore, as are many of the global SEI-CMM Level 5 Companies.

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And Mumbai too has its share of IT companies once that are established as well as start-ups, and these include Reliance, TCS, Patni, LnT Infotech, i-Flex, WNS, Shine, Naukri, Jobspert etc. and these IT and dot com companies are ruling the roost of Mumbai's relatively high octane industry of Information Technology.

Such is the growth in investment and outsourcing, it was revealed that Cap Gemini will soon have more staff in India than it does in its home market of France with 21,000 personnel+ in India.

On 25 June 2002 India and the European Union agreed to bilateral cooperation in the field of science and technology. A joint EU-India group of scholars was formed on 23 November, 2001 to further promote joint research and development. India holds observer status at CERN while a joint India-EU Software Education and Development Center is due at Bangalore.

Ranking City/Region Description

1 BangalorePopularly known as the capital of the Silicon Valley of India is currently leading in Information Technology Industries in India.

2 ChennaiIt is also called as India's second silicon valley. The TIDEL park situated here is one of the largest in Asia.

3 HyderabadHyderabad which has good infrastructure and good government support is also a good technology base in India.

4 KolkataKolkata which is slowly becoming a major IT hub in near future. Some of the well known technological corporations are situated.

5 Jaipur

This rapidly growing industrial hub houses a lot of IT/ITES and BPO giants. With Genpact, Connexions IT services,Evolve - The GnNxt IT Park has Deutsche Bank and EXL BPO, Girnar Soft,Infosys Technologies, Nagarro Software, Nucleus Software, Tech Mahindra, Truworth Infotech and Wipro Ltd already there, Jaipur plans to have the largest IT SEZ in India which is being built by Mahindra under the Mahindra World City on Jaipur-Mumbai NH 8.

6 Pune Pune, a major industrial town, hosts numerous multinational and national software giants along with BPO and KPO firms. World class SEZs like Hinjawadi IT park and Magarpatta city give Pune a distinct advantage. The city is a major educational hub and churns out thousands of technocrats

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every year.

7 NCRThe National Capital Region of India comprising Delhi, Gurgaon, Faridabad, Noida, Greater Noida and Ghaziabad are having ambitious projects and are trying to do every possible thing for this purpose.

8 Mumbai

Popularly known as the commercial, entertainment, financial capital of India, This is one city that has seen tremendous growth in IT and BPO industry, it recored 63% growth in 2008. TCS, Patni, LnT Infotech, I-Flex WNS and other companies are headquartered here.

c. Problem in managing demand and its solutions

In order to manage planning, production and delivery, any properly run business has to be able to balance orders for its products and services (i.e., demand) with its ability to produce them in terms of resource and scheduling constraints (i.e., supply). Otherwise it might produce too little of what is required, too much of what is not required, or deliver late, or have problems with product quality or customer satisfaction.

The average IT department, though not a business from a profit and loss perspective (the exceptional IT profit-center notwithstanding), has a resource base comprising highly paid specialists, produces highly complex products and services, and has an annual budget of anywhere from two to 10 percent of annual revenue. Yet it does a very poor job of managing—when managing at all—basic supply and demand. It generally has very little understanding of its demand and supply chains, and would have a hard time being able to answer fundamental questions like, "What is currently in the pipe?" or, "What do we have to deliver over the next 6 months?" or, "What is our projected resource utilization for the next quarter?"

It can also end up delivering products which don't correspond to what the customer really wants—or, paradoxically, products which do correspond to what the customer wants, but did not yield the desired results, even though built close enough to spec.

In short, when it comes to supply and demand, IT is unduly focused on the supply side of the equation, or the how (project management, software development and managing physical assets like hardware and networks)—to the detriment of the demand side, or the what (capturing and prioritizing demand, assigning resources based on business objectives and doing projects that deliver business benefits).

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At the risk of exaggerating the point, it's almost as if once IT has a green light to deliver a project, it couldn't care less about whether the project makes sense or will deliver business benefits—it's only objective from here on will be to deliver it to spec, on time and within budget, and manage the underlying physical assets. Put another way, IT is only concerned with building the system right, not with building the right system. The criteria for success is defined as the delivery of solutions on time, within budget and to spec—like a building contractor—instead of the delivery of solutions which deliver business benefits.

However regrettable this tunnel vision may be, it is totally understandable, because that's how the traditional IT business model and its client/vendor relationship works. IT focuses on managing supply, because that's its mandate; managing demand is unclear, and in the absence of proper governance, it defaults to a business problem on the customer's side. Projects are therefore usually approved based more on business sponsor influence —or putting it less charitably, decibel management, or catering to those executives who shout the loudest—rather than on any rational decision-making process. This might appear to be a rather harsh indictment of the demand chain in the average IT department today, but unfortunately it corresponds to reality. Far from being the rational and structured process we would like it to be, demand management is usually a nebulous combination of decibel management and organizational politics, significantly amplified in international organizations when country politics and cultural differences are thrown into the mix.

Once projects have been delivered, the absence of rational demand management becomes even more acute. While you can usually count on business executives to obtain the funding to launch projects, the same is rarely true to fund the resulting applications after delivery. This is usually because the executive sponsor has either moved on (often as a result of the project's success—or failure) or is far less motivated to go and bat for operational funding, which doesn't have the same visibility and organizational rewards as launching a new project—especially when, as is usually the case, the magnitude of the ongoing funding was not part of the original business case.

For example, a marketing director at a pharmaceutical company had little problem obtaining significant funding for a sales force automation (SFA) project. A month after the implementation however, he moved on as part of a company reorganization. In the absence of a business sponsor, the maintenance budget for the following year was next to nothing, which seriously impacted usage because significant further enhancements remained to be done—which, needless to say, was not part of the original business case.

So demand management is clearly the missing link in most IT departments. Yet any successful business model by definition has to be built on the effective management of demand as well as supply.

Using the fundamental premise that not all demand from the business will be approved—because of business priorities on the one hand, and IT resource and scheduling constraints on the other—

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the best way of representing demand would be via a funnel. Demand from the business enters at the top, follows one or more decision-making processes, and then either exits at the bottom as approved work to be executed, or remains in the pipeline pending further evaluation.

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