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A PROJECT REPORT

On

“A STUDY OF INDIAN INFORMATION TECHNOLOGY SECTOR.”

For the award of degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted To

Dr. Panjabrao Deshmukh Institute of Management Technology &


Research, Department of Dhanwate National College, Nagpur

Submitted By:

Ankit N. Fating

(Researcher)

Guided By

Mrs. Aparna Samudra

Through

Dr. Panjabrao Deshmukh Institute of Management Technology &


Research, Department of Dhanwate National College, Nagpur

Year 2009-10
Contents

1. INTRODUCTION

2. INDIAN IT SECTOR

3. IT CATAGORIES

4. CONTRIBUTION IN INDIAN ECONOMY

5. MAJOR COMPANIES

6. SWOT ANALYSIS OF IT SECTOR

7. GROWTH

8. GOVERNMENT INITIATIVE & POLICIES

9. SCOPE

10. IMPACT

11. FUTURE OF IT SECTOR IN INDIA

12. CONCLUSION

13. BIBLOGRAPHY
INTRODUCTION

The computer systems design and related services industry is


among the economy's largest and fastest sources of employment
growth. Employment increased by 616,000 over the 1994-2004
period, posting a staggering 8.0-percent annual growth rate. The
projected 2004-14 employment increase of 453,000 translates
into 1.6 million jobs, and represents a relatively slower annual
growth rate of 3.4 percent as productivity increases and offshore
outsourcing take their toll. ("Industry output and employment
projections to 2014" by Jay M. Berman, Bureau of Labor Statistics)

However, the main growth catalyst for this industry is expected to


be the persistent evolution of technology and business' constant
effort to absorb and integrate these resources to enhance their
productivity and expand their market opportunities.

Employment of computer and information systems managers is


expected to grow between 18 to 26 percent for all occupations
through the year 2014. (Career Guide to Industries 2006-07)

The Indian IT sector is growing rapidly and it has already made its
presence felt in all parts of the world. IT has a major role in
strengthening the economic and technical foundations of India.
Indian professionals are setting up examples of their proficiency
in IT, in India as well as abroad.

What is information technology?

Information Technology Association of America (ITAA)


defined by

"the study, design, development, implementation, support or


management of computer-based information system, particularly
software applications and computer hardware.”

IT deals with the use of electronic computers and computer


software to convert, store, protect, process, transmit, and
securely retrieve information.

Information technology is a general term that describes any


technology that helps to produce, manipulate, store,
communicate, and/or disseminate information
INDIAN IT SECTOR

The Information Technology (IT) sector in India holds the


distinction of advancing the country into the new-age economy.
The growth momentum attained by the overall economy since the
late 1990s to a great extent can be owed to the IT sector, well
supported by a liberalized policy regime with reduction in
telecommunication cost and import duties on hardware and
software. Perceptible is the transformation since liberalization -
India today is the world leader in information technology and
business outsourcing. Correspondingly, the industry’s contribution
to India’s GDP has grown significantly from 1.2% in 1999-2000 to
around 4.8% in FY06, and has been estimated to cross 5% in
FY07. The sector has been growing at an annual rate of 28% per
annum since FY01.
Indian IT companies have globally established their superiority in
terms of cost advantage, availability of skilled manpower and the
quality of services. They have been enhancing their global service
delivery capabilities through a combination of organic and
inorganic growth initiatives. Global giants like Microsoft, SAP,
Oracle, Lenovo have already established their captive centers in
India. These companies recognize the advantage India offers and
the fact that it is among the fastest growing IT markets in the
Asia-Pacific region.

IT CATAGORIES

The sector can be classified into 4 broad categories - IT


Services, Engineering Services, ITES-BPO Services, E
Business.

IT Services can further be categorized into Information Services


(IS) outsourcing, packaged software support and installation,
systems integration, processing services, hardware support and
installation and IT training and education.

Engineering Services include Industrial Design, Mechanical


Design, Electronic System Design (including Chip/Board and
Embedded Software Design), Design Validation Testing,
Industrialization and Prototyping.

IT Enabled Services are services that use telecom networks or


the Internet. For example, Remote Maintenance, Back Office
Operations, Data Processing, Call Centers, Business Process
Outsourcing(BPO), KNOWLEDGE PROCESS OUTSOUECING
(KPO)etc.

E Business (electronic business) is carrying out business on the


Internet; it includes buying and selling, serving customers and
collaborating with business partners.

STRUCTURE OF IT SECTOR

The Indian information technology industry has played a key role


in putting India on the global map. Thanks to the success of the IT
industry, India is now a power to reckon with. According to the
National Association of Software and Service Companies
(NASSCOM), the apex body for software services in India, the
revenue of the information technology sector has risen from 1.2
per cent of the gross domestic product (GDP) in FY 1997-98 to an
estimated 5.8 per cent in FY 2008-09.
India's IT growth in the world is primarily dominated by IT
software and services such as Custom Application Development
and Maintenance (CADM), System Integration, IT Consulting,
Application Management, Infrastructure Management Services,
Software testing, Service-oriented architecture and Web services.

The government expects the exports turnover to touch US$ 80


billion by 2011, growing at an annual rate of 30 per cent per
annum, from the earlier few million dollars worth exports in early
1990s.

As per NASSCOM's latest findings:

• Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach


US$ 71.7 billion in aggregate revenue (including hardware).
Of this, the software and services segment accounted for
US$ 59.6 billion.
• IT-BPO exports (including hardware exports) grew by 16 per
cent from US$ 40.9 billion in FY 2007-08 to US$ 47.3 billion
in FY 2008-09.

Moreover, according to a study by Springboard Research, the


Indian IT services market is estimated to remain the fastest
growing in the Asia-Pacific region with a CAGR of 18.6 per cent.

Despite the uncertainty in the global economy, the top three IT


majors— Infosys, TCS and Wipro—have seen revenue growth from
all important sources of income: from the North American and
European regions, in the financial services vertical and from
application maintenance and development (ADM) offerings
between fiscal years 2008 and 2009.

India’s IT Industry (US$ bn)


CONTRIBUTION OF INFORMATION
TECHNOLOGY IN INDIAN ECONOMY

The information technology (IT) industry has increased its


contribution to the country's GDP from 1.2 per cent in 1997-98 to
5.2 per cent in 2006-07, according to a Nasscom-Deloitte study.

The report, titled Indian IT Industry: Impacting the Economy and


Society, further says that export earnings in 2007-08 will hit $40
billion, a growth of 36 per cent. Meanwhile, direct employment is
expected to be 2 million in 2007-08, growing at a CAGR of 27 per
cent in the last decade.
The report, while bringing forth the contribution of the IT/ITeS
sector, points out that the industry has been the trigger for many
'firsts' and has contributed not only to unleashing the hitherto
untapped entrepreneurial potential of the middle class but also
taking Indian excellence to the global market.
MAJOR COMPANIES

S. No. Companies

1. TCS
2. Infosys
3. Wipro
4. HP
5. IBM
6. Satyam
7. HCL
8. Patni
9. Polaris
10. Cisco
11 KPIT Cummins
12 I-Flex Solutions
13 Microsoft
14 Dell
15 Larsen and Toubro
Public (BSE: 532540)
Type
Subsidiary of Tata Group

Founded 1968

Headquarters Mumbai, India

Ratan Tata (Chairman)


S Ramadorai (Vice Chairman)
N Chandrasekaran (CEO & MD)
S Mahalingam (Executive Director & CFO)
Key people
Phiroz Vandrevala (Executive Director & Head,
Global Corporate Affairs)
Ajoy Mukherjee (VP & Head, Global Human
Resources)

Industry Software services

TCS Bancs
Products
Digital Certification Products
Healthcare Management Systems
IT Consulting
IT Services
Services
Outsourcing
BPO
Software Products

Revenue ▲ US$ 5.70 billion (2009)

Net income ▲ US$ 1.25 billion (2009)

Total assets ▲ US$ 4.36 billion (2009)

Employees 149,654 (As on 31st Dec, 2009)

Parent Tata Group

Website TCS.com
Public
Type BSE: 500209
NASDAQ: INFY

Founded July 2, 1981

N R Narayana Murthy
Nandan Nilekani
N. S. Raghavan
Founder(s) Kris Gopalakrishnan
S. D. Shibulal
K. Dinesh
Ashok Arora

Headquarters Bangalore, India

N R Narayana Murthy
(Chairman)
Kris Gopalakrishnan
Key people
(CEO) & (MD)
S. D. Shibulal
(COO) & (Director)

Industry Software services

Products IT Services
Information technology consulting services and
Services
solutions

Revenue ▲ $ 4.663 billion (2009)[1]

Operating
▼ $ 1.374 billion (2009)[1]
income

Net income ▼ $ 1.281 billion (2009)[1]

Total assets $ 4.376 billion (2009)[1]

Total equity $ 3.784 billion (2009)[1]

Employees 103,905 (2009)[2]

Infosys BPO
Infosys Consulting
Infosys Public Services
Infosys Australia
Divisions
Infosys Brazil
Infosys China
Infosys Mexico
Infosys Sweden

Website Infosys.com
Public
Type BSE: 507685
NYSE: WIT

Founded 1945

Founder(s) M. H. Premji

Headquarter
Bangalore, Karnataka, India
s

Azim Premji (Chairman)


Girish Paranjpye (joint CEO)
Key people
Suresh Vaswani (joint CEO)
SA Sudarshan

Industry IT Services

IT Consulting
Business Process Outsourcing
Services
Product Engineering Solutions
Technology Infrastructure Services

Revenue ▼ US$ 4.98 billion (2009)

Net income ▼ US$ 0.82 billion (2009)


Total assets ▼ US$ 5.38 billion (2009)

Employees 98,391 (As on 27 October, 2009)

Website Wipro.com
TCS is the market leader in IT sector in India and Other major
companies like Wipro, Infosys, Accenture and IBM are the major
market share in the economy.

The revenue of TCS is now US $ 5.70 billion it is more than the


other major companies. The graph shows highest market price of
the company.
SWOT ANALYSIS

Strengths Weaknesses

• Highly skilled human resource • Absence of practical knowledge


• Low wage structure
• Dearth of suitable candidates
• Quality of work
• Initiatives taken by the
• Less Research and Development
Government (setting up Hi-Tech
Parks and implementation of e- • Contribution of IT sector to India’s
governance projects) GDP is still rather small.
• Many global players have set-up
operations in India like Microsoft, • Employee salaries in IT sector are
Oracle, Adobe, etc. increasing tremendously. Low wages
• Following Quality Standards benefit will soon come to an end.
such as ISO 9000, SEI CMM etc.
• English-speaking professionals
• Cost competitiveness
• Quality telecommunications
infrastructure
• Indian time zone (24 x 7
services to the global
customers). Time difference
between India and America is
approximately 12 hours, which is
beneficial for outsourcing of
work.
Opportunities Threats

• High quality IT education market • Lack of data security systems


• Increasing number of working • Countries like China and
age people Philippines with qualified
• India 's well developed soft workforce making efforts to
infrastructure overcome the English language
• Upcoming International Players barrier
in the market • IT development concentrated in
a few cities only
GROWTH OF IT SECTOR

IT industry: on a steady growth track

•The total revenues for the Indian IT industry were estimated to


touch US$ 71.7 billion in 2008-09.

•The Indian IT industry has been growing at a compound annual


growth rate (CAGR) of 27 per cent for the last five years.

•Contribution of IT industry to India’s gross domestic product


(GDP) has grown from 1.2 per cent in 1997-08 to an estimated 5.8
per cent in 2008-09.

•The total revenues from export were expected to reach US$ 47.3
billion in 2008-09.

•The total exports have been growing at a CAGR of 28.7 per cent
over the last five years.

•During this period 2008-2008, direct and indirect employment


was expected to reach 2.23 million and eight million, respectively.

•Domestic market revenues were expected to touch US$ 24.3


billion in 2008-09.

•Domestic market revenues have been growing at a CAGR of 24


per cent for the last five years.
REVENUES BY SEGMENT –INDIAN IT
INDUSTRY

CAGR: 27 per cent


INDIA MAINTAINS LEAD IN ITES-BPO

•Indian IT/ITeSsector has matured considerably with its

•expansion into varied verticals

•well differentiated service offerings

•increasing geographic penetration

•India’s
importance among emerging economies, both as a supply
and demand centre, is fuelling further IT/ITeSgrowth

•Continues to be one of the fastest growing industries in India;


while India maintains its leading position as a strategic
offshoringdestination for multinationals worldwide

•The Indian ITeS-BPO (domestic and exports) revenues are


estimated at US$ 14.7 billion and the sector grew at a rate of 18.9
per cent in 2008-09
IT SERVICES: ANCHOR SEGMENT FOR THE
SECTOR
•The Indian IT services market grew by 23 per cent between
2005-06 and 2008-09 and the revenues are estimated at nearly
US$ 8.3 billion in 2008-09.

•The banking, financial services and insurance (BFSI) vertical


continues to account for the largest share of IT/ITeSservices at 41
per cent.

•Hi-Tech/ telecom vertical accounts for the second-largest share


of the pie at 20 per cent.

•Other verticals such as manufacturing, retail, media and


healthcare are rapidly gaining pace.
.Domestic IT-ITeSmarket revenues have been growing at a CAGR
of 23 per cent between 2005-2006 and 2008-09 and were
expected to reach US$ 24.3 billion in 2008-09.

•Domestic IT-BPO revenues grew by 24 per cent in and were


expected to touch US$ 2 billion in 2008-09.

•Hardware accounted for about 49 per cent of the total domestic


IT-BPO spends in 2008-09.
ITeS-BPO: outsourcing growth story
•Indian ITeS industry grew at a rate of 18.2 per cent in 2008-09 to
reach revenues of US$ 14.8 billion.

•Exports accounted for 87 per cent of the revenues and grew at a


rate of 18 per cent in 2008-09 to reach US$ 12.84 billion.

•Services exports account for nearly 67.7 per cent of total


IT/ITeSsector exports in 2008-09.

•The concept of outsourcing is increasingly gaining acceptance


even in the more conservative markets around the world.
•Industry has graduated to providing a high proportion of voice-
based services and a range of back-office processing activities.

•Scope of services have expanded in the last three to four years


to include increasingly complex processes involving rule-based
decision making and research services requiring informed
individual judgment.
GROWTH IN EMPLOYMENT

The bar chart shows that the recruitment of engineers and IT


professionals in the industry is growing at the Compound Annual
Rate of 14.5% approximately.
In the FY06, the direct employment in the IT-ITES sector was 1.3
million people and the indirect employment was 3 million
approximately.

Trends in Salary Hikes

Along with abundant growth opportunities, IT sector is one of


the highest paying sectors. The average increase in salary in IT
sector across the levels was around 16% and the average
increase in the ITeS BPO sector across the levels was in between
16%-18% Requisites for balanced salaries -
 End to poaching
 Review of compensation according to the skills
 Developing talent in-house
 Entry of talented freshers in the industry
GORVERNMENT INITIATIVE & POLICIES

Software Technology Parks of India (STPI) was setup by


the government in 1991 to provide:

•Fiscal benefits like tax holidays to attract investment into the


industry

•Basic infrastructure

•Single–window clearances for setting up Export Oriented Units


(EOUs)

•Virtual model allows firms to avail benefits without restrictions


on location.

Progressive policy reform (fiscal/trade/other):

•No FDI restrictions.

•Fiscal reforms (international taxation, overseas investment, etc.)


to facilitate ease of international transactions introduced.
Recent initiatives:

• Area limit exemptions for the IT-BPO sector in the SEZ policy.

• Special emphasis on talent and infrastructure development .

• Infrastructure development; provisions designed to


complement the STPI scheme.

• The government set up the National Taskforce on


Information Technology and Software Development with the
objective of framing a long term National IT Policy for the
country.
• Enactment of the Information Technology Act, which
provides a legal framework to facilitate electronic commerce
and electronic transactions.
• The government-led National e-Governance Program, has
played an important role in increasing internet penetration in
rural India.
IMPACT OF IT SECTOR

Impact on Society

A society can also refer specifically to any group of people, other


animals and/or plants and the interactions within that group. This
can be anything from a small neighborhood to the entire global
community. Religion, ethnicity, interests, political opinions or
other relating factors may help form a group of people.

• Common Traditions

In the context of this report it is helpful to highlight a difference


between "traditions" and "activities/interests". Tradition can be
defined as the following:

"An inherited, established, or customary pattern of thought,


action, or behaviour (as a religious practice or a social custom).
Cultural continuity in social attitudes, customs, and institutions."

• Cultural Continuity

Social attitudes have changed in that citizens of a society now


expect the various elements of that society to be better informed
than previously. They also expect to be able to access more
information about a specific product, service or organization so
that they can make informed decisions with regard to their
interactions with that entity.
Institutions

The word institutions can incorporate a wide variety of


organizations. For the purposes of this report the institutions we
will examine will be:

• Governments,
• Commercial businesses,
• News & media organizations,
• Educational organizations.

The focus is on how information technology development has


improved the processes by which these institutions accomplish
their tasks or goals.

• Governments

The government of a nation is comprised of many varied


institutions. However developments in information technology
have helped governments to improve their "service" to their
citizens. Information technology has also had a major impact on
the defense capabilities of governments. This covers both a
government's capability to wage war and their intelligence
gathering capability. Advances in weapons technology and
weapons design have increased the effectiveness of various
governments' armed forces. For example it would have been
impossible to design aero planes such as the B2 Bomber if it were
not for the advances made in information technology. The B2
bomber relies on a "continuous curvature" design to minimize
radar signature. It would have been impossible to design or build
this machine without the development of computer modeling
techniques.
• Commercial Businesses

The advances in information technology have heavily influenced


commercial businesses in several areas. The most important role
of information technology in a commercial business, however, is
to provide a commercial advantage. Advances such as computer-
aided design, relational database technologies, spreadsheets and
word processing software provide a commercial benefit to the
business, as does automation of manufacturing processes (which
Sara-Lee did in 1964). Advances in information technology over
the last thirty years have lead to the television.

• News & Media Organizations

Due to the nature of news and media organizations, information


technologies have particular relevance to them. As noted earlier,
"Information technology is the technology used to store,
manipulate, distribute or create information". News and media
organizations are intimately acquainted with each of these
elements of information technology. This report focuses on the
distribution and creation of information.

• Educational Organizations

The developments that have occurred in information technology


have had many influences on educational establishments. The
distribution of information is not the only concern of educational
establishments.

Impact of Information Technology and Electronic


Governance

E-governance is the effective way of governance utilizing IT to


enhance efficiency of government offices. The Government of
India is devising new policies to envisage a SMART – simple,
moral, accountable, responsible, and transparent governance to
bring nationwide reforms. The customs department plans to use
electronic data interface (EDI) to handle all transactions relating
to custom duties more efficiently, for which initiatives have been
taken by National Informatics Center (NIC).
IT Policy and Emphasis on E-governance

E-governance attempts in the country started with a bang. The


initial impetus came from the Ministry of IT, which produced a
concept paper, emphasizing the method by which the state has to
deliver its services in the information age. The paper envisages a
SMART government and promises to establish the required
institutional mechanisms to facilitate initiatives towards synergic
utilization of IT to enhance effectiveness of governance.
NASSCOM conducted a survey of ten leading states (Andhra
Pradesh, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh,
Kerala, Uttar Pradesh, Rajas than, Gujarat and West Bengal) and
pointed out that all these states have an IT policy, expert group,
e-governance cell, and some even have a separate IT
department. Some of them have also included specific policy
measures that not only aim to facilitate IT investments in the
state but also focus on using IT for governance-related issues.
SCOPE OF IT INDUSTRY IN INDIA
The IT industry has great scope for people as it provides
employment to technical and non-technical graduates and has
the capability to generate huge foreign exchange inflow for India.
India exports software and services to approximately 95 countries
in the world. By outsourcing to India, many countries get benefits
in terms of labor costs and business processes. Also, the Indian
companies are broadening the range of services being provided
to the customers, which is resulting in more off shoring. Talent
acquisition, development and retention initiatives taken by the
companies have brought down the employee attrition rates,
thereby providing more stability to the employees and increasing
their job commitment.
Many financial institutions are providing funds for the expansion
of IT and ITeS businesses. In order to support IT and ITES, the
Indian Government is also taking many steps. For example:

1. The Govt. has provided incentives including tax holiday up to


2010 and competitive duty structures.
2. The Govt. is trying to reduce the international communication
cost.
3. It is providing infrastructure support through organizations such
as software technology parks.

All these factors collectively create a number of opportunities in


the IT sector.

FUTURE OF IT SECTOR IN INDIA

IT will continue to gain momentum; telecom and wireless will


follow the trend. The immense expansion in networking
technologies is expected to continue into the next decade also. IT
will bring about a drastic improvement in the quality of life as it
impacts application domains and global competitiveness.
Technologies that are emerging are Data Warehousing and Data
Mining. They involve collecting data to find patterns and testing
hypothesis in normal research. Software services that are being
used in outsourcing will go a long way.
FUTURE OPPORTUNITIES :

Domestic market

•Overall size of the domestic market in 2008-09 was estimated to


grow by 20 per cent and reach be US$ 24.3 billion

•Domestic IT BPO spending grew by 40 per cent during 2008-09

•The domestic market is picking-up, showing definite signs of


breaking-out of the trend of hardware linked growth with the
contribution of software and services exceeding that of hardware

•Government is taking up e-governance initiatives and increasing


its IT spends/ outlays; allocation has increased from US$ 96
million in 2006-07 to US$ 175 million in 2007-08, indicating
increasing IT spends.

•Demand for domestic BPO services increasing rapidly, with niche


verticals like healthcare and retail fast gaining traction apart from
the traditional verticals of BFSI and manufacturing.
Engineering: a new outsourcing
opportunity
•Global engineering services spend estimated at US$ 750 billion
which is expected to increase to more than US$1 trillion by 2020

•India’s share is about US$ 4.9 billion of the US$ 12.8 billion
outsourced services in 2008-09; India is estimated to garner a
share of about US$ 50 billion by 2020

•Range of services include engineering and designing solutions


across diverse industry verticals like telecommunications,
automotive, construction, aerospace, utilities and industrial
design

•Labourcost arbitrage in this sector is about 60 per cent of the US


counterparts

•Bechtel, General Motors, Ford, John Deere, Caterpillar, Silicon


Automation Systems, John Brown Engineering are a few global
giants that have set up their engineering services divisions in
India

Knowledge Process Outsourcing (KPO)


•The genesis of KPO followed BPO services in India, however KPO
is now growing at a rapid pace with MNCs setting up third party
captive units for data analytics, data modeling, etc.

•CRISIL estimates that the Indian KPO export market constitutes


about eight percent of Indian ITeSrevenues and employs nearly
three percent of the work force

•Growth drivers for this business include high productivity of


Indian resources and growing adoption of KPO by Small and
Medium Enterprises (SMEs).

•Opportunities span across several service offerings: legal


process outsourcing (LPO), financial and market research and
engineering services outsourcing, which are considered fast
moving service offerings.

CONCLUSION
Today, we are all in agreement that the world is becoming
increasingly dependent upon technology as is evidenced by the
big role it is playing. The Internet has become a major
shareholder. All developing nations can derive tremendous
advantages from this technology for updating the knowledge of
its researchers and scientists. The Indian software and services
industry has significantly helped to boost the Indian economy.
Society expects to be able to store information more than was
previously conceived. Society expects to be able to manipulate
the information it has for its own benefit, to increase
understanding and discover new relationships. Society expects to
be able to distribute information quickly, efficiently and cheaply.
The Government of India has been working gradually and
successfully towards improving the IT policy climate in the
country.
BIBLOGRAPHY

Websites:

www.ibef.org

www.nasscom.org

www.scribd.com

www.wikepedia.com

Articles:

From Business Standard Newspaper


growth And the opportunity of IT sector.