IT Industry

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1. INTRODUCTION
Information technology is the application of computers and telecommunications equipment to
store, retrieve, transmit and manipulate data. This term is synonymously used for computers
and computer networks, but it also includes hardware, software, electronics, semiconductors,
internet and other computer services. The term information technology in the modern sense
was first coined by Leavitt and Whisler in an article published in the Harvard Business
Review in 1958. They commented the new technology does not yet have a single established
name. We shall call it information technology.
The basic concept of information technology can be traced to World War 2, alliance of
military and industry in development of electronics, computers and information theory. After
the 1940s, the military remained the major source of funding for research and development
in IT and also for expansion of automation to replace manpower with machine power.
Some of the new emerging fields in IT are bioinformatics, cloud computing, global
information systems etc. The Indian IT industry has portrayed a major role in highlighting
India in the global map and is now a power to reckon with. It has been predicted that the
Indian IT revenues may reach US $225 billion by 2020. Surveys conducted revealed that IT
industry created almost 3 million jobs and its contribution to the GDP of India is over 7.5%.
Also it is capable of attracting FDI worth US $5 billion.

1.1 OUTSOURCING
India is preferred by many companies to delegate their back office functions. This is due to
low costs and also offers skilled manpower.
Some major deals:
Wipro ltd signed a deal to collaborate with Hitachi Data Systems, for the purpose of
offering co-branded products and services with Hitachi technology in India.
TCS got an outsourcing contract from Telenor Norway, a Norway based company, to
provide application maintenance and development services.
HCL Technologies signed a 5 year deal with Singapore Exchange worth US$ 110
million, which is an IT infrastructure outsourcing deal.
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HCL also bagged an outsourcing contract from a US- based drug manufacturer,
Merck Sharp and Dohme worth US $ 500 million.
Mahindra Satyam signed a 4 year offshore contract with KMD, a Denmark based IT
company, worth US $ 48 million.
Patni computer systems won a 5 year IT and back-office contract worth US $ 200
million from US- based health insurance provider, Universal American.

1.2 OBJECTIVES OF THE STUDY
To study the global and Indian scenario of the IT industry.
To know the industry attractiveness both in India as well as across the world.
To study the macro-environment of the IT industry.
Analyzing the top global and Indian IT players.
Comparison between the Indian and the Global IT industry.
Conclusion

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2. GLOBAL SCENARIO
Global spending in the IT market has reached US $ 3.6 trillion during 2011 which shows a
rise by 5.6% from the last year. It is expected to grow at a steady rate of 5% for the next few
years and is predicted to reach the US $ 1147 billion mark by the year 2017. Even the
healthcare IT market is on the rise with its worth at $99.6 billion in 2010. The experts say this
will grow by a rate of 10.2% and will reach $162.2 billion by 2015. This overwhelming
growth can be credited to the initiative taken by the governments all over the world regarding
the IT sector.
Not surprisingly, cloud computing continues to be a major factor in the corporate spending. It
provides various services like storage, networking, and other application services at minimum
cost. It should also be noted that spending on cloud is growing at a much faster rate than
spending on IT. In 2011 the spending on cloud was almost 3% of total IT spending i.e. US
89$ billion. This is expected to rise to US $117 billion by 2015 which makes it 5% of IT
spending.
Another notable sector in IT is that of computer gaming which is increasingly becoming
important and has the potential of turning into a segment by itself by 2015. As it is known by
everyone, US has the most advanced IT industry in the world with more than 100,000
software IT services companies. The industry employs more than 2 million highly tech savvy
individuals and offers a wide range of services like software publishing, supplying custom
made programming services, designing computer systems etc.
All the countries have realized the fact that IT industry is essential for enhancing the
competitiveness and growth of the economy. For individuals smart devices and cloud
services have become an essential part of their lives and enables them to do many things
which were not possible before. For companys new technology have improved their
operational efficiency. It has also been found that IT industry alone contributes 25% growth
of GDP of Europe and value of cloud computing in Europe is expected to cross US $1 trillion
by 2020.

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The following is a list of top 12 IT companies as per their revenue.

Rank Company Industry Revenue

1

Samsung
Electronics
Electronics $188.1

2

Apple Electronics $156.5

3

HP Hardware $120.3

4

Foxconn Electronics $119

5

IBM Computer services $104.5

6

Panasonic Electronics $99.65

7

Microsoft Software $73.72

8

Dell Hardware $62.07

9

Amazon.com Internet $61.09

10

Fujitsu Hardware/Software $54.46

11

Intel Semiconductor $53.34

12

Google Internet $50.17

Table 2.1 Top 12 IT companies as per revenue

The above list includes those companies whose primary business is associated with IT
industry that includes computer hardware, software, electronics, and semiconductor, internet,
e-commerce and computer services. Also the annual revenues of these companies exceed $50
billion.

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2.1 Global IT Investment Trends
Against the backdrop of the near-term economic picture described above are surprisingly
optimistic longer-term prospects for global IT spending. Indeed, Tower Group forecasts that
IT spend in 2010 will recover to 2008 growth rate levels of 2.5%. Beyond 2010, we
anticipate a truly strong recovery, overall global growth in IT spend reaching 4.0% in 2011
and 5.1% in 2012.

2.2 Global IT Spending Trends in Financial Services through
2013: Surprising Optimism on the Horizon
Compared to forecasts of gross domestic product (GDP) one year ago, the outlook for most
world regions has improved. Much of the growth is driven by unprecedented deficit spending
by national governments. Growth in the developed economies of North America and Europe,
in particular, is characterized by public credit. Only in the developing economies of Asia will
a large fraction of GDP growth come from the private sector. In the Gulf region, optimism
has been muted by the decline of oil prices 50% from their July 2008 high. Latin America
represents potential recovery opportunities following its recent backslide, although the
region's perennial instability makes the scope of the opportunity uncertain.
2.3 GLOBAL IT INDUSTRY
Over the years, the Indian IT-BPO industry has matured from offering non-core activities.
However, there is a huge global market that is yet untapped. The level of the opportunity in
hand can be gauged from the fact that India (domestic + exports) accounted for
approximately 5% of worldwide technology products and services related spend of USD 1.5
trillion in 2009. This underlines the immense growth opportunities for the industry players to
create innovative service models and broaden its geographical reach.
In the future, the industry is expected to generate an increasing share of revenues from the
emerging segments such as SMB, engineering and infrastructure management by offering
cost-effective delivery options such as pay-per-use and outcome based pricing models, said
Dun & Bradstreet.
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Following is the Indian IT-BPO industry outlook for 2013 from Dun & Bradstreet:
Consolidation activity is likely to pick up The Indian IT-BPO industry is
expected to adopt the inorganic growth route in order to widen their service offerings and
enter new geographical markets. Several third party and captive BPO units are likely to
increasingly acquire small size companies to ramp up revenue, acquire clients, and
expand business segments and geographical reach. Consolidation will also be driven by
international M&A deals, propelled by robustness of the Indian players. The Indian IT-
BPO industry has been seeing a spurt in consolidation in recent times, with deals such as
Sutherland Global Services acquisition of Adventity Global services, Hinduja Global
Solutions acquisition of a UK based customer relationship management company,
Careline Services, and this trend is expected to continue in the near future.
Cloud computing will be the next big wave for Indian IT-BPO
industry Cloud computing is expected to reshape the Indian IT market by generating
new opportunities for the IT vendors and driving changes in traditional IT offerings. This
service offers immense opportunity to penetrate the SMB sector and offer innovative
solutions by providing them an equivalent IT infrastructure, which they could otherwise
not be able to afford. Several big high-tech companies such as Microsoft are now
adopting the cloud computing technology to widen their market share. TCS has also
launched various models within cloud computing services targeting the large number of
SMB`s in India.
Remote Infrastructure Management Services (RIMS) is set to emerge as
a promising opportunity RIMS is touted to be a big market for Indian IT
companies in the near future. The IMS segment is progressively moving towards a remote
delivery model where services are delivered by vendors and captives from low-cost
locations. As per the comprehensive study conducted by NASSCOM and McKinsey, the
global RIMS market is estimated to be USD 96-104 billion, out of which nearly 70-75%
of the infrastructure management roles can be offshored. Given its strength in offshore
delivery of services, India is well positioned to capture a substantial share of this RIMS
opportunity.

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Small and Medium Business`s (SMB) are expected to emerge as a
significant market Indian SMB`s have realized the long-term benefits of IT
implementation in terms of increased productivity and are increasingly adopting IT
solutions. During 2009, expenditure on IT by SMB segment was about 30% of the total
IT spends valued at over Rs. 300 billion. IT vendors have identified SMBs as the growth
driver of the future and are taking steps to address them more effectively. They are
offering tailored-made easy to implement IT solutions and delivery models to SMB`s. For
instance, Microsoft has started to offer its ERP application to SMBs through the SaaS
model. Wipro has also collaborated with Microsoft to deliver ERP software through SaaS
model for an auto parts supplier.
Increased government IT spending will spur growth in the domestic
market Service providers are also expected to sharpen their focus on the domestic
market to tap the imminent growth opportunities offered by the booming Indian
economy. The rapid growth in the domestic market is likely to be driven by major
government initiatives such as increased spending on e-Governance and increased thrust
on technology adoption/up-gradation across various government departments to bridge
the gap of digital divide. The GoI has enacted a national e-Governance Plan (NeGP)
which creates a big opportunity for the IT vendors to create an effective partnership. It
has separately allocated USD9 billion for investment in NeGP projects till FY14.
Shift in focus from BFSI vertical to other emerging verticals The BFSI
vertical has been the mainstay of the Indian IT-BPO industry. However, it was one of the
worst hit segments due to the impact of global financial crisis. In 2009, the BFSI sector
observed a decline of around 5% after witnessing a below average growth rate of 3.6% in
2008. Consequently, IT vendors, in order to de-risk their business model, have increased
their focus on other verticals such as government, healthcare, retail and utilities. In the
last few years, these sectors have shown signs of increasing IT expenditure. Growth in
these emerging verticals is expected to be substantially faster than the core verticals.
Diversifying from core geographic markets Indian IT-BPO companies are
expected to diversify their business from core markets such as the US and UK as these
markets was adversely affected by the global financial crisis leading to a decline in their
overall IT spends. Over the last couple of years, India`s export share to the US has
declined sharply from around 68% in FY04 to 61% in FY10. On the other hand, the
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Indian IT companies have begun to explore opportunities offered by other growing
markets such as Mexico, Ireland, Netherlands, Philippines and Brazil. Though these
flourishing markets are presently small, they are expected to the drive growth in future. In
addition, by concentrating on these markets, businesses can diversify their risks across
regions.
Ceasing of tax benefits for STPI (Software Technology Parks of India)
impacts small players STPI have played a vital role in fostering growth of the
Indian IT-BPO industry. The uncertainty ruling over continuation of tax holiday after
Mar 2011 could slow down future expansion proposals. Large companies would be able
to alleviate the tax burden arising from the expiry of tax holiday by moving into SEZs.
However, small companies, which form the bulk of the companies registered with STPI,
will find it hard to survive, as they are still struggling post-global recession and do not
have the financial resources to face this challenge.
Rural BPOs will make their presence felt Indian BPO companies are slowly
moving towards rural areas to set up delivery centers due to rising attrition rates in urban
areas and lower cost of operations in rural areas - which is also supported by growing real
estate construction in rural area. As per NASSCOM, as on Feb 2010, about 35 rural BPO
centers employed more than 5,000 people across the country. Rural BPO`s are also
gradually moving up the value chain in terms of service offerings from basic data
management tasks to content creation and validation. 2013 could well be the year in
which rural BPO operations come of age.

2.4 Herfindahl Hirschman Index (HHI)
This index is a measure of size of firms with relation to the industry. It also indicates the level
of competition among them. The name is derived from names of the economists Orris C
Herfindahl and Albert O Hirschman. It is defined as the sum of squares of market shares of
50 largest firms within an industry.
The value of this index can range from 0 to 10000. Here an increase in HHI indicates
decrease in competition and increase in market power. Decrease in HHI shows increase in
competition and decline in market power.
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If HHI is between 0 to 1500, the industry is un-concentrated.
If HHI is between 1500 to 2500, the industry is moderately concentrated.
If HHI is above 2500, the industry is highly concentrated.
Below is the list of 50 largest firms in the IT industry and their revenues are also mentioned.
Basing on the revenues market shares have been calculated and thus HHI was found.
The HHI of the IT industry is found to be 424.26.
This shows it is below 1500, thus the global IT industry is un-concentrated. This shows that
there are no dominant players in the industry which have the power to influence the entire
global market.

Company
Revenue
billions
market share
Market share
square
Apple 164.69 10.86959391 118.1480718
Hewlett-Packard 118.68 7.832918851 61.35461773
International Business Machines 104.51 6.897694213 47.57818545
Panasonic Corporation 89.43 5.902409276 34.83843526
Sony Corporation 78.28 5.166505626 26.69278038
Microsoft Corporation 72.93 4.813403874 23.16885686
Dell 56.94 3.75805864 14.12300474
Intel 53.34 3.520457461 12.39362074
Google 50.18 3.311896427 10.96865794
Cisco Systems 47.25 3.118515468 9.725138723
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Nokia Oyj 39.05 2.577312783 6.642541184
Ingram Micro 37.83 2.496792384 6.233972209
Oracle Corporation 37.23 2.457192188 6.037793447
Ericsson Telephone Company 34.13 2.252591173 5.074166992
Accenture 29.86 1.970769775 3.883933506
LG.Display Company 26.05 1.719308528 2.956021814
Tech Data Corporation 25.36 1.673768302 2.801500328
Avnet 25.16 1.660568236 2.757486868
Flextronics International 24.69 1.629548083 2.655426953
Xerox Corporation 22.39 1.47774733 2.18373717
EMC Corporation 21.71 1.432867107 2.053108146
Sap 20.94 1.382046855 1.910053509
Qualcomm 20.46 1.350366698 1.823490219
Arrow Electronics 20.41 1.347066681 1.814588644
Alcatel-Lucent 18.87 1.245426177 1.551086363
Whirlpool Corporation 18.14 1.197245938 1.433397837
Jabil Circuit 17.46 1.152365716 1.327946743
Taiwan Semiconductor Manufacturing 17.12 1.129925604 1.276731872
Seagate Technology 16.33 1.077785346 1.161621252
Computer Sciences Corporation 15.78 1.041485166 1.084691351
Western Digital Corporation 15.65 1.032905123 1.066892994
Kyocera Corporation 15.04 0.992644924 0.985343944
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TE Connectivity 13.25 0.874504338 0.764757836
Texas Instruments 12.82 0.846124197 0.715926156
AU Optronics Corporation 12.73 0.840184167 0.705909435
Research in Motion 12.6 0.831604125 0.69156542
Catamaran 9.94 0.656043254 0.430392751
Motorola Solutions 8.698 0.574070847 0.329557338
STMicroelectronics 8.493 0.56054078 0.314205966
Applied Materials 8.103 0.534800653 0.286011738
Corning 8.012 0.528794623 0.279623753
Broadcom Corporation 8.006 0.528398621 0.279205103
Micron Technology 7.978 0.526550612 0.277255547
Wipro 7.822 0.516254561 0.266518771
Cognizant Technology Solutions Corporation 7.346 0.484838405 0.235068279
Infosys 7.231 0.477248367 0.227766004
Symantec 6.839 0.451376239 0.203740509
Advanced Semiconductor Engineering 6.561 0.433028148 0.187513377
Celestica 6.507 0.42946413 0.184439439
NetApp 6.318 0.416990068 0.173880717
TOTAL 1515.144

424.2602412
Table 2.2 Market share of top 50 IT companies

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3. INDIAN IT INDUSTRY SCENARIO
The Information technology industry in India has gained a brand identity as a knowledge
economy due to its IT and ITES (IT-Enabled Services) sector. The ITITES industry has two
major components: IT Services and business process outsourcing (BPO). The growth in the
service sector in India has been led by the ITITES sector, contributing substantially to
increase in GDP, employment, and exports. The sector has increased its contribution to
India's GDP from 6.1% in 2009-10 to 6.4% in 2010-11. The sector has increased its
contribution to Indians GDP from 1.2% in FY 1998 to 7.5% in FY 2012. According
to NASSCOM, the ITBPO sector in India aggregated revenues of US$100 $ billion in
FY2012. The top seven cities that account for about 90% of this sectors exports are
Bangalore,Chennai,Hyderabad,Mumbai, Pune, Delhi, Kolkata, Coimbatore and Kochi Export
dominate ITITES industry, and constitute about 77% of the total industry revenue. Though
the ITITES sector is export driven, the domestic market is also significant with a robust
revenue growth.
This sector has also led to employment generation. Direct employment in the IT services and
BPO/ITES segment was 2.3 million in 2009-10 and is estimated to reach nearly 2.5 million
by the end of financial year 2010-11. Indirect employment of over 8.3 million job
opportunities is also expected to be generated due to the growth of this sector in 2010-11.
Generally dominant player in the global outsourcing sector. However, the sector continues to
face challenges of competitiveness in the globalized world, particularly from countries
like China and Philippines.
India's growing stature in the Information Age enabled it to form close ties with both
the United States of America and the European Union. However, the recent global financial
crises has deeply impacted the Indian IT companies as well as global companies. As a result
hiring has dropped sharply, and employees are looking at different sectors like the financial
service, telecommunications, and manufacturing industries, which have been growing
phenomenally over the last few years. India's IT Services industry was born in Mumbai in
1967 with the establishment of Tata Group in partnership with Burroughs. The first software
export zone SEEPZ was set up here way back in 1973, the old avatar of the modern day IT
Park. More than 80 percent of the country's software exports happened out
of SEEPZ, Mumbai in 80s.
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3.1 HISTORY
The Indian Government acquired the EVS EM computers from the Soviet Union, which were
used in large companies and research laboratories. In 1968 Tata Consultancy Services
established in SEEPZ, Mumbai by the Tata Groupwere the country's largest software
producers during the 1960s. As an outcome of the various policies of Jawaharlal
Nehru (office: 15 August 1947 27 May 1964) the economically beleaguered country was
able to build a large scientific workforce, third in numbers only to that of the United States of
America and the Soviet Union. On 18 August 1951 the minister of education Maulana Abul
Kalam Azad, inaugurated the Indian Institute of Technology atKharagpur in West Bengal.
Possibly modeled after the Massachusetts Institute of Technology these institutions were
conceived by a 22 member committee of scholars and entrepreneurs under the chairmanship
of N. R. Sarkar.
The National Informatics Centre was established in March 1975. The inception of The
Computer Maintenance Company (CMC) followed in October 1976. During 1977-1980 the
country's Information Technology companies Tata InfoTech, Patni Computer
Systems and Wipro had become visible. The 'microchip revolution' of the 1980s had
convinced bothIndira Gandhi and her successor Rajiv Gandhi that electronics and
telecommunications were vital to India's growth and development. MTNL underwent
technological improvements. During 1986-1987, the Indian government embarked upon the
creation of three wide-area computer networking schemes: INDONET (intended to serve the
IBM mainframes in India), NICNET (the network for India's National Informatics Centre),
and the academic research oriented Education and Research Network (ERNET).

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3.2 POST LIBERALISATION
Regulated VSAT links became visible in 1985. Desai (2006) describes the steps taken to
relax regulations on linking in 1991:
In 1991 the Department of Electronics broke this impasse, creating a corporation
called Software Technology Parks of India(STPI) that, being owned by the government,
could provide VSAT communications without breaching its monopoly. STPI set up software
technology parks in different cities, each of which provided satellite links to be used by firms;
the local link was a wireless radio link. In 1993 the government began to allow individual
companies their own dedicated links, which allowed work done in India to be transmitted
abroad directly. Indian firms soon convinced their American customers that a satellite link
was as reliable as a team of programmers working in the clients office.
Videsh Sanchar Nigam Limited (VSNL) introduced Gateway Electronic Mail Service in
1991, the 64 kbit/s leased line service in 1992, and commercial Internet access on a visible
scale in 1992. Election results were displayed via National Informatics Centre's NICNET.
The Indian economy underwent economic reforms in 1991, leading to a new era
of globalization and international economic integration. Economic growth of over 6%
annually was seen during 1993-2002. The economic reforms were driven in part by
significant the internet usage in the country. The new administration under Atal Bihari
Vajpayeewhich placed the development of Information Technology among its top five
priorities formed the Indian National Task Force on Information Technology and Software
Development.
The New Telecommunications Policy, 1999 (NTP 1999) helped further liberalize India's
telecommunications sector. The Information Technology Act 2000 created legal procedures
for electronic transactions and e-commerce.
Throughout the 1990s, another wave of Indian professionals entered the United States. The
number of Indian Americans reached 1.7 million by 2000. This immigration consisted largely
of highly educated technologically proficient workers. Within the United States, Indians fared
well in science, engineering, and management. Graduates from the Indian Institutes of
Technology (IIT) and Indian Institute of Information Technology - Allahabad ( IIIT-A )
became known for their technical skills. Thus GOI planned to establish new Institutes
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especially for Information Technology to enhance this field. In 1998 India got the
first IT institute name Indian Institute of Information Technologyat Allahabad. The
success of Information Technology in India not only had economic repercussions but also
had far-reaching political consequences. India's reputation both as a source and a destination
for skilled workforce helped it improve its relations with a number of world economies. The
relationship between economy and technologyvalued in the western worldfacilitated the
growth of an entrepreneurial class of immigrant Indians, which further helped aid in
promoting technology-driven growth.
The economic effect of the technologically inclined services sector in Indiaaccounting for
40% of the country's GDP and 30% of export earnings as of 2006, while employing only 25%
of its workforceis summarized by Sharma (2006):
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.
Mumbai too has its share of IT companies that are India's first and largest, like TCS and well
established like Reliance, Patni, LnT InfoTech, i-Flex, WNS, Shine, Naukri, Jobspert etc. are
head-quartered in Mumbai. 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.

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3.3 INDIAN IT INDUSTRY INFORMATION

India's IT industry (in USD bn)
Particulars FY
2004
FY
2005
FY
2006
FY
2007
FY
2008
IT Services 10.4 13.5 17.8 23.5 31.0
- Exports 7.3 10.0 13.13 18.0 23.1
- Domestic 3.1 3.5 4.5 5.5 7.9
ITES-BPO 3.4 5.2 7.2 9.5 12.5
- Exports 3.1 4.6 6.3 8.4 10.9
- Domestic 0.3 0.6 0.9 1.1 1.6
Engineering services, R&D and
Software products
2.9 3.9 5.3 6.5 8.6
- Exports 2.5 3.1 4.0 4.9 6.4
- Domestic 0.4 0.7 1.3 1.6 2.4
Hardware 5.0 5.9 7.0 8.5 12.0
- Exports 0.5 0.5 0.6 0.5 0.5
- Domestic 4.4 5.1 6.5 8.0 11.5
Total IT industry (including
hardware)
21.6 28.4 37.4 48.0 64.
Table 3.1 Information about Indian IT

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3.4 STRUCTURE OF THE INDUSTRY
The top players of IT industry and their market share in India are as below

COMPANY FY 11 REVENUE
IN CRORES
MARKET SHARE
TCS 37.325 24.9
INOSYS 27.501 18.3
WIPRO 23.606 15.7
COGNIZANT 20.655 13.8
HCL TECH 15.730 10.5
MAHINDRA SATYAM 5.145 3.4
TECH MAHINDRA 5.140 3.4
MPHASIS LTD 5.037 3.4
iGate Patni 4.403 2.9
ORACLE FIN 2.360 1.6
ROLTA 1.805 1.2
POLARIS 1.586 1.1
MIND TREE 1.509 1
NIIT TECH 1.232 0.8
HEXAWARE 1,054 0.7
Table 3.2 Top 15 Indian IT companies Market Share

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Top 5 companies share 83% and top 10 share 95% of market share.

Figure 3.1 Market share of top15 Indian IT Industry

Net profit of major player in IT industry
Here we compared net profits of top 9 companies in India of IT industry of two financial
years. We found out % increase (or) % decrease in net profits with previous financial year.
This profit of companies has the major significance in the growth of the industry. Where
some companies have the increase in the profit percentage some companies decreased there
percentage of percentage compare to the previous year.

24.9
18.3
15.7
13.8
10.5
3.4
3.4
3.4
2.9
1.6
1.2
1.1
1
0.8
0.7
MARKET SHARE
TCS
INOSYS
WIPRO
COGNIZANT
HCL TECH
MAHINDRA SATYAM
TECH MAHINDRA
MPHASIS LTD
iGate Patni
ORACLE FIN
ROLTA
POLARIS
MIND TREE
NIIT TECH
HEXAWARE
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Net profit growth in different it industry in 2011
Table 3.3 Net profit Growth of Indian IT industry Source: capitaline

The net profit of the different companies of IT industry some major companies have the
negative growth in there profit margin compare to the previous year but also there is the
positive growth in the some companies. From the above table we can see that major
companies like cognizant tech, Infosys, oracle and Mahindra satyam have registered the
negative profit growth in the 2011 year compare to 2010. Also in the whole industry the
highest growth in the profit has registered by the wipro with 66.99% and then followed by the
patni computers with 43% and then TCS with he 18% growth in the profit compare to the FY
Company Net profit
(2010-11)
Net profit
(2009-10)
% Increase
Cognizant Tech 1,337.85 2229.75 -40
HCL Technologies 1049.51 912.617 15
Infosys Tech. 5755 5813.13 -0.999
MphasiS 996.88 837.714 19
Oracle Fin.Serv. 661.62 735.133 -9.999
Patni Computer 503.36 352 43
Polaris Soft. 130.64 111.658 17
MAHINDRA
Satyam
1061.7 1309.3 -18.91
TCS 5498.07 4659.38 18
Wipro 4871.74 2917.21 66.999
Others 3684.45 3240.565 13.698
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2010. Now if we see that the overall growth in the industry profit is a positive growth with
the increase of 11.171% in the FY 2011 compare to the FY2010.

3.5 HerfindahlHirschman Index (HHI):
It is defined as the sum of the squares of the market share of the 50 largest firms (or summed
over all the firms if there are fewer than 50) within the industry.
HHI = 24.9
2
+18.3
2
+15.7
2
+13.8
2
+10.5
2
+3.4
2
+3.4
2
+3.4
2
+2.9
2
+1.6
2
+1.2
2
+1.1
2
+1
2
+0.8
2
+0.7
2
= 1552.51
The market share of the companies below this list is negligible for the HHI index as the
squares of values < 1 will not affect the HHI index to a greater extent.
The HHI index value of 1552 indicates that the industry is moderately concentrated. From the
past records of the market shares of the companies, the HHI index is increasing over the
years.

Concentration ratio:
The most common concentration ratios are the CR
4
and the CR
8
, which means the four and
the eight largest firms. Concentration ratios are usually used to show the extent of market
control of the largest firms in the industry and to illustrate the degree to which an industry is
oligopolistic.
The Four-Firm Concentration Ratio (CR
4
) measures the total market share of the four
largest firms in an industry.
CR
4
= 24.9 + 18.3 + 15.7 + 13.8
= 72.7
This falls in the range of 50 80 which indicates that the industry is medium concentrated
and is likely oligopoly.

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4. MACROENVIRONMENT ANALYSIS
Macro environment analysis is a review of all the factors that a company is unable to control.
Companies conduct this analysis to stay abreast of the issue in the current business
environment. We will be discussing about PESTEL framework to understand the IT industry
scenario.

4.1 POLITICAL Factors
The political factors which affect a business can include government rules and regulations
toward that particular business environment and industry. For the IT industry in the Indian
scenario, the following enlist the political factors affecting it. The Indian political structure is
stable, but there are fears of hung parliament which means there is a lack of clear majority in
the parliament, thus creating fear of wrong investing in the minds of investors thereby
reducing capital.
U.S government has declared that U.S firms that outsource IT work outside the U.S will not
get tax benefits, this has caused reduction in the BPO contracts from the U.S in the last fiscal
year as companies try to keep jobs within their country borders and not outsourcing to India,
thereby reducing revenue from the U.S.
Indian government has decided to contract IT job to Indian IT companies creating more
opportunities and more jobs for the companies and the industry at large. In software
development different countries configuration rules and regulation are considered since client
demand differs because of different system requirements. Other factors to be considered are
customer protection law, competitive regulations, and terrorist attacks.

4.1.1 Political Stability
India suffered political instability for a few years due to the failure of any party to win an
absolute majority in Parliament. However, political stability has returned since the previous
general elections in 1999. However, political instability did not change India's economic
course though it delayed certain decisions relating to the economy.
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Economic liberalization (which is what foreign investors are interested in) has been accepted
as a necessity by all parties including the Communist Party of India (Marxist).
Thus, political instability in India, in practical terms, posed no risk to foreign direct investors
because no policy framed by a past government has been reversed by any successive
government so far.
As for terrorism, except for Kashmir in the north and parts of the north-east, terrorist activity
is either non-existent or too weak to be of any significance. Hence, political risk in India is
practically non-existent.

4.2 ECONOMICAL Factors
These includes factors affecting IT industry ranging from rising working pay, global
recession, competition, contract availability and fee. Domestic IT spending which was
hindered by recession started growing soon after; it grew by 20% and reached $20 billion in
2009.During the recession, real estate prices decline resulted in rental expenditure forcing
customer to leave luxuries goods such as electronic and computers that need software to
work. India economic attraction has helped in convincing investors due to low cost
advantage.
4.2.1 Domestic IT Spending
IT spending in India is projected to total $71.5 billion in 2013, a 7.7 percent increase from the
$66.4 billion forecasted for 2012, according to Gartner, Inc.
4.2.2 Global IT Spending
Global IT spending is to hit $ 3.7 trillion in 2013 with a growth of around 4.2% from the last
year. (Gartner)

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4.2.3 Economic attraction
There is a lot of economic attraction towards IT sector due to low cost advantage and
other factors. India, with its low cost advantage and emergence of several private players,
represents the fastest growing market.
Further the geographical location of India serves it the advantage of being exactly halfway
round the world from the US west coast, which is another reason why India is preferred
destination of many big brands.
Indias development and contribution in worlds information technology sector is of highest
reputation. Cities like Bangalore have become the favorite(most preferred) destinations of all
the big banners like HSBC, Dell, Microsoft, GE, Hewlett Packard, and several Indian
multinational firms like Infosys Technologies, Wipro, and Microland who have set up their
offices in the city. It is because the city offers good infrastructure, with large floor space and
great telecom facilities. This can be judged on the basis of the high growth statistics of India
and the changing outlook of the companies towards India.
Also, the presence of a large number of Indians, especially engineers, in the US gave India an
easy entry into the US software market.

4.3 SOCIAL Factors
These are social factors affecting IT industry which ranges from employee right, language
barriers, race nationality of company or other issues. English language being widely spoken
in India has help in fostering the industrys relationship and interaction in India and on the
global stage. India is one of the few countries to have an increasing share of working
population, since there is great availability of both skilled and unskilled labour force. Great
number of institute and universities offer IT course creating room for availability of IT
professional at lower cost since there is job competition. India continues to produce IT
professionals each year in large numbers. Cultural differences in different countries affect the
products offered by the industry, namely who the software is meant for, age difference of
users, life style of the different countries of supply and so on so forth. There will always be
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difference in client behaviours which is supported by the fact that different customers have
different taste.

4.3.1 CAREER Prospects

Table 4.1 Employment Opportunity

Due to recession, it is visible that the IT industry has lost jobs from the period of 2000-2010
by 919.7 thousands of jobs but is projected to grow by 140.3 thousand jobs till 2020.

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4.4 TECHNOLOGICAL Factors
Technological factors include technological aspects such as R&D activity, automation,
technology incentives and the rate of technological change. They can determine barriers,
minimum efficient production level and influence outsourcing decisions
4.4.1 Telephone: Cellular mobile telephony tariffs in India are the lowest in the
world. A comparison of Indian cellular tariffs vis--vis the tariffs prevailing in comparative
emerging economies in South America & Asia-Pacific region, clearly brings out the
affordability of Indian cellular mobile telephone services. This allows easy and inexpensive
flow of communication aiding the industry to do business with the global world, also
increasing the prospects of outsourced jobs for the country.
1. India has the second largest telephone network after china.
2. Enterprise telephone services, 3G, WI-MAX and VPN (Virtual Private Network) are
poised to grow.

4.4.2 INTERNET

Table 4.2 Top 3 Internet users
India lies third in the top 20 countries with the highest internet usage. This allows the
industry to grow at a higher rate than many other countries on the globe.

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4.4.3 New IT Technology: The IT industry is characterized by innovation in new
low cost technology to improve their services to their clients and to efficiently compete with
companies at the global level. With cloud computing at a rise, the IT industry can provide
easy and fast solutions to all businesses. In the business model using software as a service,
users are provided access to application software and databases. Cloud providers manage the
infrastructure and platforms that run the applications.
End users access cloud-based applications through a web browser or a light-weight desktop
or mobile app while the business software and user's data are stored on servers at a remote
location. Proponents claim that cloud computing allows enterprises to get their applications
up and running faster, with improved manageability and less maintenance, and enables IT to
more rapidly adjust resources to meet fluctuating and unpredictable business demand.

4.5 LEGAL Factors
Legal factors include discrimination law, consumer law, antitrust law, employment law,
and health and safety law. These factors can affect how a company operates, its costs, and the
demand for its products.

4.5.1 IT Act 2000: India became the 12th nation in the world to adopt a cyber-law
during 2000.
Information Technology Act 2000 addressed the following issues:
1. Legal Recognition of Electronic Documents
2. Legal Recognition of Digital Signatures
3. Offenses and Contraventions
4. Justice Dispensation Systems for Cybercrimes

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4.5.2 Indian Copyright Act: The copyright of computer software is protected
under the provisions of Indian Copyright Act 1957. Major changes to Indian Copyright Law
were introduced in 1994 and came into effect from 10 May 1995. Copyright Act clearly
explained:
The rights of a copyright holder
Position on rentals of software
The rights of the user to make backup copies
Most importantly the amendments imposed heavy punishment and fines for infringement of
copyright of software.

4.5.3 IT SEZ REQUIREMENTS: IT companies can set up SEZ with minimum
area of 10 hectares and enjoy a host of tax benefits and fiscal benefits.
Software Technology Parks of India (STPI), is a society set up by the Department of
Communication & Information Technology, Government Of India in 1991, with the
objective of encouraging, promoting and boosting the Software Exports from India.
Companies operating in software technology park (STPI), Scheme will continue to get
tax benefit till 2010. STPI maintains internal engineering resources to provide consulting,
training and implementation services. Services cover Network Design, System
Integration, Installation, Operations and maintenance of application networks and
facilities in varied areas ranging from VSATs to ATM based networks.
Thus India is a perfect solution for all those companies which seek for cheap, yet technically
skilled labor who have innovative minds and state of art to work over a project. The ample of
facilities provide in a perfect working conditions. For rest, cyber laws are there to monitor
and safeguard everyone's interest related to IT sector.
All these reasons contribute for India to be as the most adored destination to many
companies.

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4.6 ENVIRONMENTAL Factors
Environmental conservation and protection is an issue which has gained prominence because
of deteriorating environmental balance which is threatening the sustainability of life and
nature. Largely, business is also held responsible for such situations as emissions from
industries polluting the air, excessive chemical affluents drained out in water making it
poisonous and unfit for use, usage of bio non-degradable resources affecting the bio-chain
adversely and exposure of employees to hazardous radiations bring their life in danger. All
these have been taken very seriously by different stakeholders in the society including the
government and legislations and movements are creating pressure for an environment
friendly business. These have far reaching implications for business ranging from the kind of
business, the product being manufactured, how it is manufactured and how waste is being
disposed of.

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5. COMPETITIVE ANALYSIS

Figure 5.1 Competitive analysis of IT Industry

THREAT OF NEW
ENTRANTS
(High)
THREAT OF
SUBSTITUTE
PRODUCTS OR
SERVICES
(Low)
BARGAINING
POWER OF
SUPPLIERS
(Low)
BARGAINING
POWER OF
BUYERS
(Moderately
high)

THREAT AMONG
EXISTING
COMPETITORS
(High)
S
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5.1 Bargaining Power of Customers
The bargaining power of the customers is moderately high. There is enough room for
expansion for existing players and new entrants. There are large numbers of IT companies
vying for IT projects resulting in high competition for projects. The MNCs are opening
their operations in India to leverage the low cost advantage provided by India. Examples such
as HP, Dell etc. However, for the existing products and services, the clients continue the old
companies.
Service Level Agreements: Companies survive with existing service level agreements they
have with clients. These long term agreements help both the IT company and the clients.

5.2 Bargaining Power of Suppliers
As there exist many competitive suppliers in the market the supplier has very little or no
power in this industry. The IT workforce in the country is quite large. Due to slowdown, the
job-cuts, the layoffs and bleak IT outlook, the bargaining power of the talented professionals
has gone down. Demand and supply of IT professionals is no longer that favourable to
employees. The system providers have very low bargaining power over the IT companies as
there are lot of providers like Dell, HP etc.

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5.3 Threat from New Entrants
Threat from new entrants is high. The reasons are listed as follows:
An IT company can be started with very low initial cost. For example , if we want to
start a small software firm, all we need is a room and few computers and professionals
to work on the systems to produce efficient softwares.
Profitable market yielding high returns attract new firms.
o Cost: Softwares have a very low marginal cost, as it could be easily duplicated.
o Production and duplication: Unlike hardwares and other manufactured products,
once we produce generic software, same can be sold to any number of customers.
o Easy Distribution: The additional cost of selling software is very low or even nil
in some case.
The forecasting states that the future demands for small softwares highly promising
that it encourages new software firms to enter the industry.
MNCs are ramping up capacity and employee strength. This doesnt encourage new
firms because MNCs pay higher salary for skilled software professionals and so the
employees who get a chance to work in a MNC will leave any local firm and join the
company.

5.4 Existing Rivalry
This factor is high. The reasons stated below:
IT industry comprises of large and small firms, where smaller firms tend to lower
prices to increase market share; and larger firms follow.
Value proposition: 'Low-cost, little-differentiation' positioning. The customers often
dont find any differentiation between the softwares offered by different IT
companies. So, project approval is mainly based on the proposed budget and value
proposition.
Strong competitors: Few numbers of large companies. There is a strong competition
between these companies in covering foreign clients.

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5.5 Threat of Substitutes
This component is comparatively low. There is a boom in the piracy market. But
these services have a lot of drawbacks. The losses suffered as a result of software piracy
directly affect the profitability of the software industry. Because of the money lost to
pirates, publishers have fewer resources to devote to research and development of new
products, have less revenue to justify lowering software prices and are forced to pass
these costs on to their customers. Consequently, software publishers, developers, and
vendors are taking serious actions to protect their revenues.
Using pirated software is also risky for users. Aside from the legal consequences of using
pirated software, users of pirated software forfeit some practical benefits as well. Those
who use pirate software:
Increase the chances that the software will not function correctly or will fail
completely;
Forfeit access to customer support, upgrades, technical documentation, training, and
bug fixes;
Have no warranty to protect themselves;
Increase their risk of exposure to a debilitating virus that can destroy valuable data;
May find that the software is actually an outdated version, a beta (test) version, or a
nonfunctioning copy.
Thus due to all these reasons the pirated softwares cannot be a substitute for the original
products and services.
India is not the only global centre for outsourcing china, Philippines are providing
huge competition. They offer lesser costly products with the same quality. Price quoted
for projects is a major differentiator, the quality of products being same.

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6. CONDUCT ANALYSIS
Several key factors must be considered as you analyze your industry:
Pricing Strategy
Advertising intensity
R&D intensity
Technology intensity
Expansion strategy
Performance analysis
We will try to analyses the IT industry on these various factors.

6.1 PRICING STRATEGIES
There are multiple approaches to pricing of information technology products and services.
Although pricing strategies differ based on whether the software or system is getting sold as a
product or getting leased as a service, there are certain basic generic strategies for pricing the
same. These strategies are:-

6.1.1 COST BASED PRICING
Cost-based pricing of technology is historically the most popular method since it relies on
more readily available information from the cost-accounting system. Since often, information
technology post deployment is treated with Activity based costing, while developed in-house
for many firms, a cost based pricing strategy becomes extremely lucrative to developers for
the simplicity of development.

6.1.2 FUNCTION POINT ANALYSIS
Another pricing strategy for software products and services is based on Function Point
analysis and Full Function point analysis. Function Point Analysis is one of the most popular
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techniques for pricing of technology. Function Point Analysis has been proven as a reliable
method for measuring the size of computer software in terms of Kilo Lines of Code (and
more recently, Millions of Lines of Code), based on which and its complexity of development
the software is priced. Function Point Analysis has been established as being extremely
robust in estimating projects, managing change of scope of implemented engagements,
measuring productivity, and communicating functional requirements.

A few other pricing techniques are MIPS-based pricing, tiered pricing, user based pricing,
flat pricing and usage based pricing.

6.1.3 MIPS BASED PRICING
In a MIPS-based pricing strategy, software prices are based on the on the theoretical
throughput of the system (MIPS) on which the software is running.

6.1.4 FLAT PRICING
In a flat pricing contract, customers pay a fixed price for unlimited use of the software
product. This approach enables customers to more easily predict what they will pay for the
use of the software. In a tiered pricing strategy, vendors attempt to package software benefits
according to user requirements and their willingness to pay. This approach to pricing is an
attempt to link software product costs to perceived customer value.

6.1.5 USER BASED PRICING
In an user based pricing strategy, the customer is charged based on the number of users that
utilize a collection of software features over a given period of time by assigning costs to a
particular number of users or workstations and sum up individual cost allocation.
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6.1.6 USAGE BASED PRICING
In an usage based pricing strategy, customers is charged by the vendor firm only for what
they actually use on a transaction basis, during a contract period, say in months, but more
popularly for larger IT firms and engagements, in years.

6.1.7 VALUE BASED PRICING
Today another popular pricing technique is based on the economic value that a client firm
may get from a technology product or service level agreement. Such a pricing strategy is
called value based pricing. This is slowly becoming the most popular pricing strategies
followed in research labs for emergent technologies, like that of IBM Research, Microsoft
Research and SAP labs.

Now lets take an example of an IT firm to understand their pricing better.
For this lets take APPLE.
Apple Inc., is known the world over for its stylish products and impressive annual growth
rates. But what you may not know is how the company manages to post high growth rates
year after year. Lets analyze its pricing strategy as most analysts agree that the companys
pricing strategy, apart from its passion for design, is what drives sales and profits.
6.1.8 BUNDLING
Bundling is a marketing strategy where the seller combines two or more products and/or
services and sells these as a single unit for a slightly reduced price. For buyers, buying
bundled products may result in increased savings. And for a seller, it usually results in higher
sales and in higher profits, too. Apple is a master at bundling. Only Apple doesnt combine
two or more products and sell these at a reduced price. It sells the hardware at a seemingly
attractive price, knowing that the customer will pay later for the software that will play on the
hardware.
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For example, Apple TV sells for US$ 99 an attractively low price. But what customers
might not realize is that they will have to cough up a lot more in dollars to buy software such
as movies, videos, etc. in order to make use of their new purchase. Unlike several media
players in the market, the Apple TV doesnt have any in-built storage.

6.1.9 REFERENCE PRICING
Human psychology dictates that we compare prices of everything that we buy. Marketers
make use of this tendency by adopting reference pricing. However, the important question is
what do you compare the prices of the products that you intend to buy with? If Apple had its
way, it would want every one of us to compare the prices of Apple products with other Apple
products. If we go by Apples sales figures, it seems that the company is succeeding. Apple
benefits from reference pricing by launching a slew of products at various price points. So, a
buyer wouldnt mind paying more for versions with higher capacities or better features as
he/she compares the product with lower priced versions that usually wont have most of the
cutting edge features.
For example, one wouldnt mind paying US$ 199 for the iPod Touch 8GB as it has many
sought-after features such as HD recording, iCloud, etc. that, say, an iPod Nano 8GB, priced
at US$ 129, doesnt have. And if youre someone who is willing to pay more for higher
storage capacity, youd choose the iPod Touch 32 GB, at US$ 299.

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6.1.10 DIFFERENTIATION
The most potent weapon in Apples pricing strategy is differentiation. Differentiation is what
allows Apple to price its products at a premium and compel customers to compare Apple
products with other Apple products, rather than with lower-priced products from other
reputed marketers. Apple products look, feel and seem very different from competitors
products.
So, most people who buy an Apple product buy it not because it offers more features or its
cheaper but because the company has succeeded in creating a unique identity for its products.
If that was not the case, why would you buy an iPod Nano 8GB for US$ 129, when you can
buy Sonys E Series 16GB for US$ 109?

6.2 R & D ACTIVITIES
Lets take a look at the recent R & D projects of a few IT companies. This is just a brief
description of what these companies are developing.

MICROSOFT
R&D budget: $9.18 billion
Percent of net sales: 12.93
Imagine Star Trek's virtual-reality holodeck for your office desk and you've got the
idea for the Holodesk from Microsoft. This interactive system, lets users touch and
move virtual objects. Holodesk uses a Kinect camera and an optical transparent
display to give people the illusion that they're interacting with 3D graphics.

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INTEL
At Intel, researchers have started the Tomorrow Project to look at the future of
computing and the broader impact of technology on humans and the planet. "The
nature of computing is changing; it's not just about PCs anymore," says Brian David
Johnson, Intel's futurist. "It's finding its way into our pockets, TVs, and walls."

IBM
IBM revealed a new generation of experimental computer chips designed to emulate
the brain's abilities for perception, action, and cognition. These chips will be used to
make so-called cognitive computers that can learn through experience, find
correlations, create hypotheses, and remember outcomes.

CISCO
Cisco announced a makeover of its flagship Catalyst 6500 Series Switches. One of the
additions is a new 2-terabit card that can quadruple the number of devices or users
that can connect to a network. Now a single Catalyst 6500 switch can support up to
10,000 mobile devices.

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GOOGLE
Google is working to develop one gigawatt of renewable energy capacity. The
Internet search company's project, called RE<C, aims to develop enough clean energy
to power a city the size of San Franciscoat a price cheaper than that of coal.

ORACLE
Oracle unveiled more than 100 business applications, part of a long-awaited collection
called Fusion that the company spent six years developing. Fusion software unifies
the code of many acquisitions Oracle made. It can handle sales, human resources,
finance, inventory management, and other tasks.

HEWLETT-PACKARD
Hewlett-Packard began a trial in Singapore of its Mobile Health Monitoring Solution,
a wearable device (much like a wrist watch) that monitors patient blood pressure
around the clock and shares that information with health care professionals.

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QUALCOMM
GPS helps guide people outdoors. The Qualcomm Bay Area Research &
Development team is working on a mobile app that helps people find their way
around such indoor locations as airports, malls, and hospitals.

AMAZON.COM
When Amazon made its Kindle Fire tablet computer available gained an edge in a
market dominated by Apple's iPad. The Kindle Fire was sold for as low as $199, less
than half the price of the cheapest iPad. But Amazon's war with Apple could squeeze
profits, a concern that helped push shares down 13 percent in 2011.

APPLE
Apple, one of the most innovative companies in the world, is known to be highly
secretive about its projects. Before his passing, Steve Jobs told biographer Walter
Isaacson that he had figured out how to build an integrated TV with a simple user
interface that would wirelessly synchronize content with Apple's other devices. Apple
hasn't confirmed that it's developing a TV set, but Piper Jaffray analyst Gene Munster
says the company has a prototype in the works and may introduce a product by 2013.

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6.3 PERFORMANCE ANALYSIS
The worldwide IT spending and well as that of IT in India is on the rise. The domestic IT
market has grown 16.7 per cent to Rs 91,800 crore in 2011-12 from Rs 78,600 crore in the
previous fiscal year.The market size of the industry is expected to rise to USD 225 billion by
2020 considering India's competitive position, growing demand for exports, Government
policy support, and increasing global footprint. CRISIL Research, Indias largest independent
and integrated research house, predicts that Indias GDP will grow at a higher rate of 6.7 per
cent in 2013-14 in comparison to 5.5 per cent estimated for the current fiscal due to a revival
in consumption. Whereas, the growth and profitability of Indian IT-ITeS companies will
depend on the global economic scenario as well as information technology spending in North
America and Europe this year, Parliament was informed. The outlook for the Indian IT-BPM
sector continues to look positive, according to NASSCOM, which has shared the projected
growth figures for 2012-13. NASSCOMs estimates point to a double- digit momentum, with
industry exports touching USD 75-77 billion in FY2013.

Figure 6.1 Growth of Indian IT Industry
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6.3.1 PERFORMANCE SOCIAL RESPONSIBILITY AND
CSR INITIATIVES
IT and ITeS sectors lead the economic growth in terms of employment, export promotion,
revenue generation and standards of living. As per NASSCOM estimates, IT/ITeS sector
(excluding hardware) revenues are estimated at USD 87.6 billion in FY 2011-12; and the
industry is expected to grow by 19 per cent during FY 2012-13.
As per the Economic Survey 2011-12, the IT/ITeS industries has added 7.96 lakh jobs in one
year, in the period ending September 2011
The IT/ITeS sector has led to employment opportunities, both direct and indirect, of nearly
2.8 million and around 8.9 million respectively. This growth is expected to increase to more
than 14 million (direct and indirect) by 2015 and to around 30 million by 2030.
Every year the IT industry produces multitudes of e-waste. Electronic waste, e-waste, e-scrap,
or waste electrical and electronic equipment (WEEE) describes discarded electrical or
electronic devices. The HP Planet Partners Hardware Return and Recycling Program offers to
take back end-of-life HP computer and printing hardware products.
All major IT companies take an initiative in taking an active part in the CSR activities for the
nation and giving back to the society in the form of different measures. For instance,
INFOSYS introduces measures to reduce the carbon emission by trying to reduce its water
consumption, Ciscos citizenship practices demonstrate that their actions improve the health
of their business as well as the health of the global community, Canon is working to
restructure recycling systems and promote the principle of 3R (reduce, reuse, and recycle),
which is the basis of IM activities.

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7. ANALYSIS OF GLOBAL IT COMPANIES

7.1 SAMSUNG ELECTRONICS
It is a south Korean multinational company with its head quarters in Suwon , South Korea. It
is the subsidiary of Samsung group. It has assembly plants and sales networks in 61 countries
and manpower of 221,000.
Samsung electronics is the

Worlds largest IT company by revenue since 2009.
Worlds largest mobile phone maker by 2011.
Worlds second largest semi-conducter chip maker as of 2011.
Worlds largest television manufacturer since 2006.
Worlds largest maker of LCD panels for the last 8 years.
Company with largest market share in memory chips.
Worlds largest vendor of smart phones since 2011.

7.1.1 BRIEF HISTORY
Its early products were electronic and electrical appliances like televisions , calculators ,
refrigerators , air conditioners and washing machines. In 1974 it expanded into semi-
conductor business by taking over the company Korea semi-conductor , which was the first
chip-making facility in South Korea at that time.
Samsung launched its first mobile phone in 1988 in South Korean market. It bought a 40%
stake in AST research , a US based computer maker in feb 1995. In 1996 the company
became the official sponsor of 1998 winter Olympics held in Nagano, Japan.

In 2005 , Samsung surpassed their Japanese rival Sony for the first time to become the
worlds 20
th
largest and most popular consumer brand as measured by Interbrand.
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Samsung has emphasized innovation in its management strategy since the beginning and it
was the core topic when it announced its vision 2020 where it set a target to reach $400
billion annual revenue with the next ten years.

7.1.2 ITS PRODUCTS
The company mainly focuses of four areas namely digital media , semi-conductor ,
telecommunication network and LCD digital appliances. Samsung print was launched in
2009 to focus mainly on B2B sales and has released many multifunctional devices and
printers etc.
As of 2006 , it held more than 600 american patents and more than 2800 international patents
, making it the largest owner of amoled technology patents. Because of strong sales of
Samsung Galaxy range of smart phones , it overtook Apple in worldwide smart phone sales
during 2011 , with a market share of 23.8% while that of Apple was 14.6%. Samsung has
been the worlds largest memory chip maker since the year 1993.

7.1.3 CONTROVERSIES
From 1999 to 2002, Samsung along with Hynix , Infineon , Elpida etc conspired in price
fixing for the DRAM chips sold in US and had to pay a fine of $300 million , which is the
second largest fine ever paid in US history.
In 2011, Apple sued Samsung for copying their designs and using them in Galaxy range of
devices and was asked to pay $1.05 billion as damages to Apple by an us court. Samsung
appealed to the Tokyo court and they ruled out that Samsung did not violate any patents of
Apple. But the issue continued and in 2013 the damages to be paid to Apple were reduced to
$599 million.

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7.1.4 ENVIRONMENTAL RECORD
All Samsung phones that came into the market after April 2010 were free from polyvinyl
chloride (PVC) and brominated flame retardents (BFR). It is listed in Greenpeaces Guide to
Greener Electronics, which gives rating to electronics companies which produce greener
products and also which make their operations more sustainable. It earned Global Ecolabel
for 2134 of its product models which made it No 1 in the world with highest number of its
products meeting the Global Ecolabel standards.
It started Samsung Recycling Direct program which is a voluntary recycling program
which it started in US and also expanded it into Canada. In 2008 this was named the best eco-
friendly recycling program by Electronics Take Back Coalition, an advocacy group in US.

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7.2 APPLE INC.
Apple inc is an American multinational corporation with ist head quarters in California. It
designs ans sells electronics , softwares and PCs to consumers. It is best known for the MAC
computers , musicplayer i.e. iPod , smartphone i.e. iPhone , tablet i.e. iPad etc.
It was incorporated in 1976 as Apple computer inc and in 2009 the word computer was
removed from its name because of its shift of focus towards smartphones and tablets.
Apple is the:

Worlds 2
nd
largest IT Company in terms of revenue only after Samsung.
Worlds 3
rd
largest mobile maker after Samsung and Nokia.
From 2008 to 2012 it remained the most admired company in the world as per
Fortune magazine.
According to market capitalization , it is the 2
nd
largest corporation in the world that is
trading publicly.
Currently it has a total of 72800 permanent employees and 3300 temporary employees all
over the world.
7.2.1 BRIEF HISTORY
Its founders were Steve Jobs and Ronald Wayne. Apple 1 PC kits were hand made by
Wozniak and were showcased for the first time at Homebrew Computer Club. Later Wayne
sold his share to Jobs and Wozniak and Mike Markkula entered the picture with an
investment of $250000.
Apple 2 was showcased at 1
st
West Coast Computer Faire and it was a hit when used with
VisiCalc, a spreadsheet program. Similarly Apple 3 was brought out but it failed. In
December 1980 Apple went public with its share price at $22. It generated more capital than
any company since Ford company in 1956 , and it also created largest number of millionaires
than any company in history (about 300).
In 1984 Apple launched the Macintosh through a TV commercial which was aired during 3
rd

quarter of Super Bowl 18 on jan 22 1984. It is now hailed as a major milestone for the
success of Apple.
Group 9 Page | 47

There was a power struggle between Jobs and the then CEO John Sculley and in a board
meeting Apples directors sided with John and Joba was removed from Apple
12
. The same
year he founded NeXT inc to compete with Apple.
Jobs became CEO in 1997 when Gil Amelio was ousted by the board due to low stock prices
for three consecutive years. In the same year Apple joined with Microsoft to release new
version of MS-Office for Macintosh.
In 2005 Apple transitioned to using Intel in its Mac computers. In 2010 iPad was launched
and sold 300000+ units within one day and by the end of the week the number crossed
500000.

7.2.2 POST STEVE JOBS ERA
In 2011 Jobs took leave to focus more on his health and Tim Crook took over as CEO but
Jobs was still involved in major strategic decisions. Apple became the most valuable
consumer-facing brand in the world due to Steve Jobs. In june 2011 Jobs launched iCloud ,
an online storage service for music, photos etc and it was the last product he launched before
his death.
In july 2011 due to debt ceiling crisis in US , the financial reserves of Apple were larger than
that of the US government
15
. On aug 20 2012 Apples value rose to a record $624 billion. On
sep 12 2012 launched iPhone 5 which is the biggest iPhone launch ever with more than 2
million pre-orders.

7.2.3 CORPORATE CULTURE
It went against the traditional corporate style and one example to prove it was that Steve Jobs
used to roam around the company barefoot. It is famous for promoting individuality among
its employees and enhancing excellence. It also has a Fellowship Program which rewards
individuals who made extraordinary contributions. It also enforces accountability where each
project has a directly responsible individual DRI in Apple jargon.
Group 9 Page | 48

Many employees commented that the projects without the involvement of Jobs took longer to
complete than those where he was involved. Also it believed in creating specialists thus had
best-in-class employees for every role.

Apple eliminated PVCs and BFRs in its product range making it the first laptop maker to do
so. In 2007 it upgraded the MacBook Pro by replacing CCFL backlit LCD with mercury-free
LCD backlit displays and arsenic free glass. Greenpeace Guide criticizes Apple on the energy
criteria for failure in seeking external verification of the emission of green house gases and
also it did not set any targets to reduce them. All the products of Apple are certified by
Electronic Product Environmental Assessment Tool (EPEAT).

7.2.5 CHARITABLE CAUSES
It is a partner of Product RED campaign as of 2012 which focuses on transmission of HIV
from mother to child by the year 2015 with a tag line Fighting For AIDS Free Generation.
In November 2012 it donated $2.5 million to American Red Cross for relief activities after
hurricane sandy.

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7.3 HEWLETT-PACKARD
HP is an America multinational company with headquarters in California. It was founded by
William Redington Hewlett and Dave Packard in a small garage. Now it is the worlds
leading producer of PCs as per 2012 unit sales.
It merged with Compaq in 2002 and it was a sponsor of Mission Space in 2003. In 2009 it
was ranked 9
th
in the Fortune 500 list.

7.3.1 BRIEF HISTORY
It was incorporated in 1947 and went public in 1957. Their first successful product was a
precision audio oscillator , the model HP200A. Its eight model was used installed in theatres
for the movie Fantasia by Walt Disney.
In the beginning they concentrated on electronic testing equipment like signal generators ,
voltmeters etc. Later they ventured into software and other products.
Hp is recognized as the symbolic founder of Silicon Valley. It entered computer market in
1966 with minicomputers like HP 2100 and HP 1000 series. Later it launched HP 9800 and
HP 250 which were a series of desktop and business computers.
They were the first to introduce handheld scientific electronic calculator in 1972. They
followed a philosophy design for the guy at the next bench during this time. They
introduced inkjet and laser printers in 1984 for the desktops.
They registered domain name as HP.com in 1986 and it became 9
th
internet.com domain ever
to be registered. In 2011 it announced its exit from smartphone and computer business and
directed their attention towards cloud , solutions and software to enterprises and government.

Group 9 Page | 50

7.3.2 CULTURE

The founders of HP developed a unique management style which came to be named as the
HP way. The following are the core of the HP way:-
We have trust and respect for individuals.
We focus on a high level of achievement and contribution.
We conduct our business with uncompromising integrity.
We achieve our common objectives through teamwork.
We encourage flexibility and innovation.
7.3.3 CORPORATE SOCIAL RESPONSIBILTY
It set a target in 2004 to recycle one billion pounds of waste of electronics it generates which
it achieved in 2007. It set a new target of recycling 2 billion pounds of waste by 2010. It was
the first to release its supply chain emission data in 2008 becoming the first in the industry to
do so. In 2009 it was ranked 1
st
among 500 companies in US as per Newsweek , because of
its greenhouse gas emission reduction programs.
7.3.4 CONTROVERSIES
HP had to use a spying technique called pretexting in order to obtain the phone records to
find out who were leaking information regarding long term strategies of HP. In 2006 many
HP employees accused of this leak were acquitted.

There was a HPs multi million dollar cover up due to which many lawsuits were filed in
2009 on HP. The issue was that the i7 systems locked up within 30 minutes of powering on.

HP filed a lawsuit in 2011 against Oracle claiming a breach of agreement by Oracle. It was
an agreement where Oracle agreed to support itanium microprocessor used in high end
enterprise servers of HP. The case was won by HP in 2012 with the judgement that Oracle
would continue to support HPS itanium microprocessors.
HP took over Autonomy corp in 2012 but HP accused Aoutonomy corp to wontedly inflating
its value. The Autonomy team rejected it and FBI was called to investigate. This fiasco
damaged HP and its stock fell to an all time low.

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7.4 FOXCONN
Foxconn is actually trading name of the Hon Hai Precision Idustry Co Ltd , which is a
Taiwanese multinational company with its headquarters in New Taipei in Taiwan. It is the
largest contract electronics manyfacturer in the world in terms of revenue.
It manufactures many famous products like iPad, iPhone, iPod, Kindle, Play Station 3 and
Wii U. it is the largest private sector employer in China.
7.4.1 BRIEF HISTORY
It was founded in 1974 with its first manufacturing plant opened in Shenzhen , China in the
year 1988. 1n 2001 they were given contract to manyfacture intels motherboards as intel
started focusing on its core competency of making chips. Foxconn manufactures about 40%
of all consumer electronics products sold in the world
31
.
It has largest number of factories in China i.e. 13 factories in nine cities of China. Its largest
factory is the one in Shenzhen where 300000 to 450000 workers are employed. They work at
the Longhua Science and Technology Park , a walled campus , which is called Foxconn
city or iPod city. It covers an area of 1.16 sq miles and has 15 factories including
dormitories, swimming pool , a city centre, a grocery store, bank , book store, hospital etc for
the employees living there to work.
In Europe it has factories in Hungary , Slovakia and the Czech Republic. It is the 2
nd
largest
exporter of the Czech Republic. In India it is operating in a special economic zone in
Chennai. It has two plants in Osaka which manufactures large screen televisions.
It is developing an industrial park in Malaysia which will include 4 factories. In Mexico it has
a facility in Chihuahua that assembles computers , two facilities in Juarez which producers
mobile phones and set-top boxes. It also produces LCD TVs. Its major customers are Acer ,
Amazon , Apple , Cisco , Dell , Google, HP, Microsoft , Motorola Mobility , Nintendo ,
Nokia , Sony , Toshiba and Vizio.

Group 9 Page | 52

7.4.2 CONTROVERSIES
Many reports of poor working conditions and long working hours came out . also
discrimination by Taiwanese workers on non-Taiwanese workers was reported. In 2012 an
audit was conducted by Fair Labor Association due to request from Apple and they found
that workers were paid insufficient wages and work place accidents also were high in
number. A fight broke out in the workers dormitory in Shanxi in 2012 which turned violent
and had to be quelled by security.
Many suicides of Foxconn workers were reported and initially came out due to suicides of
workers due to low pays in 2010. The suicides continued due to worker abuse and illegal
overtime. The factories of Foxconn are often described as labor camps. Workers were forced
to sign a contract that Foxconn would not be blamed due to suicide of workers or even
injury. In jan 2012, 150 workers threatened to commit suicide and were stopped by hike in
pay.
On 19 feb 2010 , Foxconn made an announced in a factory in Santa Teresa , Mexico that the
buses which take the employees home were delayed due to military checking and made the
workers work overtime without pay . When it was revealed that it was purposely done by the
management to make the workers work overtime , the workers started rioting and the
gymnasium was burnt by the workers. Workers claim that it was not the first time that the
company had made the workers to work overtime without pay.

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7.5 IBM
International Business Machines Corporation has its headquarters in New York, is an
American multinational company specializing in technology and consulting services. It was
nick named as big blue by security analysts due to their use of blue colour in their products
, packaging and logo.
IBM is the
2
nd
largest US firm in terms of number of employees (433362) in 2012 by Fortune
magazine.
4
th
largest company in terms of market capitalization.
No 1 company for leaders as per fortune magazine in 2012.
No 1 green company in the world as per Newsweek.
2
nd
best global brand as per Intraband.
As per Barrons it is 2
nd
most respected company.
Named 5
th
most admired company by Fortune.
Fast Company named it 18
th
most innovative company.
Vault gave No 1 rank to IBM Global Technology Services in consulting for cyber
security in 2012.
It has 12 research labs all over the world and its employees have won 5 Nobel Prizes , 6
Turing Awards , 10 National Medals of Technology and 5 National Medals of Science.
It brought out many inventions like Automated Teller Machine (ATM), the Floppy Disk , the
Hard Disk Drive , the Magnetic Stripe Card , the Relational Database , the Universal Product
Code (UPC), the Financial Swap , SABRE Airline Reservation System , DRAM and Watson
Artificial Intelligence.

Group 9 Page | 54

7.5.1 BRIEF HISTORY
Founded in 1911 with the name Computer Tabulating Recording Company (CTR), by
merging three companies namely Tabulating Machine Company, International Time
Recording Company and Computing Scale Company. The name IBM was adopted in the year
1924.
In 1937 IBMs tabulating equipment enabled the US government to maintain employment
records of 26 million people under the Social Security Act. During WW2 it produced small
arms like M1 Carbine and Browning Automatic Rifles for the American war effort.
In 1963 with the help from IBM, NASA tracked the orbital flight of the Mercury astronauts.
It also participated in 1965 Gemini flights, 1966 Saturn flights and the 1969 mission to land a
man on the moon.
In August 2012 IBM agreed to buy Kenexa and the deal was worth $1.3 billion which was
paid entirely in cash.
It also contributed to architecture and design among which Chicagos 330 North Wabash
building was given the 1990 Honor award by the National Building Museum.

7.5.2 WORKING AT IBM
It was one of the first companies to provide group life insurance (1934), survivor benefits
(1935) and paid vacations (1937). It has an education department which oversees the training
of employees. In 1946 it launched a program for training and employing disabled people in
Kansas. It has a non-discrimination policy which covers sex, national origin, age, ethnic
origin, race and sexual orientation.
It provides same-sex partners of its employees with health benefits and also provides anti-
discrimination clause. Human Rights Campaign has given 100% rating to IBM on its index
for gay-friendlyness since 2003. IBM UK was ranked first in Stonewalls annual Workplace
Equality Index for UK employees in 2010.

Group 9 Page | 55

IBM is collaborating with Tokyo Ohka Kogyo co ltd to bring out solar energy products into
the market called CIGS solar cells. It was recognized as one of the top 20 best workplace
commuters by the US Environmental Protection Agency in 2005. This award recognizes
those companies which provided employees with commuter benefits to help reduce traffic
and air pollution.

Group 9 Page | 56

8. ANALYSIS OF INDIAN IT COMPANIES : Here is the analysis of top
3 Indian IT industry

8.1 ANALYSIS OF INFOSYS - Infosys Limited (formerly Infosys
Technologies Limited) is an Indian multinational provider of business consulting,
technology, engineering, and outsourcing services. It is headquartered in Bangalore,
Karnataka.
[2]
Infosys is the third-largest India-based IT services company by 2012 revenues.

8.1.1 History
Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India in 1981.
Infosys is a consulting and IT services company with more than 145,000 employees. From a
capital of US$ 250, it has grown to become a US$ 6.825 billion (LTM Q3- FY12 revenues)
company with a market capitalization of approximately US$ 30 billion.
Infosys became the first IT company from India to be listed on NASDAQ. Their employee
stock options program created some of India's first salaried millionaires. In 2002, Nandan M.
Nilekani takes over as CEO from N.R. Narayana Murthy, who is appointed Chairman and
Chief Mentor. In 2005, Infosys celebrated 2005 and the revenue crossed US$ 2 billion.
Infosys Limited, formerly known as Infosys Technologies, is an Indian global technology
Services Company headquartered in Bangalore, India. Infosys was ranked 27 in the list of top
companies of India in Fortune India 500 list in 2011. It has offices in 29 countries and
development centers in India, US, China, Australia, UK, Canada, Japan among others.
Infosys provides business consulting, technology, engineering and outsourcing services to
clients.
Vision - "We will be a globally respected corporation."
Mission - "To achieve our objectives in an environment of fairness, honesty, and courtesy
towards our clients, employees, vendors and society at large."

Group 9 Page | 57

8.1.2 Eminent Persons
Chairman Emeritus Narayan N.R. Murthy
Chairman of the Board K.V. Kamath
Executive C0-Chairman S. Gopalakrishnan
Chief Executive Officer and Managing Director S.D. Shibulal

8.1.3 Financial Summary (FY12)
Total Income in crores Rs. 26532.00
Net Profit in crores Rs. 2265.00
Earnings per share Rs. 166.66
Total assests in crores Rs. 29757.00

Analysis of Infosys:
Year Current Ratio Cash Ratio
2007 3.75 2.7135
2008 3.38 2.303
2009 3.97 2.5039
2010 4.47 2.3694
2011 4.72 2.839
2012 4.68 2.9012
Table 8.1 Financial data of Infosys
The ideal current ratio is 2:1; Infosys is way beyond the ideal ratio this shows that the
company is in a good position to meet its liabilities.
Since current ratio is increasing we can say that company is having more assets to
repay its liabilities.
The company is generating more cash year by year which is a very good indication of
growth.
Group 9 Page | 58

8.1.4 Services Offered
Management Consulting Services
Business Application Services
Business IT Services Application Services, Infrastructure Management Services,
Independent Validation & Testing Services
Engineering Services
Business Process Outsourcing
Cloud
Mobility
Sustainability

8.1.5 Financial Journey
The paid in capital was 10,000, reportedly borrowed by Narayana Murthy from his wife. At
inception, the Founders put in the basic financial principles
Company will earn a profit from year one.
All projects will be delivered at a reasonable profit
The balance sheet will be liquid
Borrowings will be only for asset creation
Corporate resources will never be used for personal purposes
Dividends will be paid out of surpluses.

Initial journey was difficult as India was a closed economy. Revenues grew from 0.12 crore
in the first year to 8.66 crore in fiscal 1992, the year of economic reforms in India. The
Founders went for an IPO to create liquidity for themselves. Employees were given stock in
the company. By March 31, 1992 they owned 13.6% of the shares.
Infosys now has US$ 3.8 billion in cash and cash equivalents, listed on the NASDAQ and in
India with over 4,50,000 investors. The journey that started with Rs 10,000, has evolved into
a balance sheet of 26,000 crore with over 11,623 crore paid out as dividend.

Group 9 Page | 59

8.1.6 Infrastructure Development
Infosys offices are spread over 28 million sq. ft. of built-up space and 1,23,000 seats as of
March 31, 2011. It is currently building another 8.3 million sq. ft. with 40,000 seats. Soon
they are starting a US$ 150 million campus in Shanghai for 8,000 seats. They have invested
9,450 crore so far, with a commitment of another 2,500 crore to complete what they started.
As of fiscal 2011, it has a power demand of 81 MW, diesel generating capacity of 134
MW, 48,000 tons of comfort air conditioning, UPS capacity of 45 MW, fresh water storage
of 33 million liters, waste water treatment capacity of 16 million liters, diesel storage of 1,700
KL, a laundry capacity of 7.3 tonnes per day, 35 food courts capable of feeding 40,000
people in a single sitting, training facilities of 25,000 seats, 13,800 hostel rooms, over
2,25,000 trees and 2,085 acres of land across the globe.
It has a total network bandwidth of 6,700 Mbps connecting over 1,50,000 desktops,
37,500 laptops and 5,500 servers globally. It has created parking spaces for 9,500 cars and
15,300 two-wheelers in Indian campuses for the comfort of its employees. Another seven
multi-level parking lots are under construction for 13,800 cars and 15,500 two-wheelers to
cater to the ever-increasing employee strength. However, 70% of the employees still use
public transport to commute to work as a result of our sustained focus on encouraging mass
transport.

8.2 ANALYSIS OF WIPRO - Wipro Limited (formerly Western India
Products Limited) is an information technology (IT) consulting and outsourcing service
company located in Bangalore, Karnataka, India. As of 2012, the company had 140,000
employees in 54 countries. Wipro is the second largest IT services company in India.
Wipro Limited (formerly Western India Products Limited(Amalner)
The company was established in 1945 by Mohamed Hasham Premji as
Western India Products Limited
During the 1970s and 1980s, the company shifted its focus and began to look
into business opportunities in the IT and computing industry, which was at
nascent stages in India at that time.
Wipro marketed the first indigenous homemade PC from India in 1985
Group 9 Page | 60

It is an Indian global IT services and consulting company.
Its headquarter is in Bangalore, India
In 1966 Azim Premji, still the majority shareholder as the chairman of the
company at the age of 21 and with the passage of time transformed it into one
of the largest IT outsourcing services provider of the world.
They are employing about 150,000 people worldwide as of December 2012

8.2.1 Indian scenario of WIPRO

WIPRO has 853 active enterprise customers in India
They have 25 near share development centres
They have their presence in 35 countries.
The IT Services segment had 149,560 employees as of December 2012 worldwide
belonging to 56 nationalities.
5 year CAGR by 22% by revenue.
Wipro was ranked 37 in The Brand Trust Report among the most trusted brands in
India.

8.2.2 WIPRO Divisions
The group companies of Wipro Limited.
Wipro Consumer Care & Lighting (WCCLG):- It has a profitable presence in the
branded retail market of toilet soaps, hair care soaps, baby care products and lighting
products. WCCLG is also a leader in institutional lighting in specified segments like
software, pharma and retail.
Wipro Infrastructure Engineering:- It is generally known for manufactures precision-
engineered hydraulic cylinders and truck hydraulic solutions for the infrastructure and
related industries. It the second largest independent Hydraulic Cylinder manufacturer in
the world.
Group 9 Page | 61

8.2.3 INDIAN CLIENTS
Enterprise- Bharat petroleum, Ford, Reliance, OTIS
Finance- Citi Bank, HDFC Bank, Axis Bank
Telecom- Nortel Networks, Motorola, Bharti
IT & ITES- Texas instruments, Intel
Government- NIC, Dubai Internet city, GOI

8.2.4 Performance Analysis of Wipro
Performance of Wipro in the quarter third of 2011 in their different domains.

Revenue RS(in cr.) Change
IT 7607.6 11.4%
IT products 900 10%
Others 610.9 31.6%
Table 8.2 Performance of Wipro
The revenue for the IT services business in the quarter stood at Rs 7,608 crore, up 28% over
the previous year and 11.4% sequentially. Net profit (including products and consumer care)
was up 10.4% over the previous year and 12% sequentially.
Group 9 Page | 62

8.2.5 Future Outlook of Wipro
Wipro are also moving toward a broker model where they can be the central point of
contact for firms dealing with the complexity of multiple SaaS integrations.
Wipro expect Revenues from IT Services business to be in the range of $1,500
million to $1,530 million
The Global players like IBM and Accenture have size and a global presence on their
side, it was the Indians IT who seemed to be innovating in terms of creating tools and
prebuilt platforms in the cloud arena
Attrition rate to remain near 14% in coming years.

Group 9 Page | 63

8.3 ANALYSIS OF TCS - Tata Consultancy Services Limited (TCS) is an
Indian multinational information technology (IT) service, business solutions and outsourcing
services company headquartered in Mumbai, Maharashtra. TCS is a subsidiary of the Tata
Group.
Tata Consultancy Services Limited is a global IT services, business solutions and
outsourcing company headquartered in Mumbai, India and a subsidiary of theTata
Group conglomerate. It is the second-largest India-based provider of business process
outsourcing services. TCS has been ranked #20 in the list of top companies of India,
by Fortune India 500 magazine. It is the largest technology service company in India
by revenue and market capitalization.
TCS has 142 offices across over 47 countries and generates around 30 per cent of India's IT
exports. TCS had development centers and/or regional offices in the following Indian
cities: Ahmedabad, Baroda, Bangalore, Bhubaneswar, Chennai, Coimbatore, Goa, Gurgaon,
Guwahati, Kochi, Kolkata, Lucknow, Mumbai, Noida, Patna, Pune,Thiruvananthapuram, Jam
shedpur, Hyderabad.

8.3.1 Global units
Africa: South Africa, Morocco
Asia (outside India): Bahrain, Beijing, Hong Kong, Hangzhou, Shanghai, Indonesia,
Israel, Japan, Malaysia, Philippines, Saudi Arabia, Singapore, South Korea, Taiwan,
Thailand, UAE (Dubai).
Australia: Australia.
Europe: Belgium, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland,
Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
United Kingdom.
North America: Canada, Mexico, USA.
South America: Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Peru.

Group 9 Page | 64

8.3.2 The areas of business of TCS
IT services
IT infrastructure services
Enterprise solutions
Consulting
business process outsourcing
business intelligence
performance management
engineering and industrial services,
IT and business solutions for small and medium business enterprises.

8.3.3 LIST OF ACQUISITIONS

The table below gives some details of TCS' key acquisitions

Number
Acquisition
Date
Company Business Country Value
1 8 October 2008
Citi Global Services
Limited
Business Process
Outsourcing
India $505 mn
2
November,
2006
TKS-Teknosoft Banking Product Switzerland $80.4 mn
3
November,
2005
Comicrom Banking BPO Chile $23.7 mn
Group 9 Page | 65

Number
Acquisition
Date
Company Business Country Value
4 February, 2006 Tata Infotech IT Services India
5 October, 2005 FNS
Core Banking
Product
Australia $26 mn
6 October, 2005 Pearl Group Insurance
United
Kingdom
$94.7 mn
7 November 2006 TCS Management IT Services Australia $13.0 mn
8 May 2004 Phoenix Global Solutions BPO India $13 mn
9 May 2005
Swedish Indian IT
Resources AB (SITAR)
IT Services Sweden $4.8 mn
10 May 2004
Aviation Software
Sevelopment Consultancy
India (ASDC)
IT Services India
11 January 2004
Airline Financial Support
Services India (AFS)
BPO India $5.1 mn
12 October 2001 CMC Limited IT Services India
$33.89m
(51%)
Table 8.3 Acquisitions by TCS
Group 9 Page | 66

8.3.4 TCS BPO
TCS BPO is the second leading player in the outsourcing industry in India
behind Genpact according to Dataquest survey in August 2011. TCS's BPO arm had revenues
of $925 million in the year that ended in March, and 34,000 employeesOther than major
Indian cities, TCS BPO is also present in Tier-II locations like Pune. TCS is also expanding
its BPO centre in Kolkata, where it already employs 2,000 people. Tata Consultancy Services
has opened a business process outsourcing facility in the Philippines following the path of
India-based BPO companies which have operations in that country.

Year Current ratio Cash ratio
2007 2.5 .94
2008 2.4 .99
2009 2 1.11
2010 2.3 1.02
2011 2.7 1.67
2012 2.45 1.7
Table 8.4 Financial data of TCS
The ideal current ratio is 2:1; TCS is way beyond the ideal ratio this shows that the
company is in a good position to meet its liabilities.
Since current ratio is increasing we can say that company is having more assets to
repay its liabilities.
The company is generating more cash year by year which is a very good indication of
growth.

Group 9 Page | 67

8.3.5 Performance highlights FY12
1. Revenue:
INR Revenue of `148,687 Mn, growth of 12.1% QoQ and 37.7% YoY
USD Revenue of $2,728 Mn, growth of 3.0% QoQ and 13.1% YoY
Constant currency revenue growth of 4.0%, volume growth of 5.3% QoQ
2. Profit:
Operating Income at ` 40,897 Mn, Operating Margin of 27.5%
Net Income at ` 32,805 Mn, Net Margin of 22.1%
3. Demand:
29 new clients added during the quarter; Active clients: 1032
Continued upward movement across major revenue bands
4. People:
Gross addition of 13,831 associates, closing headcount: 243,545
Utilization at 81.3% (ex-trainees) and 72.3% (including trainees)
Employee retention continues to be best in industry; LTM Attrition (IT Services)
at 10.9%

Group 9 Page | 68

9. COMPARISION BETWEEN INDIAN IT AND GLOBAL IT
A result of growth of the IT Industry is the evolution of the multinationals and the Indian IT
companies. While the MNCs are becoming more localized in the Indian market, the Indian
companies are fast adopting a global outlook. Multinationals companies are the ones that are
headquartered somewhere else and have an operation in India. Some familiar names include
IBM, HP, Accenture, and Microsoft. On the other hand, some of the Indian companies
include TCS, Infosys, Wipro, Satyam and HCL. The Indian IT companies did small low-end
projects and some project work, done remotely. On the other hand, MNSs had pretty much a
monopoly on things like outsourcing, Intellectual Property in IT industry, consulting, etc.
They did a lot of big projects and had long-term relationships with clients. There was limited
price competition between them as each one had its own niche. So, for the big projects there
was hardly any competition for them and the margins were also high.
But now the Indian companies are increasingly enhancing their global presence, the global
MNCs are increasingly leveraging India in world sourcing. Looking at their size in terms of
number of people, Indian companies are ramping up very fast and growing. Even though
revenue wise they are much smaller when compared with the multinationals that is also
growing rapidly. In terms of profits: the profits for the top 5 Indian IT companies last year
grew at somewhere around 20-30%. Furthermore, the Indian companies are now listed on the
New York Stock Exchange and most of them are on Nasdaq. By having a listing there they
are not only getting visibility but also access to low cost capital, as the cost of capital in the
US is very low as compared to India. They are having phenomenal Price Earning (PE) ratios.
The top tier companies are commanding the kind of PE that Silicon Valley start ups
command. Even in terms of market capitalization, the top Indian companies compare very
favourably with anybody.
Some of the key strengths of the Indian companies i.e. the foreign MNCs is that these
companies can take a longer term perspective as they dont have as much stock market
pressure as the typical American companies. Furthermore, in the West, every successful
company piles up a lot of debt and that is how they are able to leverage and do acquisitions.
Indian companies are not doing as many acquisitions and as a by-product of that have very
strong financials. Another factor working in favour of the Indian companies is their
flexibility, as they are not wedded to an approach. They are also investing for the future-in
training and process maturity. By contrast, the multinationals have a short-term orientation,
Group 9 Page | 69

quarter-to-quarter focus, lack of much India experience, higher cost structure in India and
higher sales cost. However, the multinationals score over the Indian companies in terms of
their size, financial muscle, and visibility. Even their relationships are typically at the CEO
level, whereas the Indian companies relationships with customers are largely at the CIO or
lower level.
Indian companies started going global seriously in the 90s after Liberalization. The
momentum has increased enormously in the last decade. Today, Indian companies are all
over the world, some succeeding tremendously, and some faltering a great deal at the outset,
mainly because of a lack of cultural insights.
Without cultural knowledge many experienced initial losses: Without a proper understanding
of the country or their work culture, and without appropriately tuning in to the expectations of
the people outside India that they deal with, it has been challenging for some of these
companies, even the most reputable, to know and understand how to be successful in the new
culture. The initial ramp-up time, till the ventures were profitable, has taken much longer, and
several companies experienced unexpected financial disasters during these initial efforts,
unprepared for the cultures they needed to work in.
A large number of investments have been lost or the financial returns diminished or delayed,
because of Indian companies being unaware of how they might need to prepare their people
or not realizing the importance of investing in this critical step.
However, Indian CEOs and HR leaders, who have been culturally savvy, have realized that
the initial cultural and people preparation is critical to their business success. Without
adequate preparation, it is easy for misunderstanding to crop up, dissatisfaction to creep in
and attrition rates to go up, while projected profits diminish.
Managing across Cultures has been fortunate enough to be called in by some of the more
savvy companies to assist in this area. For example, we were called on to hold a Retreat for
the Board of Directors of the first Indian manufacturing company to set up operations in the
US. We also oriented their first CEO to enter and work in the US.
Managing across Cultures was also the company selected to develop the cultural and
communication orientation for Indians and local hires for the IT arm of the largest Indian
conglomerate, as they entered the US in a big way. This was developed and implemented
Group 9 Page | 70

very effectively after we did an in-depth analysis of the issues and behaviours that had
created hurdles in the business.
Managing Across Cultures was also called on, by the first Indian IT company to be
incorporated in the US, to develop and conduct the initial training for their IT groups coming
from India to the US.
Today, as Indian companies have been on a global acquisition spree, it is even more critical
that they orient their people, help raise their cultural awareness and their awareness of ways
of working of other cultures, so that they can avoid the losses that come with inefficient post-
merger cultural integration.
We have coached the leaders of many Indian companies who aspire to globalize their
culture, develop a global mind-set in their employees and help their employees to aim for
excellence as they work across cultures.

9.1 INDIAN IT COMPANIES ARE NOT GLOBAL PLAYERS
Although Indias IT and BPO industry in India has crossed the landmark $100 billion in
sales, it still has a long way to go before it becomes a truly global power house, says Bryan
Cruickshank, global head of IT advisory at consulting firm KPMG.
Indian IT companies are not truly global companies, Mr Cruickshank said in an interview.
Companies like TCS and Wipro have demonstrated that they have scale, he said. But they
havent demonstrated that they are global.
Theres no doubt about the industrys scale. The sector, which had revenues of $101 billion
in the current fiscal year, employs 2.8 million people, contributes 7.5% to Indias gross
domestic product and has up to 25% of the share of total exports. The sector does business in
70 countries and employs 40,000 non-Indians.
Som Mittal, president of industry group National Association of Software and Services
Companies, speaking to reporters earlier this week, said that the industry will get 80% of its
next $100 billion from new geographies and industries, including from the Indian market.
Group 9 Page | 71

Mr Cruickshank agrees that the industry has achieved a lot. But, he warns, customers see
them as providers of IT services and not someone they are necessarily turning to to
transform their business. They dont have a lot of innovation, dont see them as truly
transformational.
Companies continue to be attracted to India because here they can find employees at the
lowest cost, according to Nasscom. Costs continue to be 50-80% lower than locations from
where the business is sourced and 10-30% cheaper than other low-cost destinations.
Nasscoms Mr Mittal says that while the model of the sector has always been to do it
cheaper, faster, better, now companies are going beyond that to focus on the outcomes of
their clients.
But, these same factors that have given the sector its boost for the past several years and
helped it achieve its dominancewage arbitrage and English-language skillsare
diminishing as wages in India have been on the rise and the numbers of English-language
speaking countries where Indians can do business are limited.
So what do you have left to offer after that to dominate a global scenario? asks Mr
Cruickshank.
For a company in this sector to wear the global label, Mr Cruickshank says it needs to meet
certain criteria, including an ability to execute seamlessly across time zones and geographies
and a blend of strong global processes that can be tailored to local requirements. It should
also be able to understand and interpret local requirements using global themes.
Indian companies, he says, need to recognize the local and business environment and
embrace the peculiarities of the market place that they are in. Language, he says, is the easiest
step to deal with but companies need to do a lot more than that. This means they need to
embrace local laws and regulations, the political environment, culture, business practices.
Indian IT sector has a lot to be proud of, says Mr Cruickshank. But its about time to
move to the top of the next S curve. Im looking to see who will be the leaders in that.
Rajat Mathur, Wipro Ltd.s chief sales and operations officer for Asia Pacific and Japan, says
he doesnt disagree with Mr Cruickshank. We have to be a local company like a Philips is,
for instance, he said. I think of it as a company from Kolkata and not from the Netherlands.
Group 9 Page | 72

Thats the kind of thing that should happen but were still a young company so well get there
in time. We are embracing globalization.
Mr Mittal of Nasscom told India Real Time that the model of global delivery centres was
created by India and that the industry has evolved significantly. He said the top five largest
companies have 40,000 non-Indian employees, work in 60 countries and service in 35
languages.

Group 9 Page | 73

10. Future Outlook
Over the last 20 years, the IT-BPO industry which was first involved in limited sector with
fewer number of companies is now one of the largest contributors to the Indian economy in
terms of GDP and the services sector in particular. The industry has been on a continuous
growth path and the revenues have grown over to 15 times in ten years and that is from 1998
to 2009. The contribution of the industry can be viewed from its impact on the countrys
GDP and how it had helped in increasing this GDP, foreign exchange earnings, and
employment generation. This industry has also helped other sectors to grow by giving
employment to these sectors and by attracting investment as FDI.
Although there has been economic downturn the industry will have sustainable
growth.
In order to focus on benefit from cost savings from global sourcing in terms of
potential, operational efficiencies and quality it is expected that it will enhance global
sourcing.
India Inc would remain focused to achieve cost savings and greater productivity y
adopting various tactical policies and measures.
Services and software segments are expected to cross $ 1.2 trillion by 2013. This
amount is even more than the 5.2 per cent growth expected in the total IT spending.
The industry will continue to diversify itself in terms of geographies, verticals and
service lines. For example L&T decided to diversify its engineering conglomerate, to
form a holding company under which it will house its nine independent companies to
divide it into various verticals to maintain growth, profitability and shareholder value.
Small and medium scale business could come forth as IT is growing but in terms of
technology advances its adoption in India is at a slower pace. So this is a golden
opportunity for SMB
Domestic market are expected to be focussed more by service providers to lessen the
risk related to business and generate more opportunities for local market and help
them to prosper.
Indian vendors in the BPO sector would experience growth, owing to factors like
dependable service delivery, sustained acquisitions of Europe and North America-
Group 9 Page | 74

based shared service centres, as well as revenue growth from continental Europe by
way of partnerships.
The current scenario in the Indian IT industry has registered tremendous growth in recent
years and has created much optimism about the future of the Indian Information technology
industry. Analysts are expecting a huge potential of growth in the Information Technology
industry in India in near future.

10.1 Exports intensive growth :
The IT industry contributes for a major share in the exports from India. This is expected to
grow further in coming years. To fetch currency as dollars in terms of foreign investments IT
industry has played a substantial role. The IT industry has in India has played a significant
role in placing India on the international map. The Indian IT industry can be broadly divided
into two markets: domestic market and exports market. The exports market constitutes the
largest segment accounting for 75% of the total revenue generated by the Indian software
industry.
Generation of employment - IT industry greatest contribution is employment. For a
developing country like India, with a huge population, the high rate of employment in
the IT sector is a big advantage and helping in raising lifestyle of people. The IT
industry is expected to generate employment of 230,000 jobs by the end of 2012
which is again expected to increase significantly in coming years.

Software exports - Huge investments are expected in the software Industry in the
next few years as for example, a five year agreement between HCL Technologies and
News Corp for administering its information centres and IT services in the UK.
According to industry executives, the deal is estimated to be at about $200 $250
million.

Group 9 Page | 75

New Market entry for software exports from India have opened up in the Middle East, South
and Southeast Asia, Africa, and Eastern Europe. Indias image for IT outsourcing due to
skilled labour force has opened the gate for further opportunities. Developing countries as
U.S. are now using the Indian business models designed by Indian IT companies for growth
in IT sector.

Another important area of future growth for the IT industry of India is the domestic market.
While exports dominate the IT industry at present, there is huge scope of growth in the
domestic market which can be tapped in the future. The focus for the future is to ensure that
the benefits of the IT industry percolate to the grass root levels.

Group 9 Page | 76

11. CONCLUSION
As IT industry is fastest growing industry in India as it is expected to exhibit continuous
growth. Instead of recession, Industry has taken back the precision of tremendous growth. IT
contributes to Indias GDP to 8.1% and hence helps in increasing economic condition of
country. 90% of revenue of IT sector comes from export. This export has also increased due
to setup of SEZ that is special economic zone. SEZ includes liberalization of infrastructural
rules, relaxation, procedural government policies. There was liberalisation in terms of
monetary, trade, fiscal, taxation, tariff and rigid labour laws.
IT sectors has contributed to impact social life of people by raising their standards through
employment, hikes in salary and providing them on-site opportunities. Indian IT BPO
growing at 25% every year is responsible for fuelling growth of IT. Many MNCs as
Microsoft are providing outsourcing opportunities to India. IT has contributed to skill
improvement by providing people with technical and critical skills. It has contributed to setup
of integrated revenue ships in India such as ITPL Park in Bangalore and various other
business parks in metros and then by contributing as roads and international airports.
IT is showing a path to small and medium scale business, high inflow of FDI in IT sector is
expected to continue in coming years, which has boosted the entire economy in recent years.
New market entry for software exports have opened in Middle East, south and south-eastern
Asia, Eastern Europe. On other hand IT industry strongly contributes to itself it has played a
prominent role in driving growth of sectors as Real estate, Telecom, Retail.

Group 9 Page | 77

REFRENCES
Arora, A. And Sthreye, S. (2001), Analytical description of IT industry and the
Indian software service industry

Meehan m. J., spring (2006), Outsourcing information technology to India
explaining pattern of the foreign direct investment & contracting in the software
industry

Kumar v, (2005), About the completion in IT industry at India competition and
beyond

Bhatnagar s., (2008), Indias software industry

Market share- ET intelligence group the research arm of the economic times and part
of times group, http://www.etintelligence.com

Net profit capitaline, Indias cooperate database , http://www.capitaline.com.

Infosys, http://www.infosys.com.

Wipro, http://www.wipro.com.

TCS, http://www.tcs.com.

"Results for the Quater." TCS, 12 July 2012. Web.
Matt Bodimeade global IT market 13 Sep 2012 companiesandmarkets.com
USA Today Apples 1984 super bowl commercial still stands as watershed event 28
Jan 2004

Group 9 Page | 78

Spector G Apples Jobs starts new firm , targets education market 24 Sept 1985

Sydney morning herald Apple co-founder tells his side of the story September 28
2006

Greenpeace international which companies are phasing out of PVC and BFR
My solution info HP meets billion pound recycling goal 6 months early , sets target
for 2 billion pounds by 2010

Foxconn workers labour under guard after riot shuts plant Bloomberg 26 Sep 2012

Moore Malcolm mass suicide protest at Apple manufacturer Foxconn Factory 11
Jan 2012

DeWitt Larry early automation challenges for SSA April 2000

Indvik Lauren IBM takes on salesforce with $1.3 billion acquisition 27 Aug 2012

Revenues of top 50 IT companies taken from YCHARTS.COM

Arpan Kar Pricing of information technology 23 May 2011 businessfundas.com

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