Indian IT Industry

Global IT Industry Trends

Global Demand (IT Services) $416 (2004) $555(2009)
Outsourcing Services $148 (2004) $218 (2009)

Offshored Market $9.8 (2004) $19.8(2009)

Source: IDC Research All figures are in billion USD

IT Services pie expanding Offshoring of IT services expanding faster

Offshoring Trends..
% of Respondents* % of IT Services being offshored % of Respondents*

Today
73% 15% 12% 0% <5% 510% 1015% >15%

Tomorrow
2% 8% 20% 70%

Labor Arbitrage

Productivity Competitive
Edge

Primary drivers for Outsourcing are continuously getting re-defined

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Worldwide Offshore IT Services Export Share by Region 2004

Canada 2% China 3% Latin America 4% Philippines 5% MEA 2% Others 2%

CEE 7%

India 75%

Source: IDC, 2005

IT Services - Comparisons

Low

Medium

High

Source: Gartner Research

India Advantage continues

Distribution of IT Services imports and exports across Regions / Countries

(for the year 2004)

Importing countries/ regions United States Canada Western Europe CEE MEA Asia Pacific

Countries / Regions from which software is exported from (in USD million) Canada 135 0 62 0 11.2 0 India 5557 114 1487 35 73 133 Philippines 428 3.2 0 0 0 8.6 Latin America 375 0.9 0 0 0 0 china 270 2.3 14 0 0 39 MEA 150 2 0 8.3 0 8.6 CEE 466 12.2 183 0 0 0 Others 128 0.4 18 38.9 13.2 24.8 Total 7509 135 1764 83 97.5 214

Total Source: IDC, 2005

208.2

7399

439.8

375.9

325.3

168.9

661.2

223.3

9802.5

Current Indian IT Landscape

Category 2002-2003 2003-2004 2004-2005E

IT Services & Products

-Exports -Domestic ITES-BPO -Exports

9.9
7.1 2.8 2.7 2.5

12.8
9.2 3.6 3.9 3.6

16.5
12.2 4.3 5.7 5.1

-Domestic
Total Software and Services -Exports -Domestic Hardware -Exports -Domestic Total IT industry (Software+ITES+hardware)

0.2
12.6 9.6 3 3.6 0.3 3.3 16.1

0.3
16.7 12.8 3.9 4.8 0.5 4.3 21.5

0.6
22.2 17.3 4.9 6 0.7 5.3 28.2 7

Source: NASSCOM All figures are in billion USD

Distribution of IT Revenues across various Service lines

Service Line USD Billion Project oriented services IT consulting System Integration Custom Application Development and maintenance Network consulting and integration IT outsourcing IS outsourcing Application outsourcing Network Infrastructure Management Support and Training IT training and Education Hardware Support and Installation Packaged Software support and Installation Total Source: Nasscom, IDC 0.02 0.35 5.54 FY'03 3.23 0.08 0.1 3.02 0.03 1.94 0.01 1.85 0.08 0.37 India FY'04 3.85 0.12 0.14 3.54 0.05 2.45 0.02 2.16 0.27 0.61 0.02 0.04 0.55 6.91 100.00% 57.10% 24.80% Growth 19.20% 50.00% 40.00% 17.20% 66.70% 26.60% 100.00% 16.80% 260.00% 64.90% CY2002 124.4 20.8 64.5 18.8 20.3 116.8 67.4 14.6 34.9 108.9 18.8 45.1 44.9 350.1 Worldwide CY2003 130.4 21.5 66.8 20 22.1 133.5 76.2 17.8 39.4 118.2 19.5 48.6 50.1 382.1 Growth 4.80% 3.10% 3.60% 6.50% 9.00% 14.30% 13.20% 22.20% 13.10% 8.60% 3.60% 7.60% 11.60% 9.10%

Indian IT story
Tata Consultancy Services Ltd in 1968 under the visionary leadership of Mr. F. C. Kohli
Many years ago there was an industrial revolution. We missed it due to reasons over which we had no control. Today, there is a new revolution a revolution in Information Technology which requires the capability to think clearly. This we have in abundance. We have an opportunity to participate in this revolution on an equal footing; We have the opportunity to be leaders.

Indian IT story
TCS agreed to export software in lieu of import of hardware or computers. TCS with a reference from Burroughs did a large software project for Detroit Police Department in 1974 TCS moved from low value development services to Migrating systems in 1979
Key clients include IBM and American Express

Exit of IBM in 1978 due to Foreign Exchange Regulation Act (FERA) IT departments of big firms and startups
Birla, DCM to fulfill export obligations for import of computers Infosys and Patni MNC like Texas Instruments, HP, Digital started getting established after 1980

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Indian IT story Export led growth

Growth of IT industry (1994-2004) (in USD Million)

Year

Export Revenues

Export Growth (%)

Domestic Revenues

Domestic Growth (%)

N.A.* 40.00 36.73 71.94 19.79 11.37 31.68 11.90 22.25 21.84 11

1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04

480 734 1085 1750 2650 4000 6300 7647 9545 12800

53.15 52.63 47.82 61.29 51.42 50.94 57.50 21.38 24.82 33.33

350 490 670 1152 1380 1537 2024 2265 2769 3374

Indian IT story - Offshoring

Late 1980s aggressively move offshore TCS first development center in Chennai
100 90 80 70
% of Revenues

90

Onsite Offshore

60 50 40

61

62 58.2 57.4 56.1 50.7 45.2 38.6 33.9 34.7 43 38 57

30 20 10 5 0 1990-91

29.5

1994-95

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04E

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Indian IT story Process capability

Distribution of Quality Certifications SEI Quality Assessment No. of Companies as on 31 Dec. 2001 1 36 19 9 1 1 1 4 4 N.A. N.A N.A No. of Companies as on 31 Dec. 2002 2 48 23 22 1 5 1 5 3 N.A. N.A N.A No. of Companies as on 31 Dec. 2003 5 67 22 19 1 4 1 6 2 178 13 6 SEI CMMI SEI CMM Level 5 SEI CMM Level 4 SEI CMM Level 3 SEI CMM Level 2 PCMM Level 5 PCMM Level 4 PCMM Level 3 PCMM Level 2 ISO 9001 ISO 9002 ISO 9000

Major deals with ABN AMRO and Pearl Global Development Centers

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Factors governing IT growth

Skilled Manpower
250,000 engineering graduates and diploma holders enter the workforce annually 14000 colleges and 272 Universities producing about 2.5 million graduates every year Establishment of IIITs and introducing courses in computer science / Information Technology in Engineering Colleges.
Distribution of IT and ITES professionals Segment Software - exports sector Software- domestic sector Software- inhouse captive ITES-BPO Total 1999-00 110000 17000 115000 42000 284000 2000-01 162000 20000 178114 70000 430114 2001-02 170000 22000 224250 106000 522250 2002-03 205000 25000 260000 180000 670000 2003-04 270000 28000 290000 253500 841500 2004-05E 345000 30000 322000 348000 1045000

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Factors governing IT growth

Establishment of STPI
Around 40 STPIs across the country

Investment in Telecommunication Infrastructure

Liberalization of Telecom by allowing FDI in the sector Allowed ISP and Internet Telephony

Stable Economic and Political Environment Stable Financial System

Improvements in banking infrastructure electronic banking Most of the operations are now electronic with respect to banking, stock exchanges, etc

Government invested in various kinds of infrastructure relating to transportation, power and real estate

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Factors governing IT growth

Information Technology Act in 2000
Acceptance of Digital signatures and electronic records

Tax holidays to software firms Apex body NASSCOM

Quality Certifications Issues relating to piracy, Intellectual property Security certifications Lobbying with government

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Road Ahead
Domain capabilities
New verticals like Healthcare, Hospitality, Logistics, Retail, etc

Service capabilities
Faster provisioning of services Access to broader array of services including consulting, IS outsourcing, system integration, etc

Geographic expansion/reach
For markets and delivery

Investments in new technologies

RFID, VOIP, etc. Open Source

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Core Elements of our Strategy

Full Services IT Player Continue to strengthen Domain Competency Extend geographic presence Delivery & Customer Reach Selectively Pursue Partnerships & Inorganic Growth Invest in R&D and develop unparalleled execution capability Invest in people and develop high-performing teams

We Build Today for YOUR Tomorrow

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Thank You