Abhijeet's presentation on IT and ITeS indsstry
- 1. NOVEMBER IT & ITeS 2011 For updated information, please visit www.ibef.org 1
- 2. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 2
- 3. NOVEMBER IT & ITeS 2011 Advantage India 2020F Growing demand Global footprint Market size: • Strong growth in export demand • Indian IT firms have delivery centres across the world USD225 from new verticals billion • Growing economy to propel rise in • Industry well diversified across local demand verticals like BFSI, telecom, retail Advantage India Competitive position Policy support • India has 60-70 per cent cost saving • Tax holidays extended to IT sector over source countries • SEZ scheme since 2005 to benefit IT • Already the leading destination for companies with single window IT&ITeS, India’s market share is still approval mechanism, tax benefits etc. rising 2011 • Huge talent pool Market size: USD76 billion Source: Nasscom, Aranca Research Note: SEZ stands for Special Economic Zone BFSI stands for Banking, Financial Services and Insurance For updated information, please visit www.ibef.org ADVANTAGE INDIA 3
- 4. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 4
- 5. NOVEMBER IT & ITeS 2011 Evolution of the Indian IT sector 2005 onwards 2000-2005 • Indian firms become Multi National Companies with • Number of Indian firms delivery centres 1995-2000 grow in size and start across the globe offering complex • Indian firms make services like product global acquisitions • IT industry starts to management, go-to • IT sector employs over mature market strategies etc. 2 million people Pre - 1995 directly and over 8 • Increased investment • Western firms set up in R&D and number of captives in million indirectly infrastructure begins India • India increasingly • By early 90s, US seen as a product based companies development begin to outsource destination work due to low cost and skilled talent pool of India For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 5
- 6. NOVEMBER IT & ITeS 2011 Segments of the Indian IT sector • Market Size: USD46.0 billion during FY11 • Over 73 per cent of the revenue comes from the export IT services market • BFSI has been the major sector in this segment • Market size: USD17.3 billion during FY11 Business process • US accounts for over 60 per cent of the export market outsourcing (BPO) • Around 81 per cent of the revenue comes from the export market IT&ITeS sector • Market size: USD12.9 billion during FY11 Engineering design and product • Over 70 per cent of the revenue in the segment comes development from exports • Market size USD11.8 billion during FY11 • Over 80 per cent revenue comes from domestic market Hardware • Domestic market is seeing good growth as penetration of personal computers is rising in India Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 6
- 7. NOVEMBER IT & ITeS 2011 Indian IT market size growing; TCS the market leader … (1/2) → Indian technology and BPO sector is estimated to have Market size of IT industry in India (USD billion) generated USD88.1 billion in revenue during FY1 at a 1 year-on-year growth rate of 20.1 per cent → As a proportion of India’s GDP, the contribution of IT sector has risen from 1.2 per cent in FY98 to 6.4 per 59.0 cent in FY11 47.5 50.1 40.9 31.7 Note: The revenue figures of Cognizant are for the year ending 2010 22.0 23.0 29.1 16.2 21.9 FY07 FY08 FY09 FY10 FY11E Domestic Export Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 7
- 8. NOVEMBER IT & ITeS 2011 Indian IT market size growing; TCS the market leader … (2/2) → TCS is the market leader commanding over 8.5 per Market share of major IT players based on revenues (2010) cent of the total Indian IT & ITeS revenue Company name Market share → Top firm firms share around 35 per cent of total industry revenue showing that the market is fairly competitive TCS 8.5% Wipro 7.9% Infosys 6.9% Cognizant 5.2% HCL Tech 4% Tech Mahindra 1.2% Mahindra Satyam 1.2% Source: Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 8
- 9. NOVEMBER IT & ITeS 2011 IT and BPO account for 80 per cent of India’s IT&ITeS exports Sector-wise export revenues (USD billion) CAGR: 16.4 % 11.4 → Total exports from the IT sector stands at USD59 billion 10.4 during FY1 the industry has seen strong growth at a 1; 10 14.1 8.8 CAGR of 16.4 per cent during FY07-1 despite weak 1 7.1 11.7 12.4 9.9 global economic growth scenario 7.6 27.3 33.5 22.2 25.8 17.1 → IT services’ exports has been the major contributor to the exports market of India with exports of over 57 per FY07 FY08 FY09 FY10 FY11 cent of the total IT exports during FY11 IT services BPO Engg. services and hardware → BPO commands an export share of around 24 per cent Source: Nasscom, Aranca Research Note: CAGR stands for Compounded Annual Growth Rate Sector-wise breakup of export revenues FY11 19.3% IT Services BPO 56.8% 23.9% Engg. Services and Hardware Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 9
- 10. NOVEMBER IT & ITeS 2011 BFSI the major vertical in the IT-BPO segment Export revenues breakup across verticals (USD billion) Other 0.9 1.4 MPE 1.0 0.9 Cost and utilities 1.5 1.5 → BFSI is the major vertical of business for the IT-BPO T&T 1.5 1.5 segment with export revenue of USD20.1 billion during Healthcare 2.1 1.0 FY10 commanding a share of over 40 per cent of the Retail 4.7 total IT-BPO exports from India during FY10 Manufacturing 4.2 7.9 7.5 Telecom 10.0 9.3 → Over 85 per cent of the total Indian IT-BPO exports is BFSI 20.1 18.8 across four sectors viz. BFSI, telecom, manufacturing and retail. The hitherto smaller sectors are expected to FY10E FY09 grow going forward Source: Nasscom, Aranca Research Market share in terms of export revenue (FY10E) T&T: Travel and Tourism, MPE: Media, Publishing and Entertainment Note: The figures mentioned are for IT and BPO only and do not include 3.0% 2.0% 1.8% engineering services and hardware exports 3.0% BFSI Telecom 4.2% Manufacturing 9.5% Retail 40.4% Healthcare T&T 15.9% Cost and utilities MPE 20.1% Other Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 10
- 11. NOVEMBER IT & ITeS 2011 With over 60 per cent share, US is the major importer of IT services Geographical segmentation of export revenue (USD billion) 28.3 30.1 → US has traditionally been the biggest importer of Indian IT exports and during FY10 over 60 per cent of Indian IT-BPO exports worth USD30.1 billion were 8.7 8.9 absorbed by the US 5.9 6 3.3 3.6 0.9 1.1 → Non US-UK countries only share 21.5 per cent of the total Indian IT-BPO exports USA UK Continental APAC RoW Europe → Demand from emerging countries is expected to show FY09 FY10E strong growth going forward Source: Nasscom, Aranca Research Note: The figures mentioned are for IT and BPO only and do not Geographical segmentation of export revenue (FY10) include Engg. Services and hardware exports RoW is Rest of the 2.2% World, APAC is Asia Pacific USA 7.2% UK 12.1% Continental Europe 17.9% 60.6% APAC RoW Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 11
- 12. NOVEMBER IT & ITeS 2011 IT-BPO sector dominated by large players Number of % of total export % of total Category Work focus players revenue employees • Fully integrated players offering full range of Large sized 7 43-45% ~30% services • Large scale operations and infrastructure • Mid tier Indian and MNC firms offering services in Mid sized 75-80 35-37% ~30-35% multiple verticals • Dedicated captive centres • Players offering niche IT-BPO services Emerging 300-350 9-12% ~15-20% • Dedicated captives offering niche services • Small players focussing on specific niches in either Small >3500 10-12% ~15-17% services or verticals • Includes Indian providers and small niche captives Source: Nasscom, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 12
- 13. NOVEMBER IT & ITeS 2011 Notable trends in the Indian IT&ITeS sector • India has been rated as the most attractive location for global sourcing Global sourcing hub • India offers low cost, vast skilled talent pool, good quality of infrastructure etc as adjudged in the rankings by AT Kearney • India is the most preferred location for engineering offshoring according to a Engineering offshoring customer poll conducted by Booz and Co • Companies are now offshoring complete product responsibility • The number of global delivery centres of Indian IT firms has crossed 250 centres Global delivery in over 60 countries as of 2009 model • As of 2009, over 150 centres have been set up by various Indian IT firms in North America • Increased focus on R&D by Indian IT firms has resulted in rising number of patents filed by Indian IT firms Patent filing • The share of IT firms in total patents filed in India went up from 4 per cent in FY05 to 13 per cent in FY08 For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 13
- 14. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 14
- 15. NOVEMBER IT & ITeS 2011 IT sector to be driven by strong demand and Indian expertise • 3.7 million addition to talent pool every year • Strong mix of young and experienced professionals Talent Pool • Global IT offshore spending expected to grow at CAGR of 6.2 • Computer penetration expected to per cent during FY08-13 increase • Global BPO spending expected to • Government expected to become a Global grow at a CAGR of 9.1 per cent demand Domestic major contributor to domestic during FY08-13 growth demand by 2013-14 Growth drivers • Robust IT infrastructure across various • Tax holidays for STPI and SEZs Indian cities such as Bengaluru • Procedural ease and single window Policy Infrastructure • Delivery centres spread across various support clearance for setting up facilities countries Source: STPI stands for Software Technology Park of India SEZ stands for Special Economic Zone For updated information, please visit www.ibef.org GROWTH DRIVERS 15
- 16. NOVEMBER IT & ITeS 2011 Strong domestic and global demand expected … (1/2) → Increasing affluence of domestic consumers, Domestic revenue from IT and BPO (USD billion) globalisation of key segments expected to enhance the domestic spend on IT services 50 → Number of sectors in India are expected to outsource higher percentage of their non core work giving boost to IT-BPO sector 23 → Domestic market is expected to cross USD50 billion by 2020 15.7 FY11 FY14F FY20F Source : Nasscom, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 16
- 17. NOVEMBER IT & ITeS 2011 Strong domestic and global demand expected … (2/2) → Indian IT-BPO exports are expected to reach USD175 Export market revenue of IT and BPO (USD billion) billion by 2020 175 → Over 80 per cent growth is expected from the non- traditional sectors such as public sector, media and utilities 88 → Strong demand is expected from emerging countries which currently account for only 20 per cent of global IT spending 47.6 FY11 FY14F FY20F Source : Nasscom, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 17
- 18. NOVEMBER IT & ITeS 2011 Indian talent pool ready to take IT sector to the next level … (1/2) → Availability of skilled talent has been a major reason Graduates addition per year in India (‘000) behind India’s emergence as global outsourcing hub → India added over 3.7 million graduates during 2010 → Growing talent pool of India has the ability to drive 3,114 the R&D and innovation business in the IT-BPO space 2,940 2,714 454 514 571 2008 2009 2010 Technical graduates Non-technical graduates Source : Nasscom, Aranca Research Note: Graduates includes both graduates and post graduates For updated information, please visit www.ibef.org GROWTH DRIVERS 18
- 19. NOVEMBER IT & ITeS 2011 Indian talent pool ready to take IT sector to the next level … (2/2) → About 2 per cent of the industry revenue is spent on Training expenditure by Indian IT-BPO sector training employees in the IT-BPO sector Salaries for inhouse training → 40 per cent of the total spend on training is spent on staff training new employees 11% External training (new 24% recruits) → A number of firms have forged alliances with leading External training (existing education institutions to train their employees 19% employees) 6% Recruitment cost 13% Employee welfare 27% Other costs Source : Nasscom, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 19
- 20. NOVEMBER IT & ITeS 2011 SEZs to drive Indian IT sector; Tier II cities emerge as new centres … (1/2) → During FY10, 94 per cent of total IT exports was Characteristics of STPI and SEZ in India accounted for by STPI units Characteristics of STPI and SEZ in India → IT-SEZs have been initiated with a view to creating zones that lead to infrastructural development, Parameters STPI SEZ exports and employment Term 10 years 15 years • 100 per cent tax • 100 per cent tax holiday on export holiday on profits exports for first Fiscal benefits • Exemption from five years excise duties and • Exemption from customs excise duties and customs • No location • Restricted to constraints prescribed zones Location and size • 23 per cent STPI with a minimum restrictions units in tier II and area of 25 acres III cities Source : Nasscom, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 20
- 21. NOVEMBER IT & ITeS 2011 SEZs to drive Indian IT sector; Tier II cities emerge as new centres … (2/2) Growth of IT industry in Jaipur Trends in tier II and II cities 64 • 43 new tier II/III cities are emerging as IT delivery location 57 • This could reduce pressure on leading locations 42 • The cost in newer cities is expected to be lower by up to 28 per cent than the leading cities • Over 50 cities already have basic infrastructure and human resource to support the global sourcing and business services industry • Some cities are expected to emerge as regional hubs FY07 FY08 FY09 supporting domestic companies IT Exports in USD millions from Jaipur • Jaipur is emerging as an IT city with exports of over USD64 million in FY09 as shown below Source : Nasscom, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 21
- 22. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 22
- 23. NOVEMBER IT & ITeS 2011 Newer geographies and verticals provide huge opportunities • BRIC nations, continental Europe and Japan have IT spending of over USD183 billion but contribute only 12 per cent of India’s IT revenues • Adoption of technology and outsourcing is New geographies expected to make Asia the second largest IT market New customer New verticals segments • Public sector, healthcare, media and utilities have IT spend of over USD587 billion but constitute only 20 per cent of India’s IT revenues • A number of sectors are expected to depend on • SMBs have IT spend of over USD185 billion but technology and service providers to reduce the contribute only 15 per cent of India’s IT revenues cost to serve • Emergence of new service offerings and business models will aid in tapping this market profitably and efficiently Source: All the figures are taken from International Data Corporation(IDC)and Nasscom and are FY10 estimates Notes: SMB- Small and Medium Businesses For updated information, please visit www.ibef.org OPPORTUNITIES 23
- 24. NOVEMBER IT & ITeS 2011 Spending on offshoring set to rise; India at an advantage → Growth in offshoring is expected to outclass the growth in overall IT spend across the various verticals → Offshoring as a per cent of total spend is also expected to rise across the various verticals → India has the opportunity to tap the growing offshoring market with its cost advantage, expertise and huge talent pool Source: Nasscom, Aranca Research 39.0% 32.1% 22.8% 22.2% 11.9% 14.2% 16.6% 15.0% 12.2% 7.7% 7.4% 6.1% 7.1% 7.1% 2.9% 3.4% 3.8% 2.0% 3.6% 1.3% Application management Customer application IS outsourcing System integration BPO development Growth in worldwide spend (CAGR 2008-2013E) Growth in offshoring (CAGR 2008-2013E) Offshoring as a % of total spend, 2008 Offshoring as a % of total spend, 2013E For updated information, please visit www.ibef.org OPPORTUNITIES 24
- 25. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 25
- 26. NOVEMBER IT & ITeS 2011 Infosys: The emergence of an Indian MNC … (1/2) Milestones Segment wise revenue breakup (FY11) • 1983: Infosys is founded by six engineers in Pune with an initial capital of USD250 • 1993: Goes public 17.5% Financial services • 1999: Touches revenue of USD100 million; Listed on 35.9% Manufacturing NASDAQ Telecom 14.2% • 2006: Infosys celebrates 25 years; Revenues cross USD2 Retail billion; Employees grow to 50,000+ Others 12.9% • 2008: Infosys crosses revenue of USD4 billion; Net profit 19.6% cross USD1 billion • 2009: Infosys selected member of the global Dow; Source: Infosys website and Annual report Employee strength crosses 1,00,000 For updated information, please visit www.ibef.org SUCCESS STORIES: INFOSYS 26
- 27. NOVEMBER IT & ITeS 2011 Infosys: The emergence of an Indian MNC … (2/2) Revenue (USD billion) Operating profit (USD billion) 5.29 1.75 1.44 1.53 4.40 4.22 3.26 1.03 2.74 0.88 FY07 FY08 FY09 FY10 FY11 FY07 FY08 FY09 FY10 FY11 For updated information, please visit www.ibef.org SUCCESS STORIES: INFOSYS 27
- 28. NOVEMBER IT & ITeS 2011 Contents Advantage India Market overview and trends Growth drivers Opportunities Success story: Infosys Useful information For updated information, please visit www.ibef.org 28
- 29. NOVEMBER IT & ITeS 2011 Industry Associations National Association of Software and Services Companies (NASSCOM) Address: International Youth Centre Teen Murti Marg, Chanakyapuri, New Delhi – 1 021 10 Phone: 91 1 2301 0199 1 Fax: 91 1 2301 5452 1 E-mail: [email protected] For updated information, please visit www.ibef.org USEFUL INFORMATION 29
- 30. NOVEMBER IT & ITeS 2011 Glossary → BFSI: Banking, Financial Services and Insurance → BPO: Business Process Outsourcing → FDI: Foreign Direct Investment → GOI: Government of India → INR: Indian Rupee → IT&ITeS: Information Technology-Information Technology Enabled Services → SEZ: Special Economic Zone → T&T: Travel and Transport → USD: US Dollar → Conversion rate used: USD1= INR48 → Wherever applicable, numbers have been rounded off to the nearest whole number For updated information, please visit www.ibef.org USEFUL INFORMATION 30
- 31. NOVEMBER IT & ITeS 2011 Disclaimer India Brand Equity Foundation (IBEF) engaged Aranca to presentation to ensure that the information is accurate to prepare this presentation and the same has been the best of Aranca and IBEF’s knowledge and belief, the prepared by Aranca in consultation with IBEF. content is not to be construed in any manner whatsoever as a substitute for professional advice. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. Aranca and IBEF neither recommend nor endorse any The same may not be reproduced, wholly or in part in specific products or services that may have been any material form (including photocopying or storing it in mentioned in this presentation and nor do they assume any medium by electronic means and whether or not any liability or responsibility for the outcome of decisions transiently or incidentally to some other use of this taken as a result of any reliance placed on this presentation), modified or in any manner communicated presentation. to any third party except with the written approval of IBEF. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or This presentation is for information purposes only. While omission on the part of the user due to any reliance due care has been taken during the compilation of this placed or guidance taken from any portion of this presentation. For updated information, please visit www.ibef.org DISCLAIMER 31