IT AND ITES

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IT AND ITESIT AND ITES


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History Current Scenario

AgendaAgenda


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IT and ITES industry has its roots in the mid-seventies

The market size was small with

export = $24 million in 1984

Liberalisation of the sector in 1990

IT revolution had its spin-offs on other sectors

Source: The Indian Renaissance

HistoryHistory


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IT BoomThe Y2K Scare Dot-com boom

Success of the Indian expatriates

HistoryHistory


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IT IndustryIT Industry

.


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BPO accounts for little less than half of the

exports Emergence of domestic BPO is the key highlight for FY 2009 recording a growth of above 40 per cent in INR

terms. The growth is led by the BFSI, Telecom and Airline industries and a greater vendor focus withspecific service offering

Revenue generated from BPO is $73.1 billion

in 2008-2009

BPOBPO

Source : Nasscom


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Current ScenarioCurrent Scenario


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Contributes to 57% of the total software and services

exports

Domestic IT services spends grew at over 43 % in FY2009

IT ServicesIT Services

Source : Nasscom


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68 companies, 37 are private limitedcompanies

Export driven industry

Share in GDP increased from 1.2% in 1998 to6% in 2010

Share in global market increased from 3% in 2000-2001 to 6% in 2008-2009

Exports crossing $40.8 billion



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Out of the total revenue 61% is from the USbased clients and 78.8% from overallexports

Volume growth addition of 2.2% due to thestrengthening of the USD versus GBP, Euro

Seven Indian cities account for 95 per centof export revenues, focus on developing 43new locations to emerge as IT-BPO hubs


Source : Nasscom


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As we can see that the largest source of income for the industry is the Bankingand financial services sector which was severely affected during recession

Source: Department of Information Technology


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Employment growth at CAGR of 26%

Direct employment reached 2.2 million with1.7 million in exports segment



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Cost leadership has been the competitive edgeof the Indian software sector

Innovation

Breadth of service offering and innovation

Specialised manpower

A young demographic profile and over 3.5million graduates and postgraduates that areadded annually to the talent base

StrengthsStrengths


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Foreign Exchange Rate

Erosion of advantage of Labor Arbitrage

Incompetent infrastructure

Low focus on Research and Development

WeaknessWeakness


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Moving up value chain

Emerging technologies

Cloud Computing

Internet based computing

Customers rent third-party providers

services

OpportunitiesOpportunities


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Moving Up Value ChainMoving Up Value Chain


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Rising Employee Costs

Foreign countries entering India

Other low cost countries developing skills

Deal sizes are getting smaller

ThreatsThreats


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55% market share of the global off-shore market

35% market share of the global ITES/BPO market

28% of IT and BPO talent among 28 low-cost countries

Regulatory environment

Knowledge of English

Time zone attractiveness

USA remains the dominant market, higher growth inEuropean/Asian market

Global ViewGlobal View


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Top-tier IT exporters are likely to continue theirgrowth momentum despite weak Europeaneconomies

Latest visa restrictions imposed by the UK and asharp depreciation in the pound and the euroagainst the dollar are less likely to have anymajor impact on the performance

The announcement of a major cut in the ITbudget by petroleum giant BP may have amarginal impact


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Effect of RecessionEffect of Recession

Steep Dip inprofits due toglobalslowdown

Recoveryintheeconomy


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Offers services, turnkey projects andproducts for the domestic and exportmarket

Second largest IT Company in India Market capitalization of 160,026.58 cr

Revenue for the year 2009-10 was Rs.

22742 cr compared to the previous yearsRs. 21693 cr an increase of 4.83%

InfosysInfosys

Source : Infosys web site


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Offers application developmnent, testing,enterprise solutions, business & ITconsultancy

Largest IT Company in India

Market Capitalisation

Revenue for the year 2009-10 was Rs.7000.64 cr

Tata Consultancy ServicesTata Consultancy Services

Source : TCS web site


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Offers ADM, enterprise solutions, embeddedtechnology, product engineering andservices

4th largest company in the sector

Profit 542.73 cr

Patni ComputersPatni Computers

Source : Patni websit e


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End of STP tax deduction benefits

US President Barack Obama Declares a Bill on TaxIncrease on Outsourcing

High attrition rate

SEZ

The dollar fluctuations

Factors affecting ITFactors affecting ITIndustryIndustry


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End of the STP tax deduction benefits10 years complete tax exemption on export

profits.

The finance act 2008 and 2009 extended the

tax holiday by 2 yearsBenefits on indirect tax Central excise dutyCustoms duty

Central sales tax

Tax holiday will be available only until thefiscal year 2011



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Solutions for STP issue Shifting to SEZSEZ enjoy the tax waiver benefits for 15 years as

against only 10 years for STP

Further tax waiver for VATLST

Increasing sops to STPsNasscom has requested the government to

extend the sops for STPs



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US government has proposed to tax expenditureby US companies on availing services fromoutside the country from 2011

Benefits enjoyed due to outsourcing A service whose expenditure in US would cost

70-80$ can be outsourced and done in 10-15$

Also there was no tax on outsourcing money

Reason for the Bill

To generate employment in US



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Affects of the Bill On IndiaIndia will loose a big share of outsourcing in com.

Many people will become job less

Worst effect that even recession had On USCompany costs will increase the services will

become costlier

Some companies will stop production or some

services



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High attrition rate At least 60,000 of the 171,000 workforce

change jobs every year

About 80% of them look for better leaders

Attrition rates US 42%

Australia 29%

Europe 24%

India 18% Global Average 24%



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Use IT services to enable programs Provide Databases

Help maintain spreadsheets etc.

Enable managers to View CSR information

Improve decision making

Corporate SocialCorporate SocialResponsibiltiyResponsibiltiy


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Activities such as teaching rural women andtheir children computers, tree plantationdrives, trusts etc.

Examples:-o Infosys Foundation

o Wipro cares

o Accenture development partnerships

o

Tech Mahindra FoundationoTCS

Corporate SocialCorporate SocialResponsibiltiyResponsibiltiy


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Services offered Business Process Outsourcing(BPO) Knowledge Process Outsourcing(KPO) Legal Process Outsourcing(LPO) Generation of Tier 1 and Tier 2 cities Innovation Infrasttucture

Future OutlookFuture Outlook


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BPO generated $ 14.8 billion revenues which is 20

% of the total of revenue of Indian IT Industry BPO Industry in India expected to grow at 20%

Expected to reach $ 181 billion worldwide by 2012

CAGR of 12 %

BPOBPO

Source: nasscom.com


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Greater skill, knowledge, education andexpertise to handle the process isrequired

KPO encompasses R&D, productdevelopment and legal e-discovery etc.

GenPact, Evalueserve, Ugam Solutions arethe top three companies in KPO

KPOKPO

IT & ITES


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IT industry needs the following infrastructureTelecom Power Roads and Transportation IT Parks

IT InfrastructureIT Infrastructure


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IT Industry has brought about a plethora ofprocess, price, management and innovation

ICICI Bank has changed the financial servicesindustry with Internet banking and electronic

payment systems

Mindtree Consulting- for KnowledgeManagement ecosystem a holistic taking intoview the entire lifecycle view of knowledge

including knowledge creation and innovation,collaboration and knowledge sharing, andreuse.

InnovationInnovation


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Union Budget 2010 failed meet expectations ofIT sector of India

FM failed to meet the extension of STPI(Software technology Park of India) in IT sector

Tax Rebate has not been mentioned in thebudget declaration and is expected to end onMarch 2011, the BPO are estimated to incurlosses in future years.

Allocation of Rs 1900 crore for UID (UniqueIdentity) project

Union budget 2010 for ITUnion budget 2010 for IT


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Cognizant registered a net profit of 22% inQ1 to $172.2 million and its revenueincreased by $145 million

BSE IT index rose higher by 178 points to

settle at 5,640.99 ; the best gainer in the13 sectoral indices.TCS jumped 4.54%to touch a year-high of Rs

871.

Wipro climbed 3.96% Infosys Technologies zoomed 2.99%whileHCL Technologies advanced 2.94%

Latest news and currentLatest news and currenthappeningshappenings


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Infosys to hire 36,000 employees in FY2010-11

TCS allotted the contract for providing totalsolution for the online voting during the

October 2010 municipal polls in Gujarat Wipro to develop crime and criminal

tracking network system (CCTNS) forHome Ministry

Latest news and currentLatest news and currenthappeningshappenings


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