Unlimited Opportunitiesof your Making

SOM MITTAL

FORMER PRESIDENT & CHAIRMAN, NASSCOM

OCTOBER 2014

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What we will discuss today

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• Where are we today, what does the present hold for us

• What are the disruptions that are happening

• What opportunities are these disruptions creating

• How do we make most of these

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India – the country

CHAOS

7th largest country

780 dialects spoken, 86 scripts used

2nd largest population

>50% below 25 years >65% below 35 years

2nd largest pool of scientists and engineers

Internet users 2nd largest 215+ million

Teledensity 75+% 920+ million subscribers

Source: IAMAI, New reports

Mix of contemporary and traditional

1994 45%

2012 22%

Poverty rate

815 million voters

Largest democracy

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Indian market presents a huge global opportunity

Source: IBEF, McKinsey

Healthcare spending to be USD 160 billion by 2017

Consumer market to be over USD1.5 trillion by 2025

Growing rural market –potential to add USD 1.8 trillion to economy

Attractive FDI destination

Infrastructure investment – USD 1 trillion over next 5 years

25% of world’s skilled workforce by 2025

Growing middle-class – ~600 million by 2025

Broadband growth – expected to have 1.38% multiplier effect on GDP

Retail industry – expected to be USD 750-850 billion by 2015

A fast growing e-commerce industry – USD 100 billion by 2015

World's second-fastest growing auto market

Banking sector to become fifth largest in the world by 2020

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Technology can also play a key role in India’s transformation

GROWTH

500 million skills needed over the next decade

400 million people need stable electricity

INCLUSIVENESS

650 million people need proper nourishment

120 million rural households need bank accounts

GOVERNANCE

#134 out of 189 countries on ease of doing business

#94 out of 176 countries on corruption perception index

Technology can help in bringing about a positive change in the lives of millions

KEY FOCUS AREAS FOR NEW GOVT

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IT-BPM industry: Highest impact sector

8.1%Relative industry share in national GDP

38% Largest share in total services exports

45% Offsets nearly half of India’s oil import bill

Highest attractor of PE/VC investments

3.1 mn

Largest private sector employer

Largest private sector women employer

Promoting balanced regional growth

Spearheading the Indian MNC story>60

Total cross border M&As;

28% share in total

$2.4 bnTotal investment;

IT-BPM share:47%

99 Operational

IT SEZs;44% in Tier II/III

>1 mn

60-70%

Highest net value add sector

Source: NASSCOMSom Mittal

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Services industry providing value addition across five distinct levels

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India leadership drivers

Cost Competitive

Scalability, Security

Strong Ecosystem

Human Capital

Customer First

3Xcheaper than US

~75 countries

~600 ODCs

43Tier II/III cities

>5 million graduates

>3 million workforce

100% coverage of outsourcing

engagements

• Optimum cost• Operational flexibilities, efficiencies

• Global delivery network• Best-in-class governance frameworks

• Competitive infrastructure• Emerging potential locations

• Largest employable pool• Diverse background

• Customer centric business outcomes• End-to-end services • Niche, domain capabilities

Maturity USD 118 billion industry

• Scale: 16,000 firms• Depth of services: across IT-BPM• Vertical-wide presence

BENEFITS IMPACT ON CUSTOMERS

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Source: NASSCOMSom Mittal

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Diverse industry structure: Future growth driven by innovation

Emerging players~1,000-1,200

Small sized~15,000 players

Mid-sized120-150 players

Large11 players

% contribution to total IT-

BPM revenues

>40 per cent

~35-40 per cent

~9-10 per cent

~9-10 per cent

• 99% (~16,000) companies contribute less than 20% of revenues

• Future growth driven by innovation, IP & valuations rather than revenues

• Need support, markets, incentives and simple regulation

• Can contribute 50% of growth by 2020

• 1% (~150) companies contribute 80% of industry revenues

• This segment needs facilitatory environment, policy predictability & stability, ease of doing business;

Incentivize expansion to Tier 2/3 towns & integrate with new cities program

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India will continue to play a dominant role in the KPO market

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Key trends in KPO services

• Expansion in breadth and depth of services

• Services are likely to be offered in near-shores along with language capabilities

• Emerging verticals and non-traditional markets will be the growth engine

Scope of services

• Many knowledge services deal with regulatory standards across nations

• Data compliance with respect to regulatory standards (especially those defined by the United States, Canada and the European Union) will be required

Awareness of regulations

• Domain expertise in sales and marketing team to sell appropriate services to client

• Collaboration with client will be required to access business related data for performing value-added analysis on it

Investment in sales and marketing

capabilities

Exports KPO - Split by verticals (2020E)

100% = $11.3bn1

• China for key phases of clinical trial process

• Philippines for number of key areas, including healthcare outsourcing

• Sri Lanka for specific service lines such as equity and credit research

Emerging geographies

32%

14%

13%

9%

6%

5%

2%

20% Hi-tech/ Telecom

BFSI

Healthcare

T&T

Retail

Manufacturing

Construction & Util-ities

Others

Source: NASSCOM

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Four major trends are driving investment in ER&D

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Increasing use of electronics

Fuel efficiency/ Alternate Fuels

Electronics / Communication technologies increasing across verticals (e.g., Automotive, Construction, Energy)

Enables real time monitoring, greater operational efficiencies and higher comfort

Higher fuel efficiency and sustainability becoming a priority

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Products for local markets

Required customized products for the emerging markets Leverage local talent (India and China) to develop products for the

emerging markets

Convergence of Technologies

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Devices and products with multiple functionalities (e.g., Consumer Electronics, Mobile handsets, Medical Devices)

Source: NASSCOM

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India also emerging as hub for products and innovation

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Tectonic Technology Shifts Underway

• Software / Hardware / Services silos merge into “Solutions”

• Majority of new software delivered "as a service”

• Hardware of all kinds embed software intelligence

• India is uniquely positioned to deliver innovative combinations of

world class product, services and hardware

India's Young will Invent the Future

• Innovation landscape worldwide is more youthful, agile, capital

efficient and multi-disciplinary than ever before

Goal: Transform India into an “Innovation Nation”!

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Govt Support Increasing for Startups plus the Digital India initiative

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• Rs 10,000 crore debt and equity fund

• Widespread incubator and accelerator network

• Simplified laws for setting up and closure

• Focus on rural entrepreneurship

Impact 2020 50,000 tech start-ups can add 2% to India’s GDP and 3 million jobs

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Vision of Digital IndiaAnnounced by Modi Govt

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Centered on 3 Key Areas

1. Digital Infrastructure as a Utility to Every Citizen

2. Governance & Services on Demand

3. Digital Empowerment of Citizens

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Nine Pillars of Digital India

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1. Broadband Highways

2. Universal Access to Phones

3. Public Internet Access Programme

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Composition of Monitoring Committee on Digital India

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Special Invitees

• Principal Secretary to PM

• Cabinet Secretary

• Secretaries of Expenditure, Planning, DoT and Posts

• Secretary, DeitY – Convener

Prime Minister – Chairman

Finance Minister

Minister of Health

Minister of HRD

Minister of Rural Development

Minister of Communications & IT

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What Is Driving the Opportunity

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New disruptive technology evolving fast

Most of these are consumer oriented

Consumer and people behaviors are getting impacted

This is creating completely new green field opportunities

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What do these things have in common?

Technology is constantly shaping our lives...

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Revenge of the Nerds..CHANGING established behaviors!Printed Maps Sleep HealthCentersGPS Based TomTom & GarminGoogle Navigation App

Overnight stay to diagnose sleep ailments Launched in 1997, revenue of $10mn in 2004 & $30mn in 2010 Abruptly shut down in 2012

Book Stores Music Industry

East is east, west is west! Dominant role of film music & recording companies Limited power to artists

Napster’s growth and industry response 1992 Global adoption

on MP3 std Arrival of Napster –

15 users in 1999, 32mn in 2000, 80 mn in 2001

Apple iTunes Retailing of digital

music – Legal alternative to p2p sharing

Artists can produce their own music

Revenue in 2012 – $4bn

Wearable devices for pathological usage

Wearable Devices

Bezos waited for exponential imprv in storage, battery life & display tech(E Ink)

2011 – eBook sale exceeded that of printed books

Winning combination of Mobile & Payment tech to disrupt FS supply chain?

Amazon Kindle

What next?

Innovators aren’t targeting your business. You’re just collateral damage.

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Increasingly rapid adoption of innovative technologies

Big Bang market adoption with disruptionsIt is no longer a 'bell curve' but a 'shark fin'...

Time to reach 1bn users has been halving with each new technology! Telephone – 110 yrs TV – 50 yrs Mobile – 20 yrs Internet – 15 yrs Smartphones – 8 yrs Messaging apps – 2 yrs

Next 1bn in less than 5 years?

Increased rate of adoption due to multiple factorsResulting in shorter product lives

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Mobile Virtual N/w Operator, UK Telefonica

Virtual shopping in subways-Korea

US health insurer

New platforms make interactions social

New platforms make interactions social

• Social forums - customers are rewarded for answering other customer queries

• P2P lending, free SIM and other offers

Big Data and Analytics break entry barriers

Big Data and Analytics break entry barriers

• Better health care at lower costs using interactive devices

• Monitor members, through remote detection/ advisory

Physical footprint much less relevant today

Physical footprint much less relevant today

• Add to cart by scanning code with smart-phone

• Home delivery after work

Clinical visits reduced by 50%

130% increase in online sales

90 secs avg waiting time for complaints

Disruptions are triggering a PARADIGM SHIFT

Disrupts physical retail! Disrupts medical consulting & pathology labs!

Disrupts Call Centres & BPO!

Intelligent personalized public transport (Finland)Intelligent personalized

public transport (Finland)

• Personalised public transport - Travel almost door to door using shared transport

• Tailored trips without transfers & parking concerns

Kutsu plus offering new kind of bus service

Disrupts public transportation, private car ownership?

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Disrupts energy, home automation?

Google driverless carsGoogle driverless cars

• Self-driven car will reduce automobile accidents, nullifying speeding, drunk/ distracted driving - 6.5 bn hours of on-road driving time to be available

• Use as automatic taxis, cars for disabled

...some could impact MULTIPLE INDUSTRIES

Escorts Group – Tractor Health Monitoring

Escorts Group – Tractor Health Monitoring Internet of thingsInternet of things

• N/w of low-cost sensors, wireless NFC devices

• Smart devices connect to mobile wallet & auto debit

• Big data gets bigger with interacting machines

Disrupts service centres?

• Early warning messages

Disrupts automotive industry?

New platforms make interactions social

New platforms make interactions social

• 3-D printing consumers could save 50-60% in costs per printed product

• Rapid prototyping, rapid manufacturing, mass customization, bioprinting

Disrupts manufacturing!

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E-Comm and Retail players are the true poster children of Big Data …

“Customers who bought this item also bought…”

“You need baby products now”

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… with applications going beyond business, to creative arts and public health

"We own the Netflix customer experience from the moment they sign up, for the whole time they are with us, across TV, phone and laptop," - Todd Yellin, VP of product innovation.

"We climb under the hood and get all greasy with algorithms, numbers and vast amounts of data. Getting to know a user, millions of them, and what they play. If they play one title, what did they play after, before, what did they abandon after five minutes?"

Google flu tracker USA CDC flu report

“We know what you like to see”

“We can predict flu trends better and quicker than CDC”

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Will require a lot of out of the box thinking

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Social Media

Analytics

Mobility

Cloud platform

Domain skills

Skill-set

Solutions/Recommendations

India level - Hackathon / Codefest

Collaboration with industry external

partners

Collaboration with Universities

Leadership trainingProblem Solving

How to inculcate a problem solving mindset in students school level onwards?

How to partner with academic institutions?

In a country of a billion plus people, how to encourage free flowing ideation?

How to create next generation leaders from current Indian talent?

How to fuel disruptive innovation in India?

Source: NASSCOM

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Ecosystem is vibrant than ever!

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India has produced 3500+ tech startups…

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Photo by kevin dooley - Creative Commons Attribution License https://www.flickr.com/photos/12836528@N00 Created with Haiku Deck

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Have we missed the opportunity in UP?

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If we act now we can still make it happen

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• We have to re-energize our colleges; improve the output; MOOCs; new ideas

• Get entrepreneurship kicked in; set up incubators ; invite industry; create mentors; increase visibility

• Focus on local solutions; tie up with Digital India vision

• Do not start with trying to convince Government; they will follow

• If need Govt., support be very specific; find a champion

• Encourage participation in forums outside; expand network

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In Summary: Fortunate to be at this time

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• World is changing fast; globalization has made world almost a border less market

• Technology has evolved and is now consumerised

• New ideas and innovation are threatening old models and business as usual

• India itself offers large opportunities to solve its problems

• Government will itself be a key customer and driver

• The eco system is encouraging entrepreneurship. Young people have more career options

The future is of our own making - Will you be the next Disrupter?