Indian IT Overview
Introduction
In an increasingly globalised world, significant complexity and uncertainty is getting attached to the unprecedented economic crisis. The Indian economy has also been impacted by the recessionary trends, with a slowdown in GDP growth to seven percent.
The focus and exponential growth in the domestic market has partially offset this fall and insulated the country, resulting in net overall momentum. The IT-BPO industry in India has today become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a “young and resilient” India. During the year, the sector maintained its double digit growth rate and was a net hirer.
This growth has been fueled by increasing diversification in the geographic base and industry verticals, and adaptation in the service offerings portfolio.
While the effects of the economic crisis are expected to linger in the near term future, the Indian IT-BPO industry has displayed resilience and tenacity in countering the unpredictable conditions and reiterating the viability of India’s fundamental value proposition.
Consequently, India has retained its leadership position in the global sourcing market. The Indian IT-BPO industry is estimated to achieve revenues of USD 71.7 billion in FY2009, with the IT software and services industry accounting for USD 60 billion of revenues.
During this period, direct employment is expected to reach nearly 2.23 million, an addition of 226,000 employees, while indirect job creation is estimated to touch 8 million. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 5.8 per cent in FY2009. Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, employing over 1.76 million employees.
While the current mood is that of “cautious optimism,” the industry is expected to witness sustainable growth over a two-year horizon, going past its USD 60 billion export target in FY2011. While the industry has significant headroom for growth, competition is increasing, with a number of countries creating enabling business environments aimed at replicating India’s success in the IT-BPO industry.
Hence, concentrated efforts are required by all stakeholders to address the current challenges, to ensure that India realizes its potential, and maintains its leadership position.
EVOLUTION OF IT
• 1968: The Tata industrial conglomerate forms software services unit Tata Consultancy Services.
• Mid-1970s: IBM exits India. Import duties of 150 percent or more mean that VCRs cost $3,000 and TVs cost $6,000. Wipro starts to create India's first homegrown PC.
• 1994: Telecom liberalized.
• 1995: TCS determines that its Case Pac tool developed for IBM can be used to scan software for Y2K problems. An industry is born.
• 1999: Y2K contracts pile into India.
• 2002: Indian companies expand hiring. Massive layoffs in US
• 2003: Led by service conglomerates such as Wipro and Infosys, India becomes a primary destination for offshore outsourcing as foreign companies seek to lower cost
Govt. of India & IT Sector – Policies & Privileges
• IT PRIMARY FACTORS
• Cost
• Labor cost
• Infrastructure costs
• Exchange rates
• Labor competitiveness
• Size
• Level of education
• Compatibility
• OTHER FACTORS
• Business and political risks
• Geographical location
• Regulatory considerations
• MAJOR PLAYERS
TOP COMPANIES
India's Top Software companies
1 TCS
2 Infosys
3 Satyam
4 Wipro
5 IBM
India's Top BPO firms
1 Genpact
2 WNS
3 Wipro BPO
4 HCL BPO Services
5 ICICI One Source
6 IBM Daksh
7 Progeon
8 Aegis BPO Services
9 EXL Service Holdings
10 24/7 Customer
CONTRIBUTION TO GDP
• IT-ITES sector's contribution to the country's GDP has increased more than four times to 5.2 per cent in 2006-07 as compared to 1.2 per cent in FY'98,
•
POLICIES
Setting up IT software and services operations in India are governed by certain rules and regulations. A brief list of guidelines for individuals/ companies interested in setting up such operations is given below:
As an Indian Company
A foreign company can commence operations in India through incorporation of a company under the provisions of Co Act. Foreign equity in such Indian companies can be up to 100 percent depending upon the business plan of the foreign investor, prevailing foreign investment policies of the Government and receipt of requisite approvals. An Indian citizen can set up IT software and services operations in India in the following manner:
as an Individual/ Proprietor; or
as a Partnership Firm/ Trust; or
as a Company registered under the Companies Act, 1956 ("Co Act"). No prior permission of Government of India is required to set up IT/ software units in India.
Setting up of operations in India by Overseas Company/ Non-Resident
A foreign company or a non-resident planning to set up business operations in India can do so in the following manner:
As a foreign company through a Liaison Office/ Representative Office, Project Office or a Branch Office; or
As an Indian company through a Joint Venture or a Wholly Owned Subsidiary.
A foreign company is one that has been incorporated outside India and conducts business in India. These companies are required to comply with the provisions of Co Act.
Joint Venture with an Indian Partner
Foreign companies can set up their operations in India by forming strategic alliances with Indian partners. Foreign investments are approved through two routes as under: Automatic Route: Approvals for foreign equity up to 26 percent, 50 percent, 51 percent, 74 percent and 100 percent are given on an automatic basis subject to fulfillment of prescribed parameters in certain industries as specified by the Government.
RBI accords automatic approval to all such cases.
Government Approval: Approval in all other cases where the proposed foreign equity exceeds 26 percent, 50 percent, 51 percent or 74 percent in the specified industries or if the industry is not in the specified list, it requires prior specific approval from Foreign Investment Promotion Board ("FIPB").
PRIVILEGES
To encourage units in this sector, Government of India has announced many schemes:
Export Promotion Capital Goods ("EPCG") Scheme:
This scheme allows import of capital goods at a concessional customs duty rate of 5 percent, where the importer as a condition is required to achieve a specified export obligation. The export obligation and the period within which the same is required to be achieved vary based on the nature of the unit and value of imported capital goods.
Special Economic Zones ("SEZs"):
SEZs are designated areas dedicated towards growth of exports, having full flexibility of operations that are permitted to import duty free capital goods and raw material. The movement of goods to and fro between ports and SEZ are unrestricted.
The units in SEZ have to export the entire production subject to permitted sales in the DTA.
Currently, the operational SEZs in India which include the Santacruz Electronic Export Promotion Zone, Kandla Export Promotion Zone, Vizag Export Promotion Zone and Cochin Export Promotion Zones which have been converted to SEZs. Fiscal incentives available to SEZ units have been discussed ahead in detail.
The SEZ policy is welcome, very welcome. They need islands of non-interference. The devil is in the details as usual. The centre has formally approved 212 SEZ units with an in principle approval to 152 more. I don’t buy the usual rhetoric that poor farmers will be affected and the like. First of all, large landowners are not necessarily poor. Every day, dozens of large landowners are turning into instant millionaires by turning in their lands to real estate / IT giants.
The government must assure prevailing rates to them and/or issue bonds tied to the future development of the area. It must also take into account small and marginal landowners interests and device a new scheme for them which tie them monetarily into future development in that area. The issue must stop there. The SEZs provide a 15 year tax holiday to the IT companies after 2009. The details are 100% exempti0n for the first 5, 50% for the next 5, and variable for another 5 based on reinvestment in SEZs.
100 Percent Export Oriented Unit ("EOU"):
In terms of the benefits available, the EOU scheme, on a general basis, is similar to SEZ scheme. But in this scheme, there is no need to be physically located in the designated area (as in the case of SEZs). This scheme offers zero import duty on import of all capital goods, special 10 years income tax rebate (however, such rebate will not be available for Assessment Year 2010-2011 and onwards).
The incentives provided to EOUs are generally similar to those provided to SEZ units, except the exemption from central sales tax on purchases.
Software Technology Park ("STP"):
This is a special scheme under the Ministry of Information Technology, similar to EOU scheme, which is specific for the software industry. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Manipur, Mohali and Thiruvanathapuram.
This scheme offers zero import duty on import of all capital goods, special 10 years income tax rebate (however, such rebate will not beer are 11 available for Assessment Year 2010-2011 and onwards), availability of infrastructure facilities like high-speed data communication links, etc. The incentives provided to EOUs are generally similar to those provided to SEZ units, except the exemption from central sales tax on purchases.
MARKET STRUCTURE
GLOBAL & INDIAN SCENARIO
Global Sourcing Trends
The fundamental contribution of information technology is the expansion of knowledge, which is necessarily accompanied by a reduction in uncertainty. This becomes relevant for market structure in several ways.
IDC estimates that in 2008, the worldwide IT market growth will be lower at about 5.5-6.0 per cent, mainly due to the economic slowdown in the US and elsewhere.
IT-BPO services grew at an above-sector-average rate of nearly 8 per cent and remained the largest category, accounting for an increasing share of the worldwide technology sector revenue aggregate.
Outsourcing continued to be the primary growth driver, sustained by gradual shifts in regional spending patterns – with increasing traction in Europe and Asia Pacific offsetting a marginal decline in share of the Americas. IT spending in the BRIC countries - Brazil, Russia, India, and China – is expected to grow by 16 per cent in 2008, reaching USD 115 billion. Other emerging economies (based on 10%+ growth rates and the greatest net-new IT spending potential in the next four years) include Mexico, Poland and Turkey, followed by Vietnam, Thailand, Saudi Arabia, Argentina, Colombia, and United Arab Emirates.
Green IT is expected to be an important highlight during 2008. According to the Green IT Survey conducted by IDC, over 50 per cent consider suppliers’ greenness when buying IT, almost 80 per cent think the importance of greenness as an IT buying consideration is growing, and over one-third have policies that favor green vendors. 2008 will see the introduction of green products (energy-efficient, space-efficient, materials efficient, regulatory-compliant) that will create meaningful differentiation and move market share.
STPI
(Software Technology Park India) is a scheme that dates back to the early years of the IT industry. It allowed for a 10-year exemption from Corporate Income Tax (upto 90% of turnover), Sales Tax, Customs Duty, Excise duty. Back in the day, the infant IT companies could not deal with the astronomical cost of telecommunications, archaic customs duty rules, and a high rate of taxation. So the initial 10-year tax holiday helped an infant industry attain critical mass.
Even though companies like Infosys are 20 years old, they are still able to avail of the 10-year tax holiday by setting up new units with fresh 10-year extensions. For companies outside the STPI, the corporate income tax rate alone is 36-37% (Corporate Income Tax = 35%, Surcharge = 2.5%, Education Tax = 2%). Sales tax exemption is 10-12% for states and 3-4% for Union Territories (UT). This is why you don’t find all IT companies in UTs. The contribution of the STPI tax holiday to the overall success of the IT story cannot be underestimated. It is rated it as one of the best initiatives undertaken by the Indian government. The party it set to end in 2009. If all IT companies come out of the scheme – the Indian government will realize between $3-5 billion dollars (15-25000 cr) in direct taxes alone (this figure is based on projected size of the IT industry at a 36% tax rate on a $50bn size).
The Global IT spending is expected to decline steeply below the expected levels of $869 billion by 2010.
IT industry provides direct employment to more than 20 lakh people; indirect employment number goes far beyond..!!
IT industry contributes to around 5.2% to Indian USD 1 trillion GDP.
SOUCRES OF REVENUE
IT industry is largely dependent on Banking and financial industry. With the decline in these sectors, the revenue from these is expected to decline, hurting the bottom line of IT majors. This calls for exploring new verticals.
Revenue By Geography
The Americas and Europe continue to be the key markets for the Indian IT-ITeS sector.
Budget 2009 & its Impact on the IT industry
The Union budget presented gives a long term direction to inclusive growth, Infrastructure development, Education and employment generation of 12 Million jobs a year.
In terms of the Impact on the IT industry, steps like the scrapping of the FBT, extension of the 10A benefits till 2011, increase in the MAT credit period to 10 years and increased allocation to education are welcome steps.
On the personal taxation, while the increases in tax limits are nominal, the Removal of surcharge on income tax will benefit number of employees in our industry. The Industry also welcomes the planned outlay of Rs. 2100 crores to create ‘Educational infrastructure’ including setting up IIT’s and interest waivers for educating students. These reforms will clearly bring in a manifold resource increase for employability in the technical stream.
PEST ANALYSIS
Political:
Political stability: Indian political structure is considered Stable enough expect the fact that there is a fear of hung Parliament (no clear majority). - Positive
U.S. government has declared that U.S companies that Political outsource IT work to other locations other than U.S. will not get tax benefit. - Negative
Government owned companies and PSUs have decided t o Give more IT projects to Indian IT companies. - Positive
Terrorist attack or war. – Negative
Economical:
• Global IT spending (demand). (Other Factors
Business and political risks
Geographical location
Regulatory considerations(–ve)
Domestic IT Spending (Demand): Domestic Market grow by 20% & reach approx USD 20 billion in 2008-09 Nasscom (+VE).
Currency Fluctuation (-ve)
Real Estate Prices: Decline in real estate prices has resulted reducing the rental expenditure (+ve).
Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate (+ve).
• Economic attractiveness: Due to cost advantage and other factors (+ve Other Factors
Business and political risks
Geographical location(Regulatory considerations)
Social
Language Spoken: English is widely spoken language in India. English medium is the most accepted medium of education.(+ve)
Education: Large number of technical institutes and universities over the countries provide IT education. (+ve)
Working age population. (+ve)
Technological:
Telephony (+ve)
India has the world lowest call rates
Expected to have total subscribers base of about 500 million by 2010.
India has the second largest telephone network after china.
Enterprise telephone services, 3G, Wi-max, VPN, poised to grow.
Internet Backbone: Due to IT revolution in 90’s india is well connected with undersea optical cables. (+ve) New IT Technologies: Technologies like SOA, web 2.0, High definition content, grid computing, and innovation in low cost technologies is presenting new challenges & opportunities for Indian IT industry.(+ve)
STP Of IT Industry
Segmentation
Market segmentation is a process that segments a market into smaller sub-markets, called segments. Segments are to be homogeneous or have similar attributes. Purchasing patterns and trends can appear prominently in certain segments. Good market segmentation is to create segments where prominent patterns can emerge. Market segmentation may be used to analyze the followings;
Market responsiveness analysis: This is very useful in direct marketing since market responsiveness of product offerings can be readily available.
Market Trend Analysis: Analyzing segment-by-segment changes of sales revenues can reveal market trends. Trending information is vital in preparing for ever-changing markets. Segmentation offers deals with a specific function within the enterprise such as data processing, accounting, human resources, plant maintenance, engineering design, manufacturing, inventory control, etc. This is the most likely domain for a product or service, but you must recognize that the other domains may also get involved if the purchase of the product or service becomes a high profile decision. This purchase decision will be made by the prospect's functional management.
Targeting
The dynamics of IT industry is changing and IT firms are now preparing themselves to meet new challenges. Traditionally, Indian IT firms have been deriving sales from the Americas and Europe but going forward, the CAGRs of these regions will be low where as the Asian market is expected to grow at a very fast pace and approach the market size of the European markets by 2011. The emerging Latin American and Middle-East/African markets, though smaller in size, are also expected to have a higher CAGR. The growth in the Asia-Pacific Region is expected to be higher mainly on account of growth in spends in China and India.
8P’s of IT Industry
1.Product:
The product aspects of marketing deal with the specifications of the services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
2. People:
For service marketers, the core of the service element is the interaction between those providing services and the customer, which is known as service encounter. To achieve customer satisfaction appropriate processes are designed to ensure that the service encounter meets customer expectations. To deliver the satisfactory services, the employees of a company have to play an important role. Employees must possess personal qualities, ability to understand and satisfy customer needs, flexibility, skills and knowledge. Friendly and warm employees increase customer loyalty.
3. Place:
In service place refers to location and use of distribution channels. It is referring to the channel by which a service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.
4. Process
In Service Industry Process refers to how a service is provided and delivered to the customer. IT relies on processes to consistently deliver high quality solutions while executing a growing number of engagements from multiple locations. Values, vision and policies form the first level of our three-tiered process
architecture. They are implemented through process execution at the next level. These processes are defined with clear ownership using the ETVX (Entry, Task, Verification, and Exit) paradigm and clearly defined roles and responsibilities.
5. Physical Evidence
The environment in which the service is delivered and where the firm and the customers interact; and any tangible commodities that facilitate performance or communicate the service. Physical evidence enhances customer’s perception of quality. The general elements of physical evidence include (Organization Physical Facility):
Exterior facilities
Exterior design
Signage
Parking
Landscape
Surrounding environment
Interior Facilities
Interior design
Equipment
Layout
OTHER TANGIBLES
Business cards
Stationery
Billing statements
Reports
Employee dress/uniform
Brochures
6. Productivity
Productivity refers to the success or failure of any business, so the quality of the product should be very good for his companies have different quality standards which are certified by the quality department and are approved all over the world. If one does not have approved quality standards then he develops its own to meet the quality that are demanded by the customers
7. Price
Software pricing strategy is price planning for a software firm takes into view factors such as overall marketing objectives, consumer demand, product attributes, competitors' pricing, and market and economic trends. When a firm launches a product, the pricing decision is one of the most critical decisions. Software pricing has been concentrated the internal business objectives of vendors such as costs, specified margins, and the competition. On the marketing point of view, the goal of pricing strategy is to set a price that is the pecuniary equivalent of the value perceived by the customer in the product in order to meet the profit and achieve investment goals.
8. Promotion
Over here, services and project consulting is through contract or agreement between the parties and promotions are carried out only for the particular client selected as upgrading and extended service for a particular period, etc. This includes advertising, sales promotion, publicity, and personal selling. Branding refers to the various methods of promoting the product, brand, or company. Brief About Top IT Companies
Wipro Technologies
Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of our clients. Wipro has 55+ ‘Centers of Excellence’ that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. “Innovation is Wipro - Wipro is Innovation” is our statement of purpose. The challenge this pursuit presents to us every day is – how does one make Innovation “Purposeful”, “ingrained” and “Deliberate” in our organization. We recognize and nurture “innovative solutions” as part of our Wipro values. We prioritize focus and resources guided by this value. The Wipro way of Innovation is really about this deliberate sustained innovation. Our purpose of Innovation is to create higher value for our customers.
This continuous thought led us to foresee the benefit of partnering with technology companies to bring value to our customers. Combining these relationships with our strong R&D talent led to the idea of “Lab on Hire” and subsequently to offshore development centers which made offshore outsourcing truly mainstream. Pushing this idea a little further helped us conceptualize the remote infrastructure service model, branded as global command center or GCC to manage the customer’s IT infrastructure. Today, we serve our customers with a wide spectrum of services fuelled by the power of innovation. Products define the identity of technology companies, and the current business environment is looking to adopt innovative ways to turn ideas into real products - quickly. In addition, the complexities in technology and the advancement in chip technology have created increasing dis-aggregation in the industry. Wipro is the largest independent provider of R&D services in the world. Using “Extended Engineering” model for leveraging R&D investment and accessing new knowledge and experience across the globe, people and technical infrastructure, Wipro enables firms to introduce new products rapidly.
Wipro’s complete range of IT Services addresses the needs of both technology and business requirements to help organizations leverage leading-edge technologies for business improvement. Wipro takes charge of the IT needs of the entire enterprise. The gamut of services extends from Enterprise Application Services (CRM, ERP, e-Procurement and SCM), to e-Business solutions. Wipro’s enterprise solutions have served and continue to serve clients from a range of industries including Energy and Utilities, Finance, Telecom, and Media and Entertainment.
Budget 2009 & its Impact on the IT industry
The Union budget presented gives a long term direction to inclusive growth, Infrastructure development, Education and employment generation of 12 Million jobs a year.
In terms of the Impact on the IT industry, steps like the scrapping of the FBT,extension of the 10A benefits till 2011, increase in the MAT credit period to 10 years and increased allocation to education are welcome steps. However, steps like the increase in MAT from 10 to 15% are going to have an adverse impact on the Industry in the short run and this is something we could have avoided.
On the personal taxation, while the increases in tax limits are nominal, the removal of surcharge on income tax will benefit number of employees in our industry.
The Industry also welcomes the planned outlay of Rs. 2100 crores to create ‘Educational infrastructure’ including setting up IIT’s and interest waivers for educating students. These reforms will clearly bring in a manifold resource increase for employability in the technical stream
Tech Mahindra & Mahindra Satyam
Tech Mahindra is a global systems integrator and business transformation consulting firm focused on the communications industry. With the convergence of media and telecom, the changing landscape of the telecom industry is becoming extremely competitive. As companies rapidly strive to gain a competitive advantage, Tech Mahindra helps companies innovate and transform by leveraging its unique insights, differentiated services and flexible partnering models. This has helped our customers reduce operating costs and generate new revenue streams. Recognizing that margins from connectivity are rapidly falling and that future growth in revenues and margins will only come from new applications, content and services, operators today are busy addressing business opportunities revolving around Commerce, Content, Convergence and Customer Experience to gain a sustainable Competitive Advantage. For over two decades, Tech Mahindra has been the chosen transformation partner for wireline, wireless and broadband operators in Europe, Asia-Pacific and North America. Majority owned by Mahindra & Mahindra, one of the Top 10 industrial houses in India, in partnership with British
Telecommunications plc (BT), world’s leading communications service provider, Tech Mahindra has grown rapidly to become the 6th largest software exporter in India (NASSCOM 2007) and the second largest telecom software provider from India (Voice & Data 2007).Over 23,000 professionals service clients across the telecom eco-system, from our global network of development centres and sales offices across Americas, Europe, Middle-east, Africa and Asia-Pacific. Committed to quality, Tech Mahindra adds value to client businesses through well-established methodologies, tools and techniques backed by its stringent quality processes. Tech Mahindra is ISO 9001:2000 certified and is assessed at SEI-CMMI Level 5. Tech Mahindra has also been awarded the ISO 20000-1 (IT Service Management standard) and ISO 27001 (Security Management standard) certification for its development centers across India and UK.Tech Mahindra is certified at PCMM Level 5 for its people-care practices and is the third company in the world to have been appraised for SSE-CMM Level 3.
Mahindra Satyam
(the new brand identity of Satyam Computer Services Ltd. - NYSE: SAY), a leading global business and information technology services company, delivers consulting, systems integration, and outsourcing solutions to clients in numerous industries across the globe. Mahindra Satyam leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance. The company's professionals excel in engineering and product development, supply chain management, client relationship management, business process quality, business intelligence, enterprise integration, and infrastructure management, among other key capabilities. Mahindra Satyam development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia serve numerous clients, including many Fortune 500 organizations.
HCL Technologies
HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on 'transformational outsourcing', underlined by innovation and value creation, and offers integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 20 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Aerospace & Defense, Telecom, Retail & CPG, Life Sciences & Healthcare, Media & Entertainment, Travel, Transportation & Logistics, Automotive, Government, Energy & Utilities. HCL takes pride in its philosophy of 'Employee First' which empowers our 54,026 transformers to create a real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 2.0 billion (Rs. 9,842 crores), as on 31st March 2009. HCL is a $5 billion leading global Technology and IT Enterprise that comprises two companies listed in India - HCL Technologies & HCL Infosystems. Founded in 1976, HCL is one of India's original IT garage start-ups, a pioneer of modern computing, and a global transformational enterprise today. Its range of offerings spans Product Engineering, Custom & Package Applications, BPO, IT Infrastructure Services, IT Hardware, Systems Integration, and distribution of ICT products across a wide range of focused industry verticals. The HCL team comprises over 60,000 professionals of diverse nationalities, who operate from 23 countries including over 500 points of presence in India. HCL has global partnerships with several leading Fortune 1000 firms, including leading IT and Technology firms.
HCL has created the ability to distribute value across the customer's IT landscape through its well-distributed services portfolio, significant domain strengths, and locally relevant geographic distribution.
HCL has the widest service portfolio among Indian IT service providers, with each of its services having attained critical mass. Our five mature lines of business are R&D and Engineering, Custom Applications, Enterprise Applications, IT Infrastructure Management, and BPO Services. In addition, HCL has recently launched its Enterprise Transformation Service offerings comprising of Business, Technology, Application and Data Transformation – the four broad needs of any enterprise.
Our ability to synergistically integrate these service lines across the entire IT landscape creates new zones for value creation. Additionally, HCL has created unique service leadership in each of these areas through best-of-breed unique propositions.
HCL’s leadership in these service areas has been recognized by several leading independent analyst.
In 2005, HCL started questioning the linearity of scale-driven business models adopted by service providers (largely in the IT application business). The questioning led us to the belief that the market was rapidly approaching a point of inflection, that is a point where the volume and value proportionality would change, opening up new opportunities for service providers who aspire to focus on value.
With this realization, HCL embarked on a transformational journey that focuses on value centricity in customer relationships and on leveraging new market opportunities, while creating a unique employee experience. Hence HCL entered a new phase of evolution – transforming it from a volume-driven service provider to value-centric enterprise that turns technology into competitive advantage for all its customers across the globe.
Today HCL’s new way of doing business is being recognized by Harvard, IDC, Fortune, Forbes, Economist, Business Week and the likes.
Patni Computer Systems
Patni Computer Systems Ltd. (Patni) (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is one of the leading global providers of Information Technology services and business solutions. Over 14,500 professionals service clients across diverse industries, from 27 sales offices across the Americas, Europe and Asia-Pacific, and 22 Global Delivery Centers in strategic locations across the world. We have serviced more than 400 FORTUNE 1000 companies, for over two decades.
Our vision is to achieve global IT services leadership in providing value-added high quality IT solutions to our clients in selected horizontal and vertical segments, by combining technology skills, domain expertise, process focus and a commitment to long-term client relationships. Patni delivers high quality, reliable and cost-effective IT services to customers globally. We provide world-class technology services by constantly exploring and implementing innovative solutions that drive long-term value to our customers.
Today, our solutions provide strategic advantage to several most-admired organizations in the world. We have long-standing and vibrant partnerships with over 300 companies across the globe. At Patni, we are focused on optimizing our customers' investments in Information Technology. We help customers envision and shape their future around the key drivers of technology, productivity and cost-effectiveness. Patni's robust methodologies and processes consolidate decades of software development and maintenance experience in delivering and supporting enterprise applications and products.
Patni is an ISO 9001:2000 certified organization; assessed enterprise-wide at SEI-CMMI Level 5 (V1.2), SEI-CMM Level 5 and P-CMM Level 3. We have integrated Six Sigma techniques to focus on continuous, measurable process improvement, with powerful analytical tools and sophisticated review processes Polaris Software Lab
Polaris Software Lab Limited is one of India's leading institutions contributing to the knowledge economy of the global financial services marketplace. In a quest for knowledge, spanning over the last 2 decades (11 years as Polaris), Polaris has established its solutions and services footprint globally contributing to the realization of the business vision of some of the world's leading giants in the money vertical.
Strong roots - Respectable Pedigree
20 years ago, Citigroup began its quest to pioneer the utilization of the vast human intellect capital in India & the seeds of Polaris were sown. Polaris was fortunate to be one of the first vendors that Citigroup chose to partner with, through this Indian quest. Simultaneously Citigroup also started its own company called COSL (Citibank Overseas Software Ltd) which strategized and operationalized Citigroup's vision of leveraging India. Today, Polaris is an amalgamation of these two organizations that traveled the path of successfully architecting & realizing Citigroup's India led vision.
The Labor Pains of a Pioneer
The 2 Decade long journey was clearly an experience that helped Polaris participate, witness and experience every pitfall, every hurdle & fallacy in this path to leverage the Indian intellectual capital. The challenges were many. The challenge of creating a successful global sourcing model, the challenge of creating an alternative distributed banking platform, the challenge of creating global competitiveness from a third world economy, the challenge of replicating success from one country to another… The biggest challenge was in being the first one in the world doing all this.
Polaris Software Lab
Polaris Software Lab Limited is one of India's leading institutions contributing to the knowledge economy of the global financial services marketplace. In a quest for knowledge, spanning over the last 2 decades (11 years as Polaris), Polaris has established its solutions and services footprint globally contributing to the realization of the business vision of some of the world's leading giants in the money vertical.
Strong roots - Respectable Pedigree
20 years ago, Citigroup began its quest to pioneer the utilization of the vast human intellect capital in India & the seeds of Polaris were sown. Polaris was fortunate to be one of the first vendors that Citigroup chose to partner with, through this Indian quest. Simultaneously Citigroup also started its own company called COSL (Citibank Overseas Software Ltd) which strategized and operationalized Citigroup's vision of leveraging India. Today, Polaris is an amalgamation of these two organizations that traveled the path of successfully architecting & realizing Citigroup's India led vision.
The Labor Pains of a Pioneer
The 2 Decade long journey was clearly an experience that helped Polaris participate, witness and experience every pitfall, every hurdle & fallacy in this path to leverage the Indian intellectual capital. The challenges were many. The challenge of creating a successful global sourcing model, the challenge of creating an alternative distributed banking platform, the challenge of creating global competitiveness from a third world economy, the challenge of replicating success from one country to another… The biggest challenge was in being the first As Citigroup gained the competitive edge, Polaris gained two very critical experiences:
The experience of creating mission critical solutions with leading edge functionality, built on reliable and robust technical architecture which could be successfully implemented and replicated across the globe. This capability is today brought to the customer in the form of a suite of modular solution components under the brand name of intellect Suite. The experience of creating successful outsourcing models which enable global organizations to sustain their competitiveness.
This experience has been converted into a predictable and repeatable model of success and is known as the Entity model. While the rest of the Indian market was busy building expertise on COBOL, Java and Lotus, Polaris built expertise on Investment Banking, Retail Banking, Credit Cards, Corporate Banking, Insurance etc. one in the world doing all this.
Oracle Financial Services Software Ltd
Oracle Financial Services Software Ltd (Formerly known as i-flex solutions), majority owned by Oracle®, is a world leader in providing IT solutions to the financial industry. Company is having experience of delivering value-based IT solutions to over 825 financial institutions across 130 countries Oracle is strongly committed to the global financial services industry. To help financial institutions, Oracle has brought together the industry's best application and technology ecosystem for evolutionary transformation, providing customers with the largest footprint of functional assets.
Oracle's transformation strategy for financial services industry is executed through the Oracle Financial Services Global Business Unit (FSGBU), and Oracle Financial Services Software is an integral part of the Oracle FSGBU. Oracle Financial Services Software, a majority-owned subsidiary of Oracle, offers a comprehensive suite of offerings encompassing retail, corporate, and investment banking, funds, cash management, trade, treasury, payments, lending, private wealth management, asset management, compliance, enterprise risk and business analytics, among others.
With our process-driven approach for service-oriented architecture (SOA) deployments, we offer banks the combined benefits of interoperability, extensibility, and standardization. We also offer best-of-breed functionality for financial institutions that need to operate flexibly and competitively and respond rapidly to market dynamics in a fiercely challenging business environment. Oracle Financial Services Software has serviced over 880 customers in more than 135 countries through our portfolio of products and services.
ORACLE DELIVERS KEY FUNCTIONALITY:
Only multi-channel sales, service, marketing, and transaction solution preintegrated with core banking
Only open-standards core banking solution, enabling new products, relationship pricing, and consolidation of existing systems
Most complete end-to-end risk and performance management solution, extending into business operations and anti-money laundering
World's leading financials solution for FSI with muti-GAAP, IFRS, and multi-book code processing Only service-oriented architecture with a banking-specific data model and process library
Current IT Industry Scenario
Indian IT industry is one the major contributor to be reckoned for economical growth of India for over a decade. Indian IT has seen may rises and falls during its journey. Indian IT has got global recognition and established a niche for it self.
Currently, Indian IT Industry is facing the following challenges:
1. Globalization Effect: With opening up of trade and commerce
across different countries in the world, opportunities are becoming
plentiful.
2. India’s advantage: Liberalization of our Indian government coupled
with talented manpower is successful in making India as destination
for other countries to shop for outsourcing business.
3. Threat from other countries: Current advantages of India will not be guaranteed for years to come. We have many countries in the
competition, not to forget giant China.
• Erosion of profit margins: Due to severe competition in the outsourcing business model, profitability of an Indian IT company is being severely affected
• Impact of US economy: As majority of outsourcing business is coming from US, certainly US economic health is of critical importance. US economy condition will have direct bearing on the financials of IT services companies.
• Sustaining of Quality: in products and services offered by Indian IT companies is of paramount importance in the light of stiff competition offered by other countries. Quality is moola mantra for any IT company, without which it can not exist.
IT company challenges:
As a cascading effect, Impact of IT industry challenges mentioned above in turn has resulted in throwing up some more challenges to an Indian IT company.
Typical challenges are
1. Financial Austerities: Companies has resorted to different
mechanisms of cost cutting such as pruning of human resources,
bench cost, travel cost etc.
2 .Looking for optimal utilization of human resources.
All resources should be billable.
This means freshers should be billable from day one.
• Reducing bench cost. Keeping of reserve talent pool is done away with.
• Cross skill training: Depending up on project needs, people of specific skill set will be trained on different skill set as required in the projects.
• Recruiting trained resources with good attitude and work culture.
• Reduction in ITP costs and time
• Expects fresher to have required soft skills in addition to Technical and analytical skills
• To interact with clients presence all over the globe.
• Multi cultures mixing
• Client making choice of resources
• Shorter turn around time
• Maintaining of quality.
Future Outlook
With small and midsized businesses driven by the increased use of technology the country's information and communication technology market is estimated to grow 20.3 per cent annually to reach US$ 24.3 billion by 2011.
A survey carried out to assist business heads of major outsourcers to identify reliable, innovative and tech savvy firms had listed twenty-nine India based companies amongst the best 100 IT service providers including Tata Consultancy Services, HCL Technologies, Genpact, and WNS Global Services amongst others. According to the global InfoTech analyst International Data Corporation, the Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to become a US$ 132 billion industry, significantly, the domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4 per cent. Simultaneously, the IT and ITeS exports are estimated to more than double to US$ 78.62 billion in 2012.
Sufficient demand, strong fundamentals and a favorable environment support a positive outlook for Indian IT-BPO exports as well as the domestic market, going forward. The Indian IT-BPO industry is on track to reach USD 60 billion in exports and USD 73-75 billion in overall software and services revenue, by 2010. At the aspired levels of growth, the sector would, by 2010, employ around 2.5-3 million professionals, directly, account for direct investment of about USD 10-15 billion, and contribute 7-8 per cent of the national GDP.
However, the scope of the opportunity is significantly larger. At USD 52 billion (excluding hardware), India accounts for around 4 per cent of the worldwide spend on IT software and services. The global sourcing penetration is estimated to be growing at nearly four times the rate of absolute technology spends. Together, these two trends signify a huge opportunity for the Indian IT-BPO industry.
In order to sustain India’s edge in the global markets and improve revenues, Indian IT-BPO service providers need to shift towards more market-facing breakthroughs. They could additionally, foray new customer segments in intellectual asset-intensive service lines like engineering and R&D services, creating IP in emerging technology areas, developing and codifying specific domain expertise to target consulting and system integration services, technical innovations to develop their own standards for next generation of technologies.
Finally, providers could enhance the role they are already playing in helping improve the quality of education, by working closely with the Government and academia to facilitate changes in the curriculum and pedagogy, which directly influence the quality of graduate output.
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Introduction
In an increasingly globalised world, significant complexity and uncertainty is getting attached to the unprecedented economic crisis. The Indian economy has also been impacted by the recessionary trends, with a slowdown in GDP growth to seven percent.
The focus and exponential growth in the domestic market has partially offset this fall and insulated the country, resulting in net overall momentum. The IT-BPO industry in India has today become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a “young and resilient” India. During the year, the sector maintained its double digit growth rate and was a net hirer.
This growth has been fueled by increasing diversification in the geographic base and industry verticals, and adaptation in the service offerings portfolio.
While the effects of the economic crisis are expected to linger in the near term future, the Indian IT-BPO industry has displayed resilience and tenacity in countering the unpredictable conditions and reiterating the viability of India’s fundamental value proposition.
Consequently, India has retained its leadership position in the global sourcing market. The Indian IT-BPO industry is estimated to achieve revenues of USD 71.7 billion in FY2009, with the IT software and services industry accounting for USD 60 billion of revenues.
During this period, direct employment is expected to reach nearly 2.23 million, an addition of 226,000 employees, while indirect job creation is estimated to touch 8 million. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 5.8 per cent in FY2009. Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, employing over 1.76 million employees.
While the current mood is that of “cautious optimism,” the industry is expected to witness sustainable growth over a two-year horizon, going past its USD 60 billion export target in FY2011. While the industry has significant headroom for growth, competition is increasing, with a number of countries creating enabling business environments aimed at replicating India’s success in the IT-BPO industry.
Hence, concentrated efforts are required by all stakeholders to address the current challenges, to ensure that India realizes its potential, and maintains its leadership position.
EVOLUTION OF IT
• 1968: The Tata industrial conglomerate forms software services unit Tata Consultancy Services.
• Mid-1970s: IBM exits India. Import duties of 150 percent or more mean that VCRs cost $3,000 and TVs cost $6,000. Wipro starts to create India's first homegrown PC.
• 1994: Telecom liberalized.
• 1995: TCS determines that its Case Pac tool developed for IBM can be used to scan software for Y2K problems. An industry is born.
• 1999: Y2K contracts pile into India.
• 2002: Indian companies expand hiring. Massive layoffs in US
• 2003: Led by service conglomerates such as Wipro and Infosys, India becomes a primary destination for offshore outsourcing as foreign companies seek to lower cost
Govt. of India & IT Sector – Policies & Privileges
• IT PRIMARY FACTORS
• Cost
• Labor cost
• Infrastructure costs
• Exchange rates
• Labor competitiveness
• Size
• Level of education
• Compatibility
• OTHER FACTORS
• Business and political risks
• Geographical location
• Regulatory considerations
• MAJOR PLAYERS
TOP COMPANIES
India's Top Software companies
1 TCS
2 Infosys
3 Satyam
4 Wipro
5 IBM
India's Top BPO firms
1 Genpact
2 WNS
3 Wipro BPO
4 HCL BPO Services
5 ICICI One Source
6 IBM Daksh
7 Progeon
8 Aegis BPO Services
9 EXL Service Holdings
10 24/7 Customer
CONTRIBUTION TO GDP
• IT-ITES sector's contribution to the country's GDP has increased more than four times to 5.2 per cent in 2006-07 as compared to 1.2 per cent in FY'98,
•
POLICIES
Setting up IT software and services operations in India are governed by certain rules and regulations. A brief list of guidelines for individuals/ companies interested in setting up such operations is given below:
As an Indian Company
A foreign company can commence operations in India through incorporation of a company under the provisions of Co Act. Foreign equity in such Indian companies can be up to 100 percent depending upon the business plan of the foreign investor, prevailing foreign investment policies of the Government and receipt of requisite approvals. An Indian citizen can set up IT software and services operations in India in the following manner:
as an Individual/ Proprietor; or
as a Partnership Firm/ Trust; or
as a Company registered under the Companies Act, 1956 ("Co Act"). No prior permission of Government of India is required to set up IT/ software units in India.
Setting up of operations in India by Overseas Company/ Non-Resident
A foreign company or a non-resident planning to set up business operations in India can do so in the following manner:
As a foreign company through a Liaison Office/ Representative Office, Project Office or a Branch Office; or
As an Indian company through a Joint Venture or a Wholly Owned Subsidiary.
A foreign company is one that has been incorporated outside India and conducts business in India. These companies are required to comply with the provisions of Co Act.
Joint Venture with an Indian Partner
Foreign companies can set up their operations in India by forming strategic alliances with Indian partners. Foreign investments are approved through two routes as under: Automatic Route: Approvals for foreign equity up to 26 percent, 50 percent, 51 percent, 74 percent and 100 percent are given on an automatic basis subject to fulfillment of prescribed parameters in certain industries as specified by the Government.
RBI accords automatic approval to all such cases.
Government Approval: Approval in all other cases where the proposed foreign equity exceeds 26 percent, 50 percent, 51 percent or 74 percent in the specified industries or if the industry is not in the specified list, it requires prior specific approval from Foreign Investment Promotion Board ("FIPB").
PRIVILEGES
To encourage units in this sector, Government of India has announced many schemes:
Export Promotion Capital Goods ("EPCG") Scheme:
This scheme allows import of capital goods at a concessional customs duty rate of 5 percent, where the importer as a condition is required to achieve a specified export obligation. The export obligation and the period within which the same is required to be achieved vary based on the nature of the unit and value of imported capital goods.
Special Economic Zones ("SEZs"):
SEZs are designated areas dedicated towards growth of exports, having full flexibility of operations that are permitted to import duty free capital goods and raw material. The movement of goods to and fro between ports and SEZ are unrestricted.
The units in SEZ have to export the entire production subject to permitted sales in the DTA.
Currently, the operational SEZs in India which include the Santacruz Electronic Export Promotion Zone, Kandla Export Promotion Zone, Vizag Export Promotion Zone and Cochin Export Promotion Zones which have been converted to SEZs. Fiscal incentives available to SEZ units have been discussed ahead in detail.
The SEZ policy is welcome, very welcome. They need islands of non-interference. The devil is in the details as usual. The centre has formally approved 212 SEZ units with an in principle approval to 152 more. I don’t buy the usual rhetoric that poor farmers will be affected and the like. First of all, large landowners are not necessarily poor. Every day, dozens of large landowners are turning into instant millionaires by turning in their lands to real estate / IT giants.
The government must assure prevailing rates to them and/or issue bonds tied to the future development of the area. It must also take into account small and marginal landowners interests and device a new scheme for them which tie them monetarily into future development in that area. The issue must stop there. The SEZs provide a 15 year tax holiday to the IT companies after 2009. The details are 100% exempti0n for the first 5, 50% for the next 5, and variable for another 5 based on reinvestment in SEZs.
100 Percent Export Oriented Unit ("EOU"):
In terms of the benefits available, the EOU scheme, on a general basis, is similar to SEZ scheme. But in this scheme, there is no need to be physically located in the designated area (as in the case of SEZs). This scheme offers zero import duty on import of all capital goods, special 10 years income tax rebate (however, such rebate will not be available for Assessment Year 2010-2011 and onwards).
The incentives provided to EOUs are generally similar to those provided to SEZ units, except the exemption from central sales tax on purchases.
Software Technology Park ("STP"):
This is a special scheme under the Ministry of Information Technology, similar to EOU scheme, which is specific for the software industry. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Manipur, Mohali and Thiruvanathapuram.
This scheme offers zero import duty on import of all capital goods, special 10 years income tax rebate (however, such rebate will not beer are 11 available for Assessment Year 2010-2011 and onwards), availability of infrastructure facilities like high-speed data communication links, etc. The incentives provided to EOUs are generally similar to those provided to SEZ units, except the exemption from central sales tax on purchases.
MARKET STRUCTURE
GLOBAL & INDIAN SCENARIO
Global Sourcing Trends
The fundamental contribution of information technology is the expansion of knowledge, which is necessarily accompanied by a reduction in uncertainty. This becomes relevant for market structure in several ways.
IDC estimates that in 2008, the worldwide IT market growth will be lower at about 5.5-6.0 per cent, mainly due to the economic slowdown in the US and elsewhere.
IT-BPO services grew at an above-sector-average rate of nearly 8 per cent and remained the largest category, accounting for an increasing share of the worldwide technology sector revenue aggregate.
Outsourcing continued to be the primary growth driver, sustained by gradual shifts in regional spending patterns – with increasing traction in Europe and Asia Pacific offsetting a marginal decline in share of the Americas. IT spending in the BRIC countries - Brazil, Russia, India, and China – is expected to grow by 16 per cent in 2008, reaching USD 115 billion. Other emerging economies (based on 10%+ growth rates and the greatest net-new IT spending potential in the next four years) include Mexico, Poland and Turkey, followed by Vietnam, Thailand, Saudi Arabia, Argentina, Colombia, and United Arab Emirates.
Green IT is expected to be an important highlight during 2008. According to the Green IT Survey conducted by IDC, over 50 per cent consider suppliers’ greenness when buying IT, almost 80 per cent think the importance of greenness as an IT buying consideration is growing, and over one-third have policies that favor green vendors. 2008 will see the introduction of green products (energy-efficient, space-efficient, materials efficient, regulatory-compliant) that will create meaningful differentiation and move market share.
STPI
(Software Technology Park India) is a scheme that dates back to the early years of the IT industry. It allowed for a 10-year exemption from Corporate Income Tax (upto 90% of turnover), Sales Tax, Customs Duty, Excise duty. Back in the day, the infant IT companies could not deal with the astronomical cost of telecommunications, archaic customs duty rules, and a high rate of taxation. So the initial 10-year tax holiday helped an infant industry attain critical mass.
Even though companies like Infosys are 20 years old, they are still able to avail of the 10-year tax holiday by setting up new units with fresh 10-year extensions. For companies outside the STPI, the corporate income tax rate alone is 36-37% (Corporate Income Tax = 35%, Surcharge = 2.5%, Education Tax = 2%). Sales tax exemption is 10-12% for states and 3-4% for Union Territories (UT). This is why you don’t find all IT companies in UTs. The contribution of the STPI tax holiday to the overall success of the IT story cannot be underestimated. It is rated it as one of the best initiatives undertaken by the Indian government. The party it set to end in 2009. If all IT companies come out of the scheme – the Indian government will realize between $3-5 billion dollars (15-25000 cr) in direct taxes alone (this figure is based on projected size of the IT industry at a 36% tax rate on a $50bn size).
The Global IT spending is expected to decline steeply below the expected levels of $869 billion by 2010.
IT industry provides direct employment to more than 20 lakh people; indirect employment number goes far beyond..!!
IT industry contributes to around 5.2% to Indian USD 1 trillion GDP.
SOUCRES OF REVENUE
IT industry is largely dependent on Banking and financial industry. With the decline in these sectors, the revenue from these is expected to decline, hurting the bottom line of IT majors. This calls for exploring new verticals.
Revenue By Geography
The Americas and Europe continue to be the key markets for the Indian IT-ITeS sector.
Budget 2009 & its Impact on the IT industry
The Union budget presented gives a long term direction to inclusive growth, Infrastructure development, Education and employment generation of 12 Million jobs a year.
In terms of the Impact on the IT industry, steps like the scrapping of the FBT, extension of the 10A benefits till 2011, increase in the MAT credit period to 10 years and increased allocation to education are welcome steps.
On the personal taxation, while the increases in tax limits are nominal, the Removal of surcharge on income tax will benefit number of employees in our industry. The Industry also welcomes the planned outlay of Rs. 2100 crores to create ‘Educational infrastructure’ including setting up IIT’s and interest waivers for educating students. These reforms will clearly bring in a manifold resource increase for employability in the technical stream.
PEST ANALYSIS
Political:
Political stability: Indian political structure is considered Stable enough expect the fact that there is a fear of hung Parliament (no clear majority). - Positive
U.S. government has declared that U.S companies that Political outsource IT work to other locations other than U.S. will not get tax benefit. - Negative
Government owned companies and PSUs have decided t o Give more IT projects to Indian IT companies. - Positive
Terrorist attack or war. – Negative
Economical:
• Global IT spending (demand). (Other Factors
Business and political risks
Geographical location
Regulatory considerations(–ve)
Domestic IT Spending (Demand): Domestic Market grow by 20% & reach approx USD 20 billion in 2008-09 Nasscom (+VE).
Currency Fluctuation (-ve)
Real Estate Prices: Decline in real estate prices has resulted reducing the rental expenditure (+ve).
Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate (+ve).
• Economic attractiveness: Due to cost advantage and other factors (+ve Other Factors
Business and political risks
Geographical location(Regulatory considerations)
Social
Language Spoken: English is widely spoken language in India. English medium is the most accepted medium of education.(+ve)
Education: Large number of technical institutes and universities over the countries provide IT education. (+ve)
Working age population. (+ve)
Technological:
Telephony (+ve)
India has the world lowest call rates
Expected to have total subscribers base of about 500 million by 2010.
India has the second largest telephone network after china.
Enterprise telephone services, 3G, Wi-max, VPN, poised to grow.
Internet Backbone: Due to IT revolution in 90’s india is well connected with undersea optical cables. (+ve) New IT Technologies: Technologies like SOA, web 2.0, High definition content, grid computing, and innovation in low cost technologies is presenting new challenges & opportunities for Indian IT industry.(+ve)
STP Of IT Industry
Segmentation
Market segmentation is a process that segments a market into smaller sub-markets, called segments. Segments are to be homogeneous or have similar attributes. Purchasing patterns and trends can appear prominently in certain segments. Good market segmentation is to create segments where prominent patterns can emerge. Market segmentation may be used to analyze the followings;
Market responsiveness analysis: This is very useful in direct marketing since market responsiveness of product offerings can be readily available.
Market Trend Analysis: Analyzing segment-by-segment changes of sales revenues can reveal market trends. Trending information is vital in preparing for ever-changing markets. Segmentation offers deals with a specific function within the enterprise such as data processing, accounting, human resources, plant maintenance, engineering design, manufacturing, inventory control, etc. This is the most likely domain for a product or service, but you must recognize that the other domains may also get involved if the purchase of the product or service becomes a high profile decision. This purchase decision will be made by the prospect's functional management.
Targeting
The dynamics of IT industry is changing and IT firms are now preparing themselves to meet new challenges. Traditionally, Indian IT firms have been deriving sales from the Americas and Europe but going forward, the CAGRs of these regions will be low where as the Asian market is expected to grow at a very fast pace and approach the market size of the European markets by 2011. The emerging Latin American and Middle-East/African markets, though smaller in size, are also expected to have a higher CAGR. The growth in the Asia-Pacific Region is expected to be higher mainly on account of growth in spends in China and India.
8P’s of IT Industry
1.Product:
The product aspects of marketing deal with the specifications of the services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
2. People:
For service marketers, the core of the service element is the interaction between those providing services and the customer, which is known as service encounter. To achieve customer satisfaction appropriate processes are designed to ensure that the service encounter meets customer expectations. To deliver the satisfactory services, the employees of a company have to play an important role. Employees must possess personal qualities, ability to understand and satisfy customer needs, flexibility, skills and knowledge. Friendly and warm employees increase customer loyalty.
3. Place:
In service place refers to location and use of distribution channels. It is referring to the channel by which a service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.
4. Process
In Service Industry Process refers to how a service is provided and delivered to the customer. IT relies on processes to consistently deliver high quality solutions while executing a growing number of engagements from multiple locations. Values, vision and policies form the first level of our three-tiered process
architecture. They are implemented through process execution at the next level. These processes are defined with clear ownership using the ETVX (Entry, Task, Verification, and Exit) paradigm and clearly defined roles and responsibilities.
5. Physical Evidence
The environment in which the service is delivered and where the firm and the customers interact; and any tangible commodities that facilitate performance or communicate the service. Physical evidence enhances customer’s perception of quality. The general elements of physical evidence include (Organization Physical Facility):
Exterior facilities
Exterior design
Signage
Parking
Landscape
Surrounding environment
Interior Facilities
Interior design
Equipment
Layout
OTHER TANGIBLES
Business cards
Stationery
Billing statements
Reports
Employee dress/uniform
Brochures
6. Productivity
Productivity refers to the success or failure of any business, so the quality of the product should be very good for his companies have different quality standards which are certified by the quality department and are approved all over the world. If one does not have approved quality standards then he develops its own to meet the quality that are demanded by the customers
7. Price
Software pricing strategy is price planning for a software firm takes into view factors such as overall marketing objectives, consumer demand, product attributes, competitors' pricing, and market and economic trends. When a firm launches a product, the pricing decision is one of the most critical decisions. Software pricing has been concentrated the internal business objectives of vendors such as costs, specified margins, and the competition. On the marketing point of view, the goal of pricing strategy is to set a price that is the pecuniary equivalent of the value perceived by the customer in the product in order to meet the profit and achieve investment goals.
8. Promotion
Over here, services and project consulting is through contract or agreement between the parties and promotions are carried out only for the particular client selected as upgrading and extended service for a particular period, etc. This includes advertising, sales promotion, publicity, and personal selling. Branding refers to the various methods of promoting the product, brand, or company. Brief About Top IT Companies
Wipro Technologies
Wipro Technologies is a global services provider delivering technology-driven business solutions that meet the strategic objectives of our clients. Wipro has 55+ ‘Centers of Excellence’ that create solutions around specific needs of industries. Wipro delivers unmatched business value to customers through a combination of process excellence, quality frameworks and service delivery innovation. Wipro is the World's first CMMi Level 5 certified software services company and the first outside USA to receive the IEEE Software Process Award. “Innovation is Wipro - Wipro is Innovation” is our statement of purpose. The challenge this pursuit presents to us every day is – how does one make Innovation “Purposeful”, “ingrained” and “Deliberate” in our organization. We recognize and nurture “innovative solutions” as part of our Wipro values. We prioritize focus and resources guided by this value. The Wipro way of Innovation is really about this deliberate sustained innovation. Our purpose of Innovation is to create higher value for our customers.
This continuous thought led us to foresee the benefit of partnering with technology companies to bring value to our customers. Combining these relationships with our strong R&D talent led to the idea of “Lab on Hire” and subsequently to offshore development centers which made offshore outsourcing truly mainstream. Pushing this idea a little further helped us conceptualize the remote infrastructure service model, branded as global command center or GCC to manage the customer’s IT infrastructure. Today, we serve our customers with a wide spectrum of services fuelled by the power of innovation. Products define the identity of technology companies, and the current business environment is looking to adopt innovative ways to turn ideas into real products - quickly. In addition, the complexities in technology and the advancement in chip technology have created increasing dis-aggregation in the industry. Wipro is the largest independent provider of R&D services in the world. Using “Extended Engineering” model for leveraging R&D investment and accessing new knowledge and experience across the globe, people and technical infrastructure, Wipro enables firms to introduce new products rapidly.
Wipro’s complete range of IT Services addresses the needs of both technology and business requirements to help organizations leverage leading-edge technologies for business improvement. Wipro takes charge of the IT needs of the entire enterprise. The gamut of services extends from Enterprise Application Services (CRM, ERP, e-Procurement and SCM), to e-Business solutions. Wipro’s enterprise solutions have served and continue to serve clients from a range of industries including Energy and Utilities, Finance, Telecom, and Media and Entertainment.
Budget 2009 & its Impact on the IT industry
The Union budget presented gives a long term direction to inclusive growth, Infrastructure development, Education and employment generation of 12 Million jobs a year.
In terms of the Impact on the IT industry, steps like the scrapping of the FBT,extension of the 10A benefits till 2011, increase in the MAT credit period to 10 years and increased allocation to education are welcome steps. However, steps like the increase in MAT from 10 to 15% are going to have an adverse impact on the Industry in the short run and this is something we could have avoided.
On the personal taxation, while the increases in tax limits are nominal, the removal of surcharge on income tax will benefit number of employees in our industry.
The Industry also welcomes the planned outlay of Rs. 2100 crores to create ‘Educational infrastructure’ including setting up IIT’s and interest waivers for educating students. These reforms will clearly bring in a manifold resource increase for employability in the technical stream
Tech Mahindra & Mahindra Satyam
Tech Mahindra is a global systems integrator and business transformation consulting firm focused on the communications industry. With the convergence of media and telecom, the changing landscape of the telecom industry is becoming extremely competitive. As companies rapidly strive to gain a competitive advantage, Tech Mahindra helps companies innovate and transform by leveraging its unique insights, differentiated services and flexible partnering models. This has helped our customers reduce operating costs and generate new revenue streams. Recognizing that margins from connectivity are rapidly falling and that future growth in revenues and margins will only come from new applications, content and services, operators today are busy addressing business opportunities revolving around Commerce, Content, Convergence and Customer Experience to gain a sustainable Competitive Advantage. For over two decades, Tech Mahindra has been the chosen transformation partner for wireline, wireless and broadband operators in Europe, Asia-Pacific and North America. Majority owned by Mahindra & Mahindra, one of the Top 10 industrial houses in India, in partnership with British
Telecommunications plc (BT), world’s leading communications service provider, Tech Mahindra has grown rapidly to become the 6th largest software exporter in India (NASSCOM 2007) and the second largest telecom software provider from India (Voice & Data 2007).Over 23,000 professionals service clients across the telecom eco-system, from our global network of development centres and sales offices across Americas, Europe, Middle-east, Africa and Asia-Pacific. Committed to quality, Tech Mahindra adds value to client businesses through well-established methodologies, tools and techniques backed by its stringent quality processes. Tech Mahindra is ISO 9001:2000 certified and is assessed at SEI-CMMI Level 5. Tech Mahindra has also been awarded the ISO 20000-1 (IT Service Management standard) and ISO 27001 (Security Management standard) certification for its development centers across India and UK.Tech Mahindra is certified at PCMM Level 5 for its people-care practices and is the third company in the world to have been appraised for SSE-CMM Level 3.
Mahindra Satyam
(the new brand identity of Satyam Computer Services Ltd. - NYSE: SAY), a leading global business and information technology services company, delivers consulting, systems integration, and outsourcing solutions to clients in numerous industries across the globe. Mahindra Satyam leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance. The company's professionals excel in engineering and product development, supply chain management, client relationship management, business process quality, business intelligence, enterprise integration, and infrastructure management, among other key capabilities. Mahindra Satyam development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia serve numerous clients, including many Fortune 500 organizations.
HCL Technologies
HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on 'transformational outsourcing', underlined by innovation and value creation, and offers integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 20 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Aerospace & Defense, Telecom, Retail & CPG, Life Sciences & Healthcare, Media & Entertainment, Travel, Transportation & Logistics, Automotive, Government, Energy & Utilities. HCL takes pride in its philosophy of 'Employee First' which empowers our 54,026 transformers to create a real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 2.0 billion (Rs. 9,842 crores), as on 31st March 2009. HCL is a $5 billion leading global Technology and IT Enterprise that comprises two companies listed in India - HCL Technologies & HCL Infosystems. Founded in 1976, HCL is one of India's original IT garage start-ups, a pioneer of modern computing, and a global transformational enterprise today. Its range of offerings spans Product Engineering, Custom & Package Applications, BPO, IT Infrastructure Services, IT Hardware, Systems Integration, and distribution of ICT products across a wide range of focused industry verticals. The HCL team comprises over 60,000 professionals of diverse nationalities, who operate from 23 countries including over 500 points of presence in India. HCL has global partnerships with several leading Fortune 1000 firms, including leading IT and Technology firms.
HCL has created the ability to distribute value across the customer's IT landscape through its well-distributed services portfolio, significant domain strengths, and locally relevant geographic distribution.
HCL has the widest service portfolio among Indian IT service providers, with each of its services having attained critical mass. Our five mature lines of business are R&D and Engineering, Custom Applications, Enterprise Applications, IT Infrastructure Management, and BPO Services. In addition, HCL has recently launched its Enterprise Transformation Service offerings comprising of Business, Technology, Application and Data Transformation – the four broad needs of any enterprise.
Our ability to synergistically integrate these service lines across the entire IT landscape creates new zones for value creation. Additionally, HCL has created unique service leadership in each of these areas through best-of-breed unique propositions.
HCL’s leadership in these service areas has been recognized by several leading independent analyst.
In 2005, HCL started questioning the linearity of scale-driven business models adopted by service providers (largely in the IT application business). The questioning led us to the belief that the market was rapidly approaching a point of inflection, that is a point where the volume and value proportionality would change, opening up new opportunities for service providers who aspire to focus on value.
With this realization, HCL embarked on a transformational journey that focuses on value centricity in customer relationships and on leveraging new market opportunities, while creating a unique employee experience. Hence HCL entered a new phase of evolution – transforming it from a volume-driven service provider to value-centric enterprise that turns technology into competitive advantage for all its customers across the globe.
Today HCL’s new way of doing business is being recognized by Harvard, IDC, Fortune, Forbes, Economist, Business Week and the likes.
Patni Computer Systems
Patni Computer Systems Ltd. (Patni) (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is one of the leading global providers of Information Technology services and business solutions. Over 14,500 professionals service clients across diverse industries, from 27 sales offices across the Americas, Europe and Asia-Pacific, and 22 Global Delivery Centers in strategic locations across the world. We have serviced more than 400 FORTUNE 1000 companies, for over two decades.
Our vision is to achieve global IT services leadership in providing value-added high quality IT solutions to our clients in selected horizontal and vertical segments, by combining technology skills, domain expertise, process focus and a commitment to long-term client relationships. Patni delivers high quality, reliable and cost-effective IT services to customers globally. We provide world-class technology services by constantly exploring and implementing innovative solutions that drive long-term value to our customers.
Today, our solutions provide strategic advantage to several most-admired organizations in the world. We have long-standing and vibrant partnerships with over 300 companies across the globe. At Patni, we are focused on optimizing our customers' investments in Information Technology. We help customers envision and shape their future around the key drivers of technology, productivity and cost-effectiveness. Patni's robust methodologies and processes consolidate decades of software development and maintenance experience in delivering and supporting enterprise applications and products.
Patni is an ISO 9001:2000 certified organization; assessed enterprise-wide at SEI-CMMI Level 5 (V1.2), SEI-CMM Level 5 and P-CMM Level 3. We have integrated Six Sigma techniques to focus on continuous, measurable process improvement, with powerful analytical tools and sophisticated review processes Polaris Software Lab
Polaris Software Lab Limited is one of India's leading institutions contributing to the knowledge economy of the global financial services marketplace. In a quest for knowledge, spanning over the last 2 decades (11 years as Polaris), Polaris has established its solutions and services footprint globally contributing to the realization of the business vision of some of the world's leading giants in the money vertical.
Strong roots - Respectable Pedigree
20 years ago, Citigroup began its quest to pioneer the utilization of the vast human intellect capital in India & the seeds of Polaris were sown. Polaris was fortunate to be one of the first vendors that Citigroup chose to partner with, through this Indian quest. Simultaneously Citigroup also started its own company called COSL (Citibank Overseas Software Ltd) which strategized and operationalized Citigroup's vision of leveraging India. Today, Polaris is an amalgamation of these two organizations that traveled the path of successfully architecting & realizing Citigroup's India led vision.
The Labor Pains of a Pioneer
The 2 Decade long journey was clearly an experience that helped Polaris participate, witness and experience every pitfall, every hurdle & fallacy in this path to leverage the Indian intellectual capital. The challenges were many. The challenge of creating a successful global sourcing model, the challenge of creating an alternative distributed banking platform, the challenge of creating global competitiveness from a third world economy, the challenge of replicating success from one country to another… The biggest challenge was in being the first one in the world doing all this.
Polaris Software Lab
Polaris Software Lab Limited is one of India's leading institutions contributing to the knowledge economy of the global financial services marketplace. In a quest for knowledge, spanning over the last 2 decades (11 years as Polaris), Polaris has established its solutions and services footprint globally contributing to the realization of the business vision of some of the world's leading giants in the money vertical.
Strong roots - Respectable Pedigree
20 years ago, Citigroup began its quest to pioneer the utilization of the vast human intellect capital in India & the seeds of Polaris were sown. Polaris was fortunate to be one of the first vendors that Citigroup chose to partner with, through this Indian quest. Simultaneously Citigroup also started its own company called COSL (Citibank Overseas Software Ltd) which strategized and operationalized Citigroup's vision of leveraging India. Today, Polaris is an amalgamation of these two organizations that traveled the path of successfully architecting & realizing Citigroup's India led vision.
The Labor Pains of a Pioneer
The 2 Decade long journey was clearly an experience that helped Polaris participate, witness and experience every pitfall, every hurdle & fallacy in this path to leverage the Indian intellectual capital. The challenges were many. The challenge of creating a successful global sourcing model, the challenge of creating an alternative distributed banking platform, the challenge of creating global competitiveness from a third world economy, the challenge of replicating success from one country to another… The biggest challenge was in being the first As Citigroup gained the competitive edge, Polaris gained two very critical experiences:
The experience of creating mission critical solutions with leading edge functionality, built on reliable and robust technical architecture which could be successfully implemented and replicated across the globe. This capability is today brought to the customer in the form of a suite of modular solution components under the brand name of intellect Suite. The experience of creating successful outsourcing models which enable global organizations to sustain their competitiveness.
This experience has been converted into a predictable and repeatable model of success and is known as the Entity model. While the rest of the Indian market was busy building expertise on COBOL, Java and Lotus, Polaris built expertise on Investment Banking, Retail Banking, Credit Cards, Corporate Banking, Insurance etc. one in the world doing all this.
Oracle Financial Services Software Ltd
Oracle Financial Services Software Ltd (Formerly known as i-flex solutions), majority owned by Oracle®, is a world leader in providing IT solutions to the financial industry. Company is having experience of delivering value-based IT solutions to over 825 financial institutions across 130 countries Oracle is strongly committed to the global financial services industry. To help financial institutions, Oracle has brought together the industry's best application and technology ecosystem for evolutionary transformation, providing customers with the largest footprint of functional assets.
Oracle's transformation strategy for financial services industry is executed through the Oracle Financial Services Global Business Unit (FSGBU), and Oracle Financial Services Software is an integral part of the Oracle FSGBU. Oracle Financial Services Software, a majority-owned subsidiary of Oracle, offers a comprehensive suite of offerings encompassing retail, corporate, and investment banking, funds, cash management, trade, treasury, payments, lending, private wealth management, asset management, compliance, enterprise risk and business analytics, among others.
With our process-driven approach for service-oriented architecture (SOA) deployments, we offer banks the combined benefits of interoperability, extensibility, and standardization. We also offer best-of-breed functionality for financial institutions that need to operate flexibly and competitively and respond rapidly to market dynamics in a fiercely challenging business environment. Oracle Financial Services Software has serviced over 880 customers in more than 135 countries through our portfolio of products and services.
ORACLE DELIVERS KEY FUNCTIONALITY:
Only multi-channel sales, service, marketing, and transaction solution preintegrated with core banking
Only open-standards core banking solution, enabling new products, relationship pricing, and consolidation of existing systems
Most complete end-to-end risk and performance management solution, extending into business operations and anti-money laundering
World's leading financials solution for FSI with muti-GAAP, IFRS, and multi-book code processing Only service-oriented architecture with a banking-specific data model and process library
Current IT Industry Scenario
Indian IT industry is one the major contributor to be reckoned for economical growth of India for over a decade. Indian IT has seen may rises and falls during its journey. Indian IT has got global recognition and established a niche for it self.
Currently, Indian IT Industry is facing the following challenges:
1. Globalization Effect: With opening up of trade and commerce
across different countries in the world, opportunities are becoming
plentiful.
2. India’s advantage: Liberalization of our Indian government coupled
with talented manpower is successful in making India as destination
for other countries to shop for outsourcing business.
3. Threat from other countries: Current advantages of India will not be guaranteed for years to come. We have many countries in the
competition, not to forget giant China.
• Erosion of profit margins: Due to severe competition in the outsourcing business model, profitability of an Indian IT company is being severely affected
• Impact of US economy: As majority of outsourcing business is coming from US, certainly US economic health is of critical importance. US economy condition will have direct bearing on the financials of IT services companies.
• Sustaining of Quality: in products and services offered by Indian IT companies is of paramount importance in the light of stiff competition offered by other countries. Quality is moola mantra for any IT company, without which it can not exist.
IT company challenges:
As a cascading effect, Impact of IT industry challenges mentioned above in turn has resulted in throwing up some more challenges to an Indian IT company.
Typical challenges are
1. Financial Austerities: Companies has resorted to different
mechanisms of cost cutting such as pruning of human resources,
bench cost, travel cost etc.
2 .Looking for optimal utilization of human resources.
All resources should be billable.
This means freshers should be billable from day one.
• Reducing bench cost. Keeping of reserve talent pool is done away with.
• Cross skill training: Depending up on project needs, people of specific skill set will be trained on different skill set as required in the projects.
• Recruiting trained resources with good attitude and work culture.
• Reduction in ITP costs and time
• Expects fresher to have required soft skills in addition to Technical and analytical skills
• To interact with clients presence all over the globe.
• Multi cultures mixing
• Client making choice of resources
• Shorter turn around time
• Maintaining of quality.
Future Outlook
With small and midsized businesses driven by the increased use of technology the country's information and communication technology market is estimated to grow 20.3 per cent annually to reach US$ 24.3 billion by 2011.
A survey carried out to assist business heads of major outsourcers to identify reliable, innovative and tech savvy firms had listed twenty-nine India based companies amongst the best 100 IT service providers including Tata Consultancy Services, HCL Technologies, Genpact, and WNS Global Services amongst others. According to the global InfoTech analyst International Data Corporation, the Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to become a US$ 132 billion industry, significantly, the domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4 per cent. Simultaneously, the IT and ITeS exports are estimated to more than double to US$ 78.62 billion in 2012.
Sufficient demand, strong fundamentals and a favorable environment support a positive outlook for Indian IT-BPO exports as well as the domestic market, going forward. The Indian IT-BPO industry is on track to reach USD 60 billion in exports and USD 73-75 billion in overall software and services revenue, by 2010. At the aspired levels of growth, the sector would, by 2010, employ around 2.5-3 million professionals, directly, account for direct investment of about USD 10-15 billion, and contribute 7-8 per cent of the national GDP.
However, the scope of the opportunity is significantly larger. At USD 52 billion (excluding hardware), India accounts for around 4 per cent of the worldwide spend on IT software and services. The global sourcing penetration is estimated to be growing at nearly four times the rate of absolute technology spends. Together, these two trends signify a huge opportunity for the Indian IT-BPO industry.
In order to sustain India’s edge in the global markets and improve revenues, Indian IT-BPO service providers need to shift towards more market-facing breakthroughs. They could additionally, foray new customer segments in intellectual asset-intensive service lines like engineering and R&D services, creating IP in emerging technology areas, developing and codifying specific domain expertise to target consulting and system integration services, technical innovations to develop their own standards for next generation of technologies.
Finally, providers could enhance the role they are already playing in helping improve the quality of education, by working closely with the Government and academia to facilitate changes in the curriculum and pedagogy, which directly influence the quality of graduate output.
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