Informaton Technolgy in India

The Indian information and technology industry has played a key role in putting India on the global map. Thanks to the success of the IT industry, India is now a power to reckon with. According to the National Association of Software and Service Companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector has grown from 1.2 per cent of the gross domestic product (GDP) in FY 1997-98 to an estimated 5.5 per cent in FY 2007-08. The net value added by this sector, to the economy, is estimated to be 3.3 to 3.9 per cent for FY 2007-08.
The phenomenal growth of the Indian IT Software & Services and ITES-BPO sector has had a perceptible multiplier effect on the Indian economy as a whole. In addition to the direct positive impact on national income, the sector has grown to become the biggest employment generator, and has spawned the mushrooming of several ancillary industries such as transportation, real estate and catering, and has created a rising class of youthful consumers with high disposable incomes. This, in turn, has triggered a rise in direct-tax collections and propelled an increase in consumer spending.
The total IT Software and Services employment is expected to reach the 2- million mark in 2007-08 (excluding employment in the hardware sector), as against 1.63 million in 2006-07, a growth of 22.7 per cent year-on-year. This represents a net addition of 375,000 professionals to the industry employee base, this year. The indirect employment attributed by the sector is estimated to about 8 million in year 2007-08. This translates to the creation of about 10 million job opportunities attributed to the growth of this sector.
The Indian IT industry is recognised the world over for its quality. Today, India leads the world in terms of the number of quality certifications achieved by centres in any single country. As of December 2007, over 498 India-based centres (both Indian firms as well as MNC-owned captives) had acquired quality certifications with 85 companies certified at Software Engineering Institute (SEI), Carnegie Mellon Capability Maturity Model (CMM) Level 5 – higher than any other country.
India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services.
The government expects the exports turnover to touch US$ 80 billion by 2011, growing at an annual rate of 30 per cent per annum, from the earlier few million dollars worth exports in early 1990s.
As per NASSCOM's latest findings:

• Indian IT-BPO sector grew by 33 per cent in FY 2007-08 to reach US$ 64 billion in aggregate revenue (including hardware). Of this, the software and services segment accounted for US$ 52 billion, growing by 28 per cent over FY 2006-07.
• Software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$ 40.4 billion, contributing nearly 63 per cent to the overall IT-BPO revenue aggregate.
• IT-BPO exports (including hardware exports) grew by 28 per cent from US$ 31.8 billion in FY 2006-07 to US$ 40.9 billion in FY 2007-08.
• While the US (61 per cent) and the UK (18 per cent) remained the largest IT-BPO export markets in FY 2006-07, the industry is now making a mark in other countries as well - with exports to Continental Europe in particular, growing at a compound annual growth rate (CAGR) of more than 55 per cent over FY 2004-07.
• Domestic IT market (including hardware) reached US$ 23.1 billion in FY 2007-08 as against US$ 16.2 billion in FY 2006-07, a growth of 43 per cent. Hardware remained the largest segment of the domestic market with a growth rate of 44 per cent in FY 2007-08. Software and services spending grew by over 41 per cent during the year.
• The industry's vertical market exposure was well diversified across several mature and emerging sectors. Banking, financial services and insurance (BFSI) remained the largest vertical market for Indian IT-BPO exports, followed by high-technology and telecom. These sectors together accounted for nearly 60 per cent of the Indian IT-BPO exports in FY 2006-07.
• Manufacturing, retail, media, healthcare, airlines and transportation, and utilities were the other key segments.

Moreover, according to a study by Springboard Research, the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.


Outsourcing
A research by Gartner forecasts India as the undisputed leader in the outsourcing space in the year 2008. The Outsourcing Service Provider Performance Study 2007, undertaken by sourcing advisory firm Equa Terra, reported that the majority of UK businesses offshore all or parts of their IT functions to India and plan to continue with this strategy as India continued to be the favourite outsourcing destination for businesses in UK in terms of satisfaction.
India's most prized resource is its readily available technical work force. India has the second largest English-speaking scientific professionals in the world, second only to the US. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. According to a Gartner study, India remains the undisputed leader in offshore services and tops the list of 30 countries on criteria's such as language, government support, labour pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property, security and privacy.
Twenty-nine India-based companies including Tata Consultancy Services, HCL Technologies, Genpact, and WNS Global Services amongst others, have been listed among the best 100 IT service providers in a survey carried out with a view to assist business heads of major outsourcers identify reliable, innovative and tech-savvy partners.
Last year, India generated close to US$ 40 billion in proceeds from IT and IT-based services. Almost 80 per cent of these revenues were generated by exports. Global offshoring has a market volume of roughly US$ 70 billion, with India’s share in the global market totalling 45 per cent.
Multinationals in India
Information technology has been a promising sector for India, generating revenues both for the domestic as well as the global market. India's IT potential and markets with very high returns have attracted multinationals to grab a share of the pie and cash in on the IT boom. Also, the increase in purchasing power and the rapid business expansion of the small and medium enterprises (SMEs) holds promise for global IT giants, who look at a 100 per cent year-on-year growth in their small and medium businesses (SMBs) market in India.
Also, according to a study by consulting firm Zinnov, India's IT spending is likely to grow between 17.6-24 per cent by 2010 from the current IT spending totalling US$ 17 billion.

• Intel Capital, chipmaker Intel's global investment arm, has announced an investment of US$ 23 million in three Indian companies- One97 Communications, IndiaMART.com and Global Talent Track.
• Moreover, Intel is looking to invest more than US$ 1 billion in India over the next three years in partnership with Indian and foreign hardware firms to prepare light-weight personal computers.
• Cisco posted over 100 per cent year-on-year growth in its SME business in India in FY 2007-08.
• Oracle is expecting over 100 per cent growth in India for its CRM business on the back of increased technology awareness and need for cost-effective customer servicing.
• Yahoo! Inc and Tata Sons' subsidiary firm, Computational Research Laboratories (CRL), have entered into a joint agreement to make available-EKA, a supercomputer, for cloud computing research in India. Hewlett Packard (HP), the world’s biggest maker of personal computers, recently stated that a total of eight entries in the list of top 500 supercomputers are from India. EKA is ranked 13th.
• Dell, which not only manufactures and sells hardware in India but also has a service and support arm, had ended the year 2007 with revenues of US$ 638.96 million and expects to touch the billion-dollar mark next year.
• World's leading chip designer firm, ARM, is expanding its India design centre to make it the largest outside Britain.
• US-based, US$ 1-billion dollar-chip maker, Microchip Technology, will invest US$ 65 million in its India development centre over the next five years.

Domestic Markets
India's domestic market has also become a force to reckon with, as the existing IT infrastructure evolves both in terms of technology and depth of penetration. Global as well as domestic IT companies like IBM, Accenture, HP, TCS, HCL and Wipro have witnessed a remarkable growth in their business.
The domestic information technology business has become far too attractive to ignore. India Inc's demand for IT services and products has bolstered growth in the domestic sector with deal sizes going up remarkably and contracts worth US$ 50 million-US$ 100 million up for grabs.

Such growth in the software and services sector has been achieved because of spectacular growths in some segments. For instance, 680,000 notebooks were sold in the first half of 2007-08, registering an increase of 59 per cent.
This year too laptop sales are likely to increase. According to research firm Gartner, India's personal computer (PC) market is likely to grow by 13.7 per cent to 11.1 million units in 2009, aided by a surge in demand for laptops. The laptop market is expected to grow by 37 per cent in 2009 to 3.69 million units and constitute a third of the total PC market.
In the next couple of years, global market intelligence and consulting firm, IDC, sees a higher local demand driven by growth of broadband, expansion of Software-as-a-Service (SaaS), service oriented architecture, virtualisation as also networking projects. The net margins in the domestic market are at about 9-11 per cent which has improved considerably in recent years. Of late IT service providers, MNCs and domestic firms have developed strategies exclusively for the domestic market according to a research report by Gartner.
Further, India's homegrown IT mammoths are looking at buying companies abroad. In one of the biggest acquisitions ever, HCL Technologies has acquired UK-based Axon with a US$ 811-million bid at 650 p per share.
Indian companies also continue to bag prestigious deals. Recently, Tata Consultancy Services has won a multi-year contract from Ducati to deploy ERP solutions for the Italian super bike major in Europe.
In spite of the global meltdown, Infosys posted better-than-expected earnings growth for the December quarter aided by a weaker rupee and improved operational efficiencies.
Infosys reported a 33.3 per cent rise in net profits at almost US$ 335.40 million for the December quarter of 2008-09, compared with about US$ 251.60 million in the year-ago quarter. Revenues rose 35.5 per cent to almost US$ 1.18 billion from US$ 870.23 million.
However, certain cases such as Satyam have rocked India’s IT sector both in the country and abroad for poor corporate governance and financial fraud. Satyam case was put on track by taking immediate crisis control measures by the government such as appointing a new board have helped put Satyam back on track. In fact, a large number of Satyam’s clients such as GE and Malaysian Airlines insist on continuing business with the company despite the fraud. In fact, the Commerce Minister, Mr Kamal Nath reaffirms his faith in Indian corporates saying that Satyam is just a one-off case and can hardly be cited as a general feature of the Indian IT industry.
Rural Penetration
According to a new report of the Internet and Mobile Association of India (IAMAI) rural India has 3.3 million active internet users. Since rural India was mapped for the first time, the year-on-year growth of internet users in rural India could not be estimated.
The research also notes there are 5.5 million people who claim to have used Internet at some point in time. Various government and private sector initiatives to connect rural India, especially the government-led National e-Governance Programme, have played an important role in increasing internet penetration in rural India.
Growth
The Indian information technology sector continues to be one of the sunshine sectors of the Indian economy showing rapid growth and promise.

• According to NASSCOM, the Indian IT-BPO sector is aiming to reach a target of US$ 60 billion in exports and US$ 73 billion-US$ 75 billion in overall software and services revenues by 2010.
• With small and mid-sized businesses driven by the increased use of technology India's information and communication technology market is estimated to grow 20.3 per cent annually to reach US$ 24.3 billion by 2011.
• 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 by 2012.