A PROJECT REPORT

On
A STUDY OF INDIAN INFORMATION TECHNOLOGY SECTOR.
For the awar o! e"ree o!
MASTER OF #USINESS ADMINISTRATION
S$%&'tte To
Dr. Pan(a%rao De)h&$*h In)t't$te o! Mana"e&ent Te+hno,o"- . Re)ear+h/ De0art&ent
o! Dhanwate Nat'ona, Co,,e"e/ Na"0$r

S$%&'tte #-1
An*'t N. Fat'n"
2Re)ear+her3
G$'e #-
Mr). A0arna Sa&$ra
Thro$"h
Dr. Pan(a%rao De)h&$*h In)t't$te o! Mana"e&ent Te+hno,o"- . Re)ear+h/ De0art&ent
o! Dhanwate Nat'ona, Co,,e"e/ Na"0$r
Year 4556785
Contents
l. lNTRODUCTlON
2. lNDlAN lT SECTOR
3. lT CATAGORlES
4. CONTRlBUTlON lN lNDlAN ECONOMY
5. MAJOR COMPANlES
6. SWOT ANALYSlS OF lT SECTOR
7. GROWTH
8. GOVERNMENT lNlTlATlVE & POLlClES
9. SCOPE
l0. lMPACT
ll. FUTURE OF lT SECTOR lN lNDlA
l2. CONCLUSlON
l3. BlBLOGRAPHY
INTRODUCTION
The computer systems design and related services industry is among the
economy's largest and fastest sources of employment growth. Employment
increased by 6l6,000 over the l994-2004 period, posting a staggering 8.0-
percent annual growth rate. The projected 2004-l4 employment increase of
453,000 translates into l.6 million jobs, and represents a relatively slower
annual growth rate of 3.4 percent as productivity increases and offshore
outsourcing take their toll. ("lndustry output and employment projections to
20l4" by Jay M. Berman, Bureau of Labor Statistics)
However, the main growth catalyst for this industry is expected to be the
persistent evolution of technology and business' constant effort to absorb
and integrate these resources to enhance their productivity and expand
their market opportunities.
Employment of computer and information systems managers is expected to
grow between l8 to 26 percent for all occupations through the year 20l4.
(Career Guide to lndustries 2006-07)
The lndian lT sector is growing rapidly and it has already made its
presence felt in all parts of the world. lT has a major role in strengthening
the economic and technical foundations of lndia. lndian professionals are
setting up examples of their proficiency in lT, in lndia as well as abroad.
What is information technology?
Information Technology Association of America (lTAA) defined by
"the study, design, development, implementation, support or management
of computer-based information system, particularly software applications
and computer hardware."
lT deals with the use of electronic computers and computer software to
convert, store, protect, process, transmit, and securely retrieve information.
Information technology is a general term that describes any technology that
helps to produce, manipulate, store, communicate, and/or disseminate
information
INDIAN IT SECTOR
The lnformation Technology (lT) sector in lndia holds the distinction of
advancing the country into the new-age economy. The growth momentum
attained by the overall economy since the late l990s to a great extent can
be owed to the lT sector, well supported by a liberalized policy regime with
reduction in telecommunication cost and import duties on hardware and
software. Perceptible is the transformation since liberalization - lndia today
is the world leader in information technology and business outsourcing.
Correspondingly, the industry's contribution to lndia's GDP has grown
significantly from l.2% in l999-2000 to around 4.8% in FY06, and has
been estimated to cross 5% in FY07. The sector has been growing at an
annual rate of 28% per annum since FY0l.
lndian lT companies have globally established their superiority in terms of
cost advantage, availability of skilled manpower and the quality of services.
They have been enhancing their global service delivery capabilities through
a combination of organic and inorganic growth initiatives. Global giants like
Microsoft, SAP, Oracle, Lenovo have already established their captive
centers in lndia. These companies recognize the advantage lndia offers
and the fact that it is among the fastest growing lT markets in the Asia-
Pacific region.
IT CATAGORIES
The sector can be classified into 4 broad categories - IT Services
Engineering Services ITES!"#O Services E "$siness%
IT Services can further be categorized into lnformation Services (lS)
outsourcing, packaged software support and installation, systems
integration, processing services, hardware support and installation and lT
training and education.
Engineering Services include lndustrial Design, Mechanical Design,
Electronic System Design (including Chip/Board and Embedded Software
Design), Design Validation Testing, lndustrialization and Prototyping.
IT Ena&le' Services are services that use telecom networks or the
lnternet. For example, Remote Maintenance, Back Office Operations, Data
Processing, Call Centers, Business Process Outsourcing(BPO),
KNOWLEDGE PROCESS OUTSOUEClNG (KPO)etc.
E "$siness (electronic business) is carrying out business on the lnternet; it
includes buying and selling, serving customers and collaborating with
business partners.
STRUCTURE O( IT SECTOR
The lndian information technology industry has played a key role in putting
lndia on the global map. Thanks to the success of the lT industry, lndia is
now a power to reckon with. According to the National Association of
Software and Service Companies (NASSCOM), the apex body for software
services in lndia, the revenue of the information technology sector has
risen from l.2 per cent of the gross domestic product (GDP) in FY l997-98
to an estimated 5.8 per cent in FY 2008-09.
lndia's lT growth in the world is primarily dominated by lT software and
services such as Custom Application Development and Maintenance
(CADM), System lntegration, lT Consulting, Application Management,
lnfrastructure Management Services, Software testing, Service-oriented
architecture and Web services.
The government expects the exports turnover to touch US$ 80 billion by
20ll, growing at an annual rate of 30 per cent per annum, from the earlier
few million dollars worth exports in early l990s.
As per NASSCOM's latest findings:
lndian lT-BPO sector grew by l2 per cent in FY 2009 to reach US$
7l.7 billion in aggregate revenue (including hardware). Of this, the
software and services segment accounted for US$ 59.6 billion.
lT-BPO exports (including hardware exports) grew by l6 per cent
from US$ 40.9 billion in FY 2007-08 to US$ 47.3 billion in FY 2008-
09.
Moreover, according to a study by Springboard Research, the lndian lT
services market is estimated to remain the fastest growing in the Asia-
Pacific region with a CAGR of l8.6 per cent.
Despite the uncertainty in the global economy, the top three lT majors
lnfosys, TCS and Wiprohave seen revenue growth from all important
sources of income: from the North American and European regions, in the
financial services vertical and from application maintenance and
development (ADM) offerings between fiscal years 2008 and 2009.
Indias IT Industry (US$ bn)
CONTRI"UTION O( IN(OR)ATION
TEC*NO+OG, IN INDIAN ECONO),
The information technology (lT) industry has increased its contribution to
the country's GDP from l.2 per cent in l997-98 to 5.2 per cent in 2006-07,
according to a Nasscom-Deloitte study.
The report, titled lndian lT lndustry: lmpacting the Economy and Society,
further says that export earnings in 2007-08 will hit $40 billion, a growth of
36 per cent. Meanwhile, direct employment is expected to be 2 million in
2007-08, growing at a CAGR of 27 per cent in the last decade.
The report, while bringing forth the contribution of the lT/lTeS sector, points
out that the industry has been the trigger for many 'firsts' and has
contributed not only to unleashing the hitherto untapped entrepreneurial
potential of the middle class but also taking lndian excellence to the global
market.
)A-OR CO)#ANIES
S% No% Com.anies
l.
TCS
2.
lnfosys
3.
Wipro
4.
HP
5.
lBM
6.
Satyam
7.
HCL
8.
Patni
9.
Polaris
l0.
Cisco
ll
KPlT Cummins
l2
l-Flex Solutions
l3
Microsoft
l4
Dell
l5
Larsen and Toubro
Ty.e
Public (BSE: 532540)
Subsidiary of Tata Group
(o$n'e' l968
*ea'/$arters Mumbai, lndia
0ey .eo.le
Ratan Tata (Chairman)
S Rama'orai (Vice Chairman)
N Chan'rase1aran (CEO & MD)
S )ahalingam (Executive Director & CFO)
#hiro2 3an'revala (Executive Director & Head, Global
Corporate Affairs)
A4oy )$1her4ee (VP & Head, Global Human Resources)
In'$stry Software services
#ro'$cts
TCS Bancs
Digital Certification Products
Healthcare Management Systems
Services
lT Consulting
lT Services
Outsourcing
BPO
Software Products
Reven$e US$ 5.70 billion (2009)
Net income US$ l.25 billion (2009)
Total assets US$ 4.36 billion (2009)
Em.loyees l49,654 (As on 3lst Dec, 2009)
#arent Tata Group
We&site TCS.com
Ty.e
Public
BSE: 500209
NASDAQ: lNFY
(o$n'e' July 2, l98l
(o$n'er5s6
N R Narayana Murthy
Nandan Nilekani
N. S. Raghavan
Kris Gopalakrishnan
S. D. Shibulal
K. Dinesh
Ashok Arora
*ea'/$arters Bangalore, lndia
0ey .eo.le
N R Narayana )$rthy
(Chairman)
0ris Go.ala1rishnan
(CEO) & (MD)
S% D% Shi&$lal
(COO) & (Director)
In'$stry Software services
#ro'$cts lT Services
Services
lnformation technology consulting services and
solutions
Reven$e $ 4.663 billion (2009)
[l]
O.erating
income
$ l.374 billion (2009)
[l]
Net income $ l.28l billion (2009)
[l]
Total assets $ 4.376 billion (2009)
[l]
Total e/$ity $ 3.784 billion (2009)
[l]
Em.loyees l03,905 (2009)
[2]
Divisions
lnfosys BPO
lnfosys Consulting
lnfosys Public Services
lnfosys Australia
lnfosys Brazil
lnfosys China
lnfosys Mexico
lnfosys Sweden
We&site lnfosys.com
Ty.e
Public
BSE: 507685
NYSE: WlT
(o$n'e' l945
(o$n'er5s6 M. H. Premji
*ea'/$arters Bangalore, Karnataka, lndia
0ey .eo.le
A2im #rem4i (Chairman)
Girish #aran4.ye (joint CEO)
S$resh 3as7ani (joint CEO)
SA S$'arshan
In'$stry lT Services
Services
lT Consulting
Business Process Outsourcing
Product Engineering Solutions
Technology lnfrastructure Services
Reven$e US$ 4.98 billion (2009)
Net income US$ 0.82 billion (2009)
Total assets US$ 5.38 billion (2009)
Em.loyees 98,39l (As on 27 October, 2009)
We&site Wipro.com

TCS is the market leader in lT sector in lndia and Other major companies
like Wipro, lnfosys, Accenture and lBM are the major market share in the
economy.
The revenue of TCS is now US $ 5.70 billion it is more than the other major
companies. The graph shows highest market price of the company.

SWOT ANA+,SIS
Strengths
Highly skilled human resource
Low wage structure
Quality of work
lnitiatives taken by the Government
(setting up Hi-Tech Parks and
implementation of e-governance
projects)
Many global players have set-up
operations in lndia like Microsoft,
Oracle, Adobe, etc.
Following Quality Standards such as
lSO 9000, SEl CMM etc.
English-speaking professionals
Cost competitiveness
Quality telecommunications
infrastructure
lndian time zone (24 x 7 services to
the global customers). Time
difference between lndia and
America is approximately l2 hours,
which is beneficial for outsourcing of
work.

Wea1nesses
Absence of practical knowledge
Dearth of suitable candidates
Less Research and Development
Contribution of lT sector to lndia's GDP is
still rather small.
Employee salaries in lT sector are
increasing tremendously. Low wages benefit
will soon come to an end.

O..ort$nities
High quality lT education market
lncreasing number of working age
people
lndia 's well developed soft
infrastructure
Upcoming lnternational Players in the
market

Threats
Lack of data security systems
Countries like China and Philippines
with qualified workforce making
efforts to overcome the English
language barrier
lT development concentrated in a few
cities only

GROWT* O( IT SECTOR
IT in'$stry8 on a stea'y gro7th trac1
The total revenues for the lndian lT industry were estimated to touch US$
7l.7 billion in 2008-09.
The lndian lT industry has been growing at a compound annual growth
rate (CAGR) of 27 per cent for the last five years.
Contribution of lT industry to lndia's gross domestic product (GDP) has
grown from l.2 per cent in l997-08 to an estimated 5.8 per cent in 2008-
09.
The total revenues from export were expected to reach US$ 47.3 billion in
2008-09.
The total exports have been growing at a CAGR of 28.7 per cent over the
last five years.
During this period 2008-2008, direct and indirect employment was
expected to reach 2.23 million and eight million, respectively.
Domestic market revenues were expected to touch US$ 24.3 billion in
2008-09.
Domestic market revenues have been growing at a CAGR of 24 per cent
for the last five years.

RE3ENUES ", SEG)ENT 9INDIAN IT INDUSTR,
CAGR: 27 per cent
INDIA )AINTAINS +EAD IN ITES!"#O
lndian lT/lTeSsector has matured considerably with its


expansion into varied verticals

well differentiated service offerings
increasing geographic penetration
lndia's importance among emerging economies, both as a supply and
demand centre, is fuelling further lT/lTeSgrowth
Continues to be one of the fastest growing industries in lndia; while lndia
maintains its leading position as a strategic offshoringdestination for
multinationals worldwide
The lndian lTeS-BPO (domestic and exports) revenues are estimated at
US$ l4.7 billion and the sector grew at a rate of l8.9 per cent in 2008-09
IT SER3ICES8 ANC*OR SEG)ENT (OR T*E
SECTOR
The lndian lT services market grew by 23 per cent between 2005-06 and
2008-09 and the revenues are estimated at nearly US$ 8.3 billion in 2008-
09.
The banking, financial services and insurance (BFSl) vertical continues to
account for the largest share of lT/lTeSservices at 4l per cent.
Hi-Tech/ telecom vertical accounts for the second-largest share of the pie
at 20 per cent.
Other verticals such as manufacturing, retail, media and healthcare are
rapidly gaining pace.
%Domestic lT-lTeSmarket revenues have been growing at a CAGR of 23
per cent between 2005-2006 and 2008-09 and were expected to reach
US$ 24.3 billion in 2008-09.
Domestic lT-BPO revenues grew by 24 per cent in and were expected to
touch US$ 2 billion in 2008-09.
Hardware accounted for about 49 per cent of the total domestic lT-BPO
spends in 2008-09.
ITeS!"#O8 o$tso$rcing gro7th story
lndian lTeS industry grew at a rate of l8.2 per cent in 2008-09 to reach
revenues of US$ l4.8 billion.
Exports accounted for 87 per cent of the revenues and grew at a rate of l8
per cent in 2008-09 to reach US$ l2.84 billion.
Services exports account for nearly 67.7 per cent of total lT/lTeSsector
exports in 2008-09.
The concept of outsourcing is increasingly gaining acceptance even in the
more conservative markets around the world.
lndustry has graduated to providing a high proportion of voice-based
services and a range of back-office processing activities.
Scope of services have expanded in the last three to four years to include
increasingly complex processes involving rule-based decision making and
research services requiring informed individual judgment.
GROWT* IN E)#+O,)ENT
The bar chart shows that the recruitment of engineers and lT professionals
in the industry is growing at the Compound Annual Rate of l4.5%
approximately.
ln the FY06, the direct employment in the lT-lTES sector was l.3 million
people and the indirect employment was 3 million approximately.
Tren's in Salary *i1es
Along with abundant growth opportunities, lT sector is one of the highest
paying sectors. The average increase in salary in lT sector across the
levels was around l6% and the average increase in the lTeS BPO sector
across the levels was in between l6%-l8% Requisites for balanced
salaries -
1 End to poaching
1 Review of compensation according to the skills
1 Developing talent in-house
1 Entry of talented freshers in the industry

GOR3ERN)ENT INITIATI3E : #O+ICIES
Soft7are Technology #ar1s of In'ia 5ST#I6 7as set$. &y the
government in ;<<; to .rovi'e8
Fiscal benefits like tax holidays to attract investment into the industry
Basic infrastructure
Singlewindow clearances for setting up Export Oriented Units (EOUs)
Virtual model allows firms to avail benefits without restrictions on location.
#rogressive .olicy reform 5fiscal=tra'e=other):
No FDl restrictions.
Fiscal reforms (international taxation, overseas investment, etc.) to
facilitate ease of international transactions introduced.
Recent initiatives8
Area limit exemptions for the lT-BPO sector in the SEZ policy.
Special emphasis on talent and infrastructure development .
lnfrastructure development; provisions designed to complement the
STPl scheme.
The government set up the National Taskforce on lnformation
Technology and Software Development with the objective of framing
a long term National lT Policy for the country.
Enactment of the lnformation Technology Act, which provides a legal
framework to facilitate electronic commerce and electronic
transactions.
The government-led National e-Governance Program, has played an
important role in increasing internet penetration in rural lndia.
I)#ACT O( IT SECTOR
Im.act on Society
A society can also refer specifically to any group of people, other animals
and/or plants and the interactions within that group. This can be anything
from a small neighborhood to the entire global community. Religion,
ethnicity, interests, political opinions or other relating factors may help form
a group of people.
Common Tra'itions
ln the context of this report it is helpful to highlight a difference between
"traditions" and "activities/interests". Tradition can be defined as the
following:
"An inherited, established, or customary pattern of thought, action, or
behaviour (as a religious practice or a social custom). Cultural continuity in
social attitudes, customs, and institutions."
C$lt$ral Contin$ity
Social attitudes have changed in that citizens of a society now expect the
various elements of that society to be better informed than previously. They
also expect to be able to access more information about a specific product,
service or organization so that they can make informed decisions with
regard to their interactions with that entity.
Instit$tions
The word institutions can incorporate a wide variety of organizations. For
the purposes of this report the institutions we will examine will be:
Governments,
Commercial businesses,
News & media organizations,
Educational organizations.
The focus is on how information technology development has improved the
processes by which these institutions accomplish their tasks or goals.
Governments
The government of a nation is comprised of many varied institutions.
However developments in information technology have helped
governments to improve their "service" to their citizens. lnformation
technology has also had a major impact on the defense capabilities of
governments. This covers both a government's capability to wage war and
their intelligence gathering capability. Advances in weapons technology
and weapons design have increased the effectiveness of various
governments' armed forces. For example it would have been impossible to
design aero planes such as the B2 Bomber if it were not for the advances
made in information technology. The B2 bomber relies on a "continuous
curvature" design to minimize radar signature. lt would have been
impossible to design or build this machine without the development of
computer modeling techniques.
Commercial "$sinesses
The advances in information technology have heavily influenced
commercial businesses in several areas. The most important role of
information technology in a commercial business, however, is to provide a
commercial advantage. Advances such as computer-aided design,
relational database technologies, spreadsheets and word processing
software provide a commercial benefit to the business, as does automation
of manufacturing processes (which Sara-Lee did in l964). Advances in
information technology over the last thirty years have lead to the television.
Ne7s : )e'ia Organi2ations
Due to the nature of news and media organizations, information
technologies have particular relevance to them. As noted earlier,
"lnformation technology is the technology used to store, manipulate,
distribute or create information". News and media organizations are
intimately acquainted with each of these elements of information
technology. This report focuses on the distribution and creation of
information.
E'$cational Organi2ations
The developments that have occurred in information technology have had
many influences on educational establishments. The distribution of
information is not the only concern of educational establishments.
Im.act of Information Technology an' Electronic Governance
E-governance is the effective way of governance utilizing lT to enhance
efficiency of government offices. The Government of lndia is devising new
policies to envisage a SMART simple, moral, accountable, responsible,
and transparent governance to bring nationwide reforms. The customs
department plans to use electronic data interface (EDl) to handle all
transactions relating to custom duties more efficiently, for which initiatives
have been taken by National lnformatics Center (NlC).
IT #olicy an' Em.hasis on E!governance
E-governance attempts in the country started with a bang. The initial
impetus came from the Ministry of lT, which produced a concept paper,
emphasizing the method by which the state has to deliver its services in the
information age. The paper envisages a SMART government and promises
to establish the required institutional mechanisms to facilitate initiatives
towards synergic utilization of lT to enhance effectiveness of governance.
NASSCOM conducted a survey of ten leading states (Andhra Pradesh,
Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Kerala, Uttar
Pradesh, Rajas than, Gujarat and West Bengal) and pointed out that all
these states have an lT policy, expert group, e-governance cell, and some
even have a separate lT department. Some of them have also included
specific policy measures that not only aim to facilitate lT investments in the
state but also focus on using lT for governance-related issues.
SCO#E O( IT INDUSTR, IN INDIA
The lT industry has great scope for people as it provides employment to
technical and non-technical graduates and has the capability to generate
huge foreign exchange inflow for lndia. lndia exports software and services
to approximately 95 countries in the world. By outsourcing to lndia, many
countries get benefits in terms of labor costs and business processes. Also,
the lndian companies are broadening the range of services being provided
to the customers, which is resulting in more off shoring. Talent acquisition,
development and retention initiatives taken by the companies have brought
down the employee attrition rates, thereby providing more stability to the
employees and increasing their job commitment.
Many financial institutions are providing funds for the expansion of lT and
lTeS businesses. ln order to support lT and lTES, the lndian Government
is also taking many steps. For example:
l. The Govt. has provided incentives including tax holiday up to 20l0 and
competitive duty structures.
2. The Govt. is trying to reduce the international communication cost.
3. lt is providing infrastructure support through organizations such as
software technology parks.
All these factors collectively create a number of opportunities in the lT
sector.
(UTURE O( IT SECTOR IN INDIA
lT will continue to gain momentum; telecom and wireless will follow the
trend. The immense expansion in networking technologies is expected to
continue into the next decade also. lT will bring about a drastic
improvement in the quality of life as it impacts application domains and
global competitiveness. Technologies that are emerging are Data
Warehousing and Data Mining. They involve collecting data to find patterns
and testing hypothesis in normal research. Software services that are being
used in outsourcing will go a long way.
(UTURE O##ORTUNITIES 8
Domestic mar1et
Overall size of the domestic market in 2008-09 was estimated to grow by
20 per cent and reach be US$ 24.3 billion
Domestic lT BPO spending grew by 40 per cent during 2008-09
The domestic market is picking-up, showing definite signs of breaking-out
of the trend of hardware linked growth with the contribution of software and
services exceeding that of hardware
Government is taking up e-governance initiatives and increasing its lT
spends/ outlays; allocation has increased from US$ 96 million in 2006-07 to
US$ l75 million in 2007-08, indicating increasing lT spends.
Demand for domestic BPO services increasing rapidly, with niche verticals
like healthcare and retail fast gaining traction apart from the traditional
verticals of BFSl and manufacturing.
Engineering8 a ne7 o$tso$rcing o..ort$nity
Global engineering services spend estimated at US$ 750 billion which is
expected to increase to more than US$l trillion by 2020
lndia's share is about US$ 4.9 billion of the US$ l2.8 billion outsourced
services in 2008-09; lndia is estimated to garner a share of about US$ 50
billion by 2020
Range of services include engineering and designing solutions across
diverse industry verticals like telecommunications, automotive,
construction, aerospace, utilities and industrial design
Labourcost arbitrage in this sector is about 60 per cent of the US
counterparts
Bechtel, General Motors, Ford, John Deere, Caterpillar, Silicon Automation
Systems, John Brown Engineering are a few global giants that have set up
their engineering services divisions in lndia
0no7le'ge #rocess O$tso$rcing 50#O6
The genesis of KPO followed BPO services in lndia, however KPO is now
growing at a rapid pace with MNCs setting up third party captive units for
data analytics, data modeling, etc.
CRlSlL estimates that the lndian KPO export market constitutes about
eight percent of lndian lTeSrevenues and employs nearly three percent of
the work force
Growth drivers for this business include high productivity of lndian
resources and growing adoption of KPO by Small and Medium Enterprises
(SMEs).
Opportunities span across several service offerings: legal process
outsourcing (LPO), financial and market research and engineering services
outsourcing, which are considered fast moving service offerings.
CONC+USION
Today, we are all in agreement that the world is becoming increasingly
dependent upon technology as is evidenced by the big role it is playing.
The lnternet has become a major shareholder. All developing nations can
derive tremendous advantages from this technology for updating the
knowledge of its researchers and scientists. The lndian software and
services industry has significantly helped to boost the lndian economy.
Society expects to be able to store information more than was previously
conceived. Society expects to be able to manipulate the information it has
for its own benefit, to increase understanding and discover new
relationships. Society expects to be able to distribute information quickly,
efficiently and cheaply. The Government of lndia has been working
gradually and successfully towards improving the lT policy climate in the
country.
"I"+OGRA#*,
We&sites8
www.ibef.org
www.nasscom.org
www.scribd.com
www.wikepedia.com
Articles:
From Business Standard Newspaper growth And
the opportunity of lT sector.