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STRATEGIC
REVIEW 2017
The IT-BPM Sector in India
STRATEGIC
REVIEW 2017
The IT-BPM Sector in India: Strategic Review 2017
Copyright ©2017
Published by
NASSCOM
NASSCOM is the premier trade body for the IT-BPM sector in India. It is a not-for-profit organisation and has
emerged as the authentic voice of this industry in India. It is also the single reference point for all information
on IT industry in India. NASSCOM publishes an annual edition of its Strategic Review to disseminate the latest
status of the industry performance.
Disclaimer
The information contained herein has been obtained from sources believed to be reliable. NASSCOM disclaims
all warranties as to the accuracy, completeness or adequacy of such information. NASSCOM shall have no
liability for errors, omissions or inadequacies in the information contained herein, or for interpretations thereof.
The material in this publication is copyrighted. No part of this report can be reproduced either on paper or
electronic media without permission in writing from NASSCOM. Request for permission to reproduce any part
of the report may be sent to NASSCOM.
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Forwarding/copy/using in publications without approval from NASSCOM will be considered as infringement of
intellectual property rights.
The IT-BPM Sector in India: Strategic Review 2017
Foreword
Technology disruption and its continued impact was felt in 2016 in even greater measure, brought about by the usual
uspects – IoT, Cloud, AI etc. As if that weren’t enough, we had the Brexit referendum and the American Presidential
Election, the outcomes of which were most unexpected, and threw global markets in a tailspin for some time. Inter-
estingly, these megatrends did nothing to slow down the steady march of digital and allied high-end technologies.
Driverless cars, Artificial Intelligence, intelligent personal assistants and robotics et al are all screaming for greater
visibility, as the din grows louder. This only reiterates that the process of globalisation in an interconnected world,
aided by technology, is not something that can be reversed. It should not even be attempted!
Against the proverbial backdrop of VUCA - arguably two times over - global technology industry saw fairly modest, yet
commendable growth, about 4%, after a couple of years of remaining flat. The global IT-BPM market stood at USD 1.2
trillion in 2016 (excl. hardware) driven by the age of customers, it propelled CIOs to invest in business technologies in
a bid to capture the always-shifting stickiness factor and sustain competitiveness.
The time has come to seriously examine the proposition – is software eating the world? Perhaps a few data points if
cited, may tilt the argument in its favour. Growth was experienced in the following sectors: IT Services (due to cloud);
BPM at 4% (increased adoption of BPaaS & RPA); packaged software at 6.2% was the highest, and Global R&D at a
little over 1%. Interestingly, but not belying expectations, the growth in hardware segment declined in 2016 (USD 971
billion) vis-à-vis 2015 (USD 973 billion) impacted by declining demand for PCs.
Global sourcing market growth continues to outperform IT-BPM spend growth; in 2016, global sourcing grew 1.7
times to reach USD 173-178 billion. India continued as the world’s No.1 sourcing destination with a healthy and
significant share of 55%.
Let us look closer home, geopolitical factors and the resultant headwinds have left its imprint on the Indian IT-BPM
industry as well. It was inevitable. FY2017 will see industry revenue touching USD 154 billion, up from USD 143 billion
in FY2016 and showing a growth of 8 per cent. In addition, eCommerce will fetch USD 33 billion. In its contribution to
the national exchequer, IT-BPM continues to fare favourably on several parameters - share in total service exports is
estimated at 49% and it contributes 7.7% to India’s GDP. Overall, the industry is estimated to employ nearly 3.9 million
people, an addition of 170,000 people (approx.) over FY2016.
In FY2017, IT-BPM exports from India is expected to reach USD 117 billion, a 7.6% Y-o-Y growth. ER&D continues to
be the fastest growing segment at 10.5%, driven by global OEMs increasingly embedding software & services into
their products. IT services growing at 7% is driven by growth in software testing and ISO. BPM exports, at 7.5% Y-o-Y
growth is being driven by cloud (BPaaS), mobility and advanced analytics. The trend and the factors contributing to
growth are similar to global markets, and encouragingly, at a faster rate.
In FY2017, India’s domestic IT-BPM market is likely to grow 8.5% Y-o-Y to reach USD 38 billion (excl. eCommerce).
Rapid digitisation and GST implementation is expected to further catalyse growth. With >375 million Internet
subscribers, India has the 2nd largest user base after China. It is most aggressive in global market shares across
segments, be it the number of internet users, smartphone users, app downloads, and online payments. There is
significant push from the government to go digital and recognised by the global technology giants. The year-end also
witnessed demonetisation of higher value notes, which is giving a significant boost to digital payments – leading to a
cashless, paperless economy.
The IT-BPM Sector in India: Strategic Review 2017
The enterprise imperative for going digital is fuelled by confluence of factors, including an expanding base of
demanding digital-savvy consumers, intensified competition from digital-savvy competitors and disruptive new-en-
trants. The necessity to stay ahead couldn’t have been more overpowering. Nonetheless, India is strongly placed to be
the digital transformation partner for global businesses. The sector comprises over 16,000 firms that span every
technology segment, with over 8,000 firms offering digital solutions. One of the very few large economies that has
been growing at more than 7%, and most commendably, it has sustained the position of being the world’s No. 1
preferred location for setting up technology business. India is also home to 4,750+ start-ups offering a ready ecosys-
tem for collaboration and partnerships in niche technology areas.
Team NASSCOM presents the Strategic Review 2017, which you now hold in your hands. As you read on, you will get
a fine flair of the industry’s current position, its competitive instincts, and also draw comfort that business fundamen-
tals are robust enough to take us to our projected industry revenue of USD 200 – 225 billion by 2020.
R Chandrashekhar
President
NASSCOM
The IT-BPM Sector in India: Strategic Review 2017
ACKNOWLEDGEMENTS
The Strategic Review 2017: The IT-BPM Sector in India report is NASSCOM’s annual publication that analyses the
performance of the industry, traces its continual evolution and highlights key trends that are influencing and driving
this sector forward. The NASSCOM Research team relies heavily on both primary and secondary research, internal
and external research reports, and reaches out to stakeholders across the board – industry, government, research
firms, etc. – for their inputs that add value to the report. We would like to express our sincere gratitude to all these
stakeholders for their contribution to this report.
First, we would like to thank all member organisations of NASSCOM, who went out of their way to provide detailed
statistics for their individual organisations. We would like to thank our executive council for their valuable counsel
and guidance.
We would like to acknowledge the inputs from 451 Research, Accenture, A.T. Kearney, ASSOCHAM, Battelle, BCG,
BMR Advisors, BNP Paribas, Capgemini, CLSA, Constellation Research, Contify, Credit Suisse, Deloitte & Touche,
Dimension Data, Dun & Bradstreet, E&Y, Everest Group, Forrester, Frost & Sullivan, Gartner, Goldman Sachs, Grant
Thornton, Hackett Group, HfS Research, HSBC, IAMR, IBEF, IDC, IESA, IMF, IMRB, ISG, Kotak, KPMG, McKinsey & Co.,
Morgan Stanley, Motilal Oswal, PwC, RateGain, RBI, Strategy&, TechCrunch, Tracxn, TRAI, UBS, ValueNotes Research,
Venture Intelligence, World Bank, World Economic Forum, YourStory, Zinnov Research, etc.
NASSCOM has and continues to work on various reports on the IT-BPM sector and relevant information has been
used from these reports in the Strategic Review 2017.
We are grateful to the officers of MeitY, Ministry of Commerce and Industry, Department of Industrial Policy and
Promotion, STPI and other departments/ministries of Government of India and state governments who, as always,
willingly provided us with relevant information.
The IT-BPM Sector in India: Strategic Review 2017
Table of Content
Executive summary 01
IT-BPM industry segmentation 06
Chapter 1
IT-BPM Performance 07
IT services 33
Business Process Management (BPM) 59
ER&D 81
Software products 107
eCommerce 136
Chapter 2
Measuring India's Digital Journey 149
Chapter 3
Enterprise Digital Transformation 172
Chapter 4
Digital India 190
Appendix
Tables 212
Glossary 217
Abbreviations 221
The IT-BPM Sector in India: Strategic Review 2017
Worldwide, 2016 has been a year of continued technology disruptions (IoT, cloud, AI, etc.) and political upheavals led
by the UK voting to leave the EU (Brexit) and the US Presidential elections. The year also saw a decline in GDP of key
markets (USA, UK and Japan). While the implications of the political changes are yet to be fully felt, technology
implications are visible everywhere. Driverless cars are now a reality, driverless trucks are being beta-tested in a few
cities around the world; artificial intelligence has enabled intelligent personal assistants and robotics has found its
way into household chores, hospitality industry, media, and medical fields
BPM
Packaged
software
Hardware
ER&D
Global sourcing market growth continues to outperform IT-BPM spend growth; in 2016, global sourcing grew 1.7X to
reach USD 173-178 billion. India continued as the world’s No.1 sourcing destination with a share of 55 per cent. New
delivery centres set up worldwide in 2016 grew ~32% to 258 centres with 15% being set up in India and over 53% in
Europe and Latin America a testament of the growing nearshore model.
1
The IT-BPM Sector in India: Strategic Review 2017
BPM
Hardware
Total
2
The IT-BPM Sector in India: Strategic Review 2017
3
The IT-BPM Sector in India: Strategic Review 2017
The Indian IT-BPM industry is adapting to and in many ways shaping, the digital transformation of the global
technology and business services environment. The phenomenon is pervasive – potentially disruptive impact across
business segments (traditional and new), relatively location independent and highly contingent on skill/ capability
supply, and is redefining engagement and business models – creating opportunities for various types players (MNC /
Indian and large / SME / new ventures).
IT-BPM firms are focusing significant resources towards developing their digital capabilities and reorganising
themselves to catch the digital opportunity. Market evolution and the service provider responses are likely to lead the
way to a new face of the IT-BPM industry.
Adoption of digital technologies at the enterprise level in India is still at a very nascent stage. Spend on social media
highest; while security, analytics spend is less than 5% of the total IT budget. BFSI, telecom, retail are already on the
digital transformation journey and the progression path is towards becoming a digital enabled organization, while
healthcare is in the early stages of adopting technologies and is yet to define a digital strategy at the organisation level.
4
The IT-BPM Sector in India: Strategic Review 2017
Outlook
By 2020, India’s IT-BPM sector total revenue is projected to reach USD 200-225 billion and between USD 350-400
billion by 2025. Digital technologies will continue to define the sector and revenue from these is likely to have a 23
per cent share by 2020 and >38 per cent by 2025. Indian service providers face a significant opportunity as digital
technologies continue to be embedded in an ever widening range of products and services.
To avail this growing opportunity, firms have to develop offerings along new digital service lines, while re-inventing
traditional declining service lines. The need of the hour is to invest in a portfolio with fundamentally different
economics, putting more resources towards transformational and disruptive technologies, re-skill the existing
resource pool, build capabilities and forge partnerships with niche players and platforms to develop an ecosystem to
deliver digital solutions.