SECTOR REPORT: IT & ITes Industry

By Finance Club, JBIMS

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 INDEX
SR.NO TOPIC PAGE NO
1 PESTLE ANALYSIS 3
2 CURRENT TRENDS & COMPOSITION 8
3 POLICIES 11
4 PROJECTIONS 12
5 TOP PLAYERS IN THIS INDUSTRY 16
6 RECENT NEWS 19
7 REFERENCES 20

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 PESTLE ANALYSIS
1. Political Analysis
‘IT Sector More Driven By Politics Than Technology Today’. The Indian Information
Technology (IT) sector is witnessing its worst slowdown since the global financial
crisis of 2008. The sector is facing headwinds due to political uncertainties in the
United States (US) and parts of Europe. A report by National Association of Software
and Services Companies (NASSCOM), premier trade body for the IT-BPM sector in
India says, “India’s IT-BPM industry is feeling the impact of the global slowdown and
global political uncertainties as clients go slow on their decision-making and
investment processes. The industry is projected to grow nearly 7.8 per cent in
FY2017.” Further, the growth forecast for the financial year 2018 is also estimated to
hover around just 7-8 per cent, which means the growth is likely to remain under
pressure. This growth forecast is the lowest in the last 13 years, except for 2010,
when the industry faced the consequences of financial crisis.
Some of the major initiatives taken by the government to promote IT and ITeS sector
in India are as follows:
1.The government has identified Information Technology as one of 12 champion
service sectors for which an action plan is being developed. Also, the government has
set up a Rs 5,000 crore (US$ 745.82 million) fund for realising the potential of these
champion service sectors.
2.As a part of Union Budget 2018-19, NITI Aayog is going to set up a national level
programme that will enable efforts in AI^ and will help in leveraging AI^ technology
for development works in the country.
3.In the Interim Budget 2019-20, the Government of India announced plans to launch
a national programme on AI* and setting up of a National AI* portal.
4.National Policy on Software Products-2019 was passed by the Union Cabinet to
develop India as a software product nation.
TL;DR: The curb on H-1B visa, increasing emphasis on automation and an attempt to
reduce cost of production has led Indian IT sector go through its worse phase since
the 2008 global financial crisis.

2. Economic Analysis
India is the world's largest sourcing destination, accounting for approximately 55 per
cent of the US$ 185-190 billion market in 2017-18. India’s highly qualified talent pool
of technical graduates is one of the largest in the world and the country has a low-
cost advantage by being 5-6 times inexpensive than US. India is the second-fastest

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 digitising economy amongst 17 leading economies of the world. The cloud market in
India is expected to grow three-fold to Rs 49,621 crore (US$ 7.1 billion) by 2022 with
the help of Growing adoption of Big Data, analytics, artificial intelligence and Internet
of Things (IoT), according to Cloud Next Wave of Growth in India report. At Rs
9,57,493 crore (US$ 137 billion) in 2018-19. India ‘s IT sector market is projected to
reach Rs 6,98,900 crore (US$100 billion) by 2025. Export revenue from digital
segment forms about 20 per cent of the industry’s total export revenue. India’s IT
industry contributed around 7.7 per cent to the country’s GDP and is expected to
contribute 10 per cent of India’s GDP by 2025.

India’s IT-BPM sector is expected to expand to US$ 350 billion by 2025 and BPM is
expected to account for Rs 3,49,450-3,84,395 crore (US$ 50-55 billion) out of the
total revenue. IT BPM industry revenues was estimated at around Rs 12,37,053 crore
(US$ 177 billion) in FY2018-19 with a growth rate of 6.1 per cent. Moreover, revenue
from the digital segment is expected to form 38 per cent of the total industry
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 revenue by 2025 whereas, digital economy is estimated to reach Rs 69,89,000 crore
(US$ 1 trillion) by 2025. IT industry employs nearly 3.97 million people in India of
which 105,000 were added in FY18. The industry added around 105,000 jobs in FY18
and is expected to add over 250,000 new jobs in 2019. Hardware exports from India
are expected to grow at 7-8 per cent in FY19. The export sector crossed Rs 9,57,493
crore (US$ 137 billion) of revenues and marginally grew at the rate of 7-9 per cent in
FY19. The computer software and hardware sector in India attracted cumulative
Foreign Direct Investment (FDI) inflows worth Rs 2,60,200 crore (US$ 37.23 billion)
between April 2000 and March 2019 and ranks second in inflow of FDI, as per data
released by the Department for Promotion of Industry and Internal Trade (DPIIT).PE
investments in the sector stood at Rs 11,881 crore (US$ 1.7 billion) in Q1 2019 and
venture capital (VC) investments in the IT & ITeS sector stood at Rs. 461 crore (US$
66.0 million) during Q1 2019. The Government of India has extended tax holidays to
the IT sector for software technology parks of India (STPI) and Special Economic
Zones (SEZs). As of May 2019, there were 273 approved SEZs across the country
where 136 are exporting SEZs. Further, the country is providing procedural ease and
single window clearance for setting up facilities. On May 2019, the Ministry of
Electronics and Information Technology (MeitY) launched the MeitY Startup Hub
(MSH) portal. Also, the government has identified information technology as one of
the 12 champion service sectors for which an action plan is being developed. It is
setting up a Rs 5,000 crore (US$ 745.82 million) fund for realising the potential of
these champion service sectors.

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 3. Social Analysis
India’s social state puts it at an advantage in the global IT sector. India has low cost
advantage by being 5-6 times inexpensive than US. It’s a preferred destination for IT
& ITes in the world & continues to be a leader in the global sourcing industry with
55% market share.
IT continues to be a driving force towards all aspects connected with our lives. While
a particular technology may become obsolete and a particular company specializing
in it may suffer, the obsolete technology can only get substituted by a newer
technology offered by the same/different player in the IT/ITES industry.

4. Technological Analysis
Technologies, such as telemedicine, health, remote monitoring solutions and clinical
information systems, would continue to boost demand for IT service across the
globe. IT sophistication in the utilities segment and the need for standardization of
the process are expected to drive demand. Digitization of content and increased
connectivity is leading to a rise in IT adoption by media.
Indian IT companies have adopted the global delivery model. They are setting up
development centers in Latin America, South East Asia and Eastern European
countries to take advantage of low cost and also cater to the local market. In the US,
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 such centers will help mitigate the risks of the new immigration bill and increase the
probability of winning projects in highly regulated sectors such as healthcare,
government services, utilities etc.
Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra, are diversifying
their offerings and showcasing leading ideas in blockchain, artificial intelligence to
clients using innovation hubs, research and development centres, in order to create
differentiated offerings.

5. Environmental Analysis
There are different issues of environment and its protection and they gained
prominence. The increasing use of IT equipments and tools threatened the
environmental balance and it is great danger for the sustainability of life and nature.
Mobile phones are basically cordless phones and they receive phone calls and SMS
through waves and these waves are heavy and dangerous for the health of people.
The mobile phone operating companies have installed the signal towers, which
receives and send the waves when the calls are made. The excessive use of mobile
phone has made life dangerous and people are suffered from different diseases. It
becomes dangerous to put the smart phone in pocket as it can vibrate and its
vibration can be threat for hearts, stomach and mental problems.
6. Legal Analysis
The spread of IT industry needs implication of some necessary rules and regulations,
which can make its use regular and under law. The IT tools are used for different
illegal activities and terrorists use different social media sites to convey their
message and there was not proper arrangement to tackle their phone calls and
messages. The illegal use of IT service and different sites should be banned under
strict cyber crime regulations. In most of the developing countries, IT technology is
used for various illegal activities. However, various developed countries have
controlled the massive illegal use of phone and internet and now calls and SMS are
traced. They introduced rules and regulations against these cyber crimes and they
also create awareness among their people against cyber crimes.

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 CURRENT TRENDS & COMPOSITION

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 1. Mobile Technology
We have seen that mobile devices are becoming more consistent within the current
global environment. It doesn’t mean that there will be ‘more mobile users’ but also
what is behind the entire trend. The world is moving away from the traditional brick
and mortar style commerce, and e-commerce is set to grow even more in 2018.
India’s e-commerce is set to hit $18-$20 billion in 2018 with mobile sales taking up a
whopping 70% of this chunk. We’ll be seeing an increase in new mobile apps,
support and services and of course coding (of which India is one of the leading
providers).
Mobile will also be integrating into different areas such as health, data collection,
and communication. As we see this trend rise, we will begin to see more Indians
getting mobile devices and incorporatings mobile related services to cater to a
growing global demand.
2. Smart Cities
As our technology becomes more intelligent and cheaper, integrating it into every
aspect of society is only a natural step. The Internet of Things, a concept is just
becoming more pivotal in the development of cities. Smart Cities will take all of the
available technologies and streamline them into a seamless experience for the
individual. It will collect data and provide relevant information to assist with an
individual’s decision-making process. If you need parking, finding a specific product
or service or just turning on and off the street lights for power conservation, the IoT
environment will only get bigger. Currently, there are roughly 20 cities that have a
substantial action plan to incorporate this into a real-world scenario. As you know,
the technical workforce in India is vast, and as the rest of the world adopts Smart
Cities, we will see more service providers come into play to fill the void. The
government wants to develop an IoT worth $15 billion over the next six years. It is
one trend that is going to happen; we’ll just have to wait and see how it implements
as time advances.
3. Cyber Security
It is something that is becoming more important as we transition our sensitive data
to technology. Both the government and companies have placed a heavy emphasis
on cyber security. It includes deploying solutions for data breaches perhaps through
blockchain technology that is currently enjoying a lot of global attention. Encryption
is also a critical aspect of cyber security. As we become more integrated with
technology, encryption processes will become more necessary. People are now
becoming more focused on privacy and keeping our information safe from unwanted
eyes.
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 4. Cloud Computing
The cloud has been around for years. However, there are still many benefits yet to
discover. Cloud technology will play a pivotal role over the next few years to sustain
the increase in mobile technologies. Not only is cloud technology cheaper than
storing all your data yourself, but it also provides exciting opportunities for
companies to increase interpersonal efficiency, allowing people to speed up
production, reduce costs and turn more significant profits. India will be investing and
developing greater cloud-related solutions over the next few years.
5. Artificial Intelligence
Indian IT industry is keeping its hopes high for the new year with plans afoot for big
investments in automation and artificial intelligence. For industry body Nasscom,
2018 had been the year of ‘Digital at Scale’ as IT firms focused on leveraging new
technologies and creating right skills with help from innovation, policies and
partnerships. The industry body has projected exports to grow at 7-9% for 2018-19,
almost the same as the previous fiscal, but domestic revenue is likely to grow faster
at 10-12% and this may make the New Year transformative, with overseas funds
accounting for the lion’s share so far.

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 POLICIES
 The Income Tax Act, 1961, offers a number of incentives to IT and ITES companies,
including a 100% exemption on profits from export of computer software till 2010 and a
higher rate (60% compared to 15% for plant, machinery and equipment) of depreciation
on computers and software.
 Software Technology Parks of India (STPI), an autonomous organization under the aegis
of Ministry of Communications and Information Technology, government of India offers
a number of concessions to STPI registered IT and BPO units like 100% import duty
exemption on capital goods imports, reimbursement of Central Sales Tax (CST) paid on
capital goods purchases from the Domestic Tariff Area (DTA).
 Many state governments have started the practice of extending various financial
concessions/benefits linked to the level of employment creation. For example,
government of Andhra Pradesh offers a rebate of USD$450 on the land cost for every
job created provided at least 333 jobs are created per acre of land.
 Given India’s federal structure, a number of state/provincial governments also offer
additional financial incentives to IT and BPO units setting up operations in the region.
Typical incentives offered include capital investment and interest subsidies and
subsidies on electricity tariff.

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 PROJECTIONS

Introduction
The global sourcing market in India continues to grow at a higher pace compared to the IT-
BPM industry. The global IT & ITeS market (excluding hardware) reached US$ 1.2 trillion in
2016-17, while the global sourcing market increased by 1.7 times to reach US$ 173-178 billion.
India remained the world’s top sourcing destination in 2016-17 with a share of 55 per cent.
Indian IT & ITeS companies have set up over 1,000 global delivery centres in over 200 cities
around the world. More importantly, the industry has led the economic transformation of the
country and altered the perception of India in the global economy. India's cost
competitiveness in providing IT services, which is approximately 3-4 times cheaper than the
US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing
market. However, India is also gaining prominence in terms of intellectual capital with several
global IT firms setting up their innovation centres in India. The IT industry has also created
significant demand in the Indian education sector, especially for engineering and computer
science. The Indian IT and ITeS industry is divided into four major segments – IT services,
Business Process Management (BPM), software products and engineering services, and
hardware. India has come out on top with the highest proportion of digital talent in the
country at 76 per cent compared to the global average of 56 per cent!
Market Size
The internet industry in India is likely to double to reach US$ 250 billion by 2020, growing to
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7.5 per cent of gross domestic product (GDP). The number of internet users in India is
expected to reach 730 million by 2020, supported by fast adoption of digital technology,
according to a report by National Association of Software and Services Companies (NASSCOM).
Indian IT exports are projected to grow at 7-8 per cent in 2017-18, in addition to adding
130,000-150,000 new jobs during the same period.
Indian IT and BPM industry is expected to grow to US$ 350 billion by 2025 and BPM is
expected to account for US$ 50-55 billion out of the total revenue.
E commerce market in India is set to grow at 30 per cent annually to hit US$ 200 billion gross
merchandise value by 2026.
Indian technology companies expect India's digital economy to have the potential to reach
US$ 4 trillion by 2022, as against the Government of India's estimate of US$ 1 trillion.
Rise in mobile-phone penetration and decline in data costs will add 500 million new internet
users in India over the next five years creating opportunities for new businesses, as per private
equity and venture capital firm Omidyar Network.
Digital payment in India is expected to grow from 32 per cent in 2013-14 to 62 percent in
2017-18 in terms of volume of transactions.
Employees from 12 Indian start-ups, such as Flipkart, Snapdeal, Makemytrip, Naukri, Ola, and
others, have gone on to form 700 start-ups on their own, thus expanding the Indian start-up
ecosystem.! India ranks third among global start-up ecosystems with more than 4,200 start-
ups.
Total spending on IT by banking and security firms in India is expected to grow 8.6 per cent
year-on-year to US$ 7.8 billion by 2017!
Personal Computer (PC) shipments from India grew 20.5 per cent y-o-y to reach 3.03 million
during July-September 2017. The growth was backed by strong consumer demand and special
projects.
The public cloud services market in India is slated to grow 35.9 per cent to reach US$ 1.3
billion according to IT consultancy, Gartner. Increased penetration of internet (including in
rural areas) and rapid emergence of e-commerce are the main drivers for continued growth of
data centre co-location and hosting market in India. The Indian Healthcare Information
Technology (IT) market is valued at US$ 1 billion currently and is expected to grow 1.5 times by
2020. India's business to business (B2B) e-commerce market is expected to reach US$ 700
billion by 2020 whereas the business to consumer (B2C) e-commerce market is expected to
reach US$ 102 billion by 2020.
Cross-border online shopping by Indians is expected to increase 85 per cent in 2017, and total
online spending is projected to rise 31 per cent to Rs 8.75 lakh crore (US$ 128 billion) by 2018!
Investments/ Developments
Indian IT's core competencies and strengths have attracted significant investments from major
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countries. The computer software and hardware sector in India attracted cumulative Foreign
Direct Investment (FDI) inflows US$ 27.72 billion from April 2000 to September 2017,
according to data released by the Department of Industrial Policy and Promotion (DIPP).
Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra, are diversifying their
offerings and showcasing leading ideas in blockchain, artificial intelligence to clients using
innovation hubs, research and development centres, in order to create differentiated
offerings.
Some of the major developments in the Indian IT and ITeS sector are as follows:
India ranked ninth out of the 14 countries in the latest report of the Korn Ferry Digital
Sustainability Index (DSI), outperforming countries such as China, Russia and Brazil.
The flexi staffing market in the information technology (IT) sector in India stood at US$ 3.04
billion in FY 2016-17 and is estimated to grow at a Compound Annual Growth Rate (CAGR) of
14-16 per cent to reach US$ 5.3 billion by 2021.
Private Equity (PE) investments in India's IT & ITeS sector, in terms of deal value, increased 93
per cent year-on-year in Q2 2017 to reach US$ 2.7 billion
Exports of software services from India increased 10.3 per cent year-on-year to reach US$ 97.1
billion in FY 2016-17, according to the Reserve Bank of India's (RBI) 'Survey on Computer
Software & Information Technology Enabled Services Exports: 2016-17'.
Spending on artificial intelligence (AI) by Indian companies is expected to increase by 8-11 per
cent over the coming 18 months backed by rising influence of AI-based solutions across
verticals, as per a report by Intel.
India plans to create wireless Technology 5G by the end of the year 2020 which will help India
in realising its most important goals of “Increasing the GDP rate”, “Creating Employment” and
“Digitizing the Economy”.
The mobile wallet industry is expected to maintain its current pace of expansion and the value
of its transaction is expected to reach Rs 32 trillion (US$ 480 billion) by 2022, growing at a rate
of 126 per cent.
Government Initiatives
some of the major initiatives taken by the government to promote IT and ITeS sector in India
are as follows:
The Government of India is going to explore new opportunities in various sectors such as
providing BPO service from home, digital healthcare and agriculture to achieve the target of
making India a US$ 1 trillion digital economy.
The Government of Andhra Pradesh is targeting to attract investments worth US$ 2 billion and
create 100,000 jobs in the information technology (IT) sector in the state, stated Mr N
Chandrababu Naidu, Chief Minister, Andhra Pradesh.
The Government of Telangana is targeting to provide broadband connection to every
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household in the state by 2018, which is expected to lead to revolutionary changes in the
education and health sectors.
Mr Manoj Sinha, Minister of Communications, Government of India, launched project DARPAN
- digital advancement of rural post office for a new India, for improving the quality and adding
value to services and achieving financial inclusion for the unbanked rural population.
Mr Ram Nath Kovind, President of India, has dedicated four projects, such as Andhra Pradesh
Fibregrid, Andhra Pradesh Surveillance Project, Drone Project and Free Space Optical
Communication (FSOC) to the people of Andhra Pradesh.
The Government of India is planning to set wifi facility for around 5.5 lakh villages by March
2019 with an estimated investment of Rs 3,700 crore (US$ 555 million) and the government
expects to start broadband services with about 1,000 megabit per second (1 gbps) across 1
lakh gram panchayats by the end of this year.
Road Ahead
India is the topmost offshoring destination for IT companies across the world. Having proven
its capabilities in delivering both on-shore and off-shore services to global clients, emerging
technologies now offer an entire new gamut of opportunities for top IT firms in India. US$ 150
billion Indian IT industry’s export revenue to grow at 7-8% and domestic market revenue is
projected to grow at 10-11 per cent in 2017-18.

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 TOP PLAYERS IN THE IT SECTOR IN INDIA (With details)
1. TCS – Tata Consultancy Services
Tata Consultancy Services, founded in the year 1968 is headquartered in Mumbai, India.
# CEO: Natarajan Chandrasekaran
# Founded: 1968
# Headquarters: Mumbai
# Founders: J. R. D. Tata, F. C. Kohli
# Parent organization: Tata Group
# Subsidiaries: CMC, TCS China, Computational Research Laboratories

2. Infosys
Infosys, founded in the year 1981 has been headquartered in Bengaluru, India.
# CEO: Sali Parekh
# Founded: July 2, 1981
# Headquarters: Bengaluru
# Founders: N. R. Narayana Murthy, K. Dinesh, Nandan Nilekani, Ashok Arora, S. D. Shibulal,
Kris Gopalakrishnan, N. S. Raghavan
# Subsidiaries: Infosys BPO Limited, Panaya, Lodestone Management Consultants, Infosys
China, Infosys Australia

3. Wipro
Wipro, founded in 1945 entered into the IT domain in the year 1980 and since then has
become one of the biggest IT Company in the world.
# CEO: Abidali Z. Neemuchwala
# Founder: M.H. Hasham Premji
# Founded: December 29, 1945, India
# Headquarters: Bengaluru

4. HCL Technologies
HCL Technologies, founded in the year in 1976 by Mr. Shiv Nadar is headquartered in Noida,
India.
# CEO: C Vijaykumar
# Headquarters: Noida
# Date founded: November 12, 1991
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# Founders: Arjun Malhotra, Shiv Nadar
# Parent organization: HCL Enterprise

5.Tech Mahindra
# CEO: C.P. Gurnani
# Headquarters: Pune
# Date founded: October 24, 1986
# Founders: Anand Mahindra

6.Oracle Financial Services

Oracle Financial Services, founded in the year 1990 is headquartered in Mumbai, India.
# Headquarters: Mumbai
# Founder: Rajesh Hukku
# Founded: 1991
# Acquisition date: August 2005
# Parent organization: Oracle Corporation

7. Mindtree
Mindtree, founded in the year 1999 by ten IT professionals is headquartered in Bengaluru,
India. Its present CEO is Krishnakumar Natarajan.
# CEO: Debashis Chatterjee
# Founded: August 18, 1999
# Headquarters: Bengaluru
# Founders: Subroto Bagchi, Ashok Soota

8. Mphasis
Mphasis, incorporated in the year 2000 is headquartered in Bengaluru, India.
# CEO: Nitin Rakesh
# Founder: Jerry Rao
# Headquarters: Bengaluru
# Date founded: June 2000
# Acquisition date: 2006
# Parent organization: Hewlett-Packard, Electronic Data Systems

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 Recent News
1. Cognizant appoints Daniel Cohen as head of North America banking business
2. Infosys sees its market cap eroded by Rs 10,000 Cr on CFO exit
3. Infosys top executive Sangita Singh quits, was among the highest paid execs
4. IBM appoints Samiron Ghoshal as new global business services head in India
5. Wipro launches tech centre in Texas, to raise headcount to 2,000
6. Debjani Ghosh set to become the first woman to head Nasscom in 30 yrs

REFERENCES
1. http://www.businessworld.in/article/-IT-Sector-More-Driven-By-Politics-Than-
Technology-Today-/30-06-2017-121179/
2. https://www.ibef.org/
3. https://www.techtree.com/content/news/13373/current-trends-information-
technology-india.html
4. http://www.infodev.org/sites/default/files/resource/InfodevDocuments_628.pdf
5. https://www.ibef.org/archives/detail/b3ZlcnZpZXcmMzc2NTMmODk=
6. https://www.moneycontrol.com/

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