INDUSTRY ANALYSIS OF IT & ITES

SECTOR IN INDIA

Introduction & Market Size

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
India’s IT industry advantage by being 5-6 times inexpensive than US. India is the second-fastest
contributed around digitizing economy amongst 17 leading economies of the world.
7.7 per cent to the
country’s GDP and The cloud market in India is expected to grow three-fold to Rs 49,621 crore (US$
is expected to 7.1 billion) by 2022 with the help of Growing adoption of Big Data, analytics,
contribute 10 per artificial intelligence and Internet of Things (IoT), according to Cloud Next
cent of India’s Wave of Growth in India report.
GDP by 2025.
The IT-BPM sector in India stood at US$177 billion in 2019 witnessing a growth
of 6.1 per cent year-on-year and is estimated that the size of the industry will
grow to US$ 350 billion by 2025. Moreover, revenue from the digital segment is
expected to form 38 per cent of the total industry revenue by 2025 whereas,
digital economy is estimated to reach Rs 69,89,000 crore (US$ 1 trillion) by 2025. Total export revenue of the
industry is expected to grow 8.3 per cent year-on-year to US$ 136 billion in FY19. Spending on Information
Technology in India is expected to reach US$ 90 billion in 2019.

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 US$ 41.26 billion between April 2000 and September 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 US$ 11.8 billion across 493 deals in 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 November 2019, there were 417 approved SEZs across
the country where 274 are of IT & ITeS and 143 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
realizing the potential of these champion service sectors.

Achievements

 About 200 Indian IT firms are present in around 80 countries.

 IT exports from India are expected to reach highest ever mark of US$ 137 billion of revenues in FY19
growing at 8.3 per cent.
 Revenue of GICs is expected to touch US$ 50 billion by 2025.
 Highest ever revenue was generated by Indian IT firms at US$ 181 billion in 2018-19.

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. Export revenue of the industry is expected to grow 7-9
per cent year-on-year to US$ 135-137 billion in FY19. The 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.

TATA CONSULTANCY SERVICE

KEY PLAYERS OF .
IT INDUSTRY IN TCS offers a consulting-led, integrated portfolio of IT, BPO,
infrastructure, engineering and assurance services. This is delivered
 through its unique Global Network Delivery ModelTM, recognized
INDIA as the benchmark of excellence in software development.
A part of the Tata group, India's largest industrial conglomerate, TCS
has over 394,998 of the world's best-trained consultants in 46
countries. The company is India's first listed IT Company to reach
the US$ 100 billion market capitalization mark.

INFOSYS

Established in 1981, Infosys Ltd is today one of the largest IT

companies in India and the world. The company provides business
information technology (IT) services comprising application
development and maintenance, independent validation, infrastructure
management, engineering services comprising product engineering
and life cycle solutions and business process management.

 One of the largest IT companies in India and the world

 More than 37 years of experience
 Operations in 46 countries

WIPRO

Wipro Limited is a global leader in information technology,

consulting and business process services. It harnesses the power of
cognitive computing, hyper-automation, robotics, cloud, analytics
and emerging technologies to help its clients adapt to the digital
world and make them successful.
Wipro partners with Moogsoft to deliver next-gen AIOps solutions

KEY ISSUES BEING FACED BY THE IT INDUSTRY

1. H1-B visa
H1-B visa holders are facing issues as trump has made strict the rules
regarding visa holders. 70% of visa holders are Indians. According to
new policy the minimum salary of visa holders should be $130000.
Given this high salary, a lot of companies in US now opt to hire
Americans.

2. Economic Slowdown
Recession in the all over the world due to Covid-19 has led the
economy worst phase. Also the increasing value of dollar against
rupee has strained the industry more.

3. Data protection and privacy rules

The new data protection rule GDPR (General Data Protection
Regulation) is applicable to all companies that operate in EU.Since
not all IT companies can comply with these rules, so they had to stop
serving EU customers.

4. Domestic Challenges
Indian organizations are slow in adopting new technology like IoT,
 Block chain etc. because of lack of skilled employees. Indian
Universities are focused on providing degrees rather than enhancing
knowledge. This has created gap between demand and supply. So
Indian companies are also cutting jobs because they are not finding
right talent.

5. Maintaining innovations
IT industry players need to keep themselves updated and incorporate
new technologies to survive in this highly competitive market where
the number of big and small players are increasing continuously

PORTER FIVE FORCES INDUSTRY ANALYSIS:

Bargaining Power of Buyers:

In an industry as massive as Information Technology, the term "buyers" refers to almost everyone in the world.
While there are countries that are behind technologically, a majority of locations in the world have access to
computers and the internet etc. Given the large number of buyers, it is safe to say that the customers control the
IT industry. There are so many choices for a buyer (many firms in this industry) and there are minimal
switching costs, so customers aren't typically "locked in" to one firm. Also, because a lot of IT sales come from
companies that make large purchases, those companies are powerful and important to the IT firms (who often
provide incentives to these businesses, in order to convince them to utilize their products over competitors).
Customers are sensitive to price, but IT products and services are necessary to the success of businesses, so they
are willing to spend a lot of money to get a good product. There are typically many interactions between buyers
and IT companies because of the need for training to use products, constantly upgraded technology and an
abundance of advertising.

Bargaining Power of Suppliers:

Although companies like Intel and AMD are a part of the IT industry, for the purpose of this project I will be
classifying those companies as suppliers to the IT industry's firms. The inputs in this industry are pretty
standard, with differences being speed, memory etc. Though the inputs are standard, new companies find it
difficult (not impossible) to enter this industry as a supplier because of the existing relationships between
current suppliers and IT firms, the ever changing and improving technologies of the world and the intense
rivalry between existing players. IT firms are very important to suppliers because they are their primary
customers, but I believe suppliers are even more important to buyers (IT firms). Suppliers are not "locked" into
deals with specific firms (contracts exempt), but most of the relationships between the firms and suppliers in
this industry are well established, and these suppliers would most likely not want to end their relationships with
firms in the first place.

Threat of New Entrants:

 The IT industry is relatively attractive to newcomers because of its rapid growth and appealing customer base.
At the same time, the industry is unattractive to newcomers because of the cost advantage large-scale
incumbents possess, the significant amount of capital a new firm would need, and the major established brands
already in the industry. Any newcomer in this industry can expect a strong retaliation from existing players,
which is a major reason this industry is not too attractive. The best way for a new entrant in this field to be
successful would be if they had a brand new idea for a product or service; the lack of differentiation in the
industry is one thing a newcomer could exploit. Overall, the IT industry isn't overly attractive, but it is routine
and profitable enough that a lot of people try and enter it. Many new firms try to enter this industry, but they
rarely give established names a real run for their money.

Threat from Substitutes:

There is not much of a threat from substitutes to the IT industry, mostly because there aren't true substitutes. We
live in a digital age, so we rely on IT to run our lives and businesses. An example of a substitute would be a
scientific calculator, but to compare the two is a stretch. Nothing can really replace all that computers do for us
as a society.

Rivalry among Existing Players:

The IT industry is known for its rapid growth, effectiveness and competition. A main reason why many new
entrants are not successful is the intense rivalry between existing players. Large companies in this industry
benefit from economies of scale, which is valuable and something they try very hard not to lose. Products in this
industry are well branded and tend to have a strong customer base. Market share is unevenly distributed among
existing players, who are often in various kinds of legal and advertising battles with one another.

Reference:

https://www.ibef.org/industry/indian-iT-and-iTeS-industry-analysis-presentation

https://www.ibef.org/industry/information-technology-india/infographic

https://www.ibef.org/news/national-supercomputing-mission-a-transformative-approach-in-
supercomputing