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INTRODUCTION TO IT INDUSTRY

India has emerged as the fastest growing IT hub in the world, its growth dominated by
ITs of t war e and s er vi ces s uch as Cus t om Appl i cat i on Devel opment and
Mai nt enance (CADM), System Integration, IT Consulting, Application Management, IS
Outsourcing,Infrastructure Management Services, Software testing, Service-oriented
architecture and Web services.When it comes to IT services, the world is coming to India.
With a CAGR of 28 per centduring the last 5 years, the IT-ITES industrys contribution to
Indias GDP has risen from1.2 per cent during 1999-2000 to 4.8 per cent in 2005-06.

Growth Curve
A survey by the National Association of Software and Services Companies
(Nasscom)shows why the Indian IT industry has become a case study of success:

The Indian IT-ITES industry has recorded 33 per cent growth in exports, clockingrevenues of
US$ 23.6 billion in FY 2005-06, as compared with export revenues of US$ 17.7 billion in FY
2004-05.

FY 2005-06 also saw the overall Indian IT-ITES industry (including
domesticmarket) growing by 31 per cent registering revenues of US$ 29.6 billion, up
fromUS$ 22.5 billion in 2004-05.

Of the total IT-ITES exports in FY 2005-06, IT software and services grew by 33 per cent,
registering revenues of US$ 13.3 billion

The ITES-BPO segment clocked revenues of US$ 6.2 billion, recording a growthof 37 per
cent.

Engineering services and product exports grew from US$ 3.14 billion in FY 04-
05 to US$ 4 billion in FY 05-06.

Domestic market clocked revenues of US$ 6 billion in FY 04-05 from US$
4.8 billion in FY 05-06.




Growth Drivers
Accor di ng t o Nas s com, t he gr owt h i n I ndi a' s s er vi ces expor t s has been
l ed by manyfactors, including:

A strong demand and increased traction for traditional services like ADM

Ne w s e r v i c e s l i k e E AI ( E n t e r p r i s e Ap p l i c a t i o n I n t e g r a t i o n ) a n d
p a c k a g e implementation

New areas like engineering services.

Indian companies are enhancing their global service delivery capabilities
througha combination of green-field initiatives, cross-
border M&A, partnerships andalliances with local players.

Gl o b a l s o f t wa r e p r o d u c t g i a n t s s u c h a s Mi c r o s o f t , Or a c l e a n d S
AP h a v e established their captive development centres in India.

Leading MNC IT companies have operations in India, accounting for 16
percentof their delivery capabilities in offshore locations, with India accounting
for 70 percent of the total offshore employee base


R&D
I ndi a i s f as t emer gi ng as a r es ear ch and devel opment hub f or s ome of
t he l ar ges t I Tcompanies in the world. The country is drawing 25 per cent of fresh global
investments inR&D centres. In many cases, such as Oracle, Intel, Adobe,
STMicroelectronics (STM),SAP and others, the India R&D centre is their largest facility
outside the US or Europe.Others, including IBM, Texas Instruments, Delphi, HP,
Microsoft, Google and
Ciscohave been t appi ng I ndi an t al ent f or conduct i ng cut t i ng-
edge r es ear ch. Accor di ng t oDaniel Dias, director, IBM India Research Lab, India
has a rich talent base. As a result,a lot is going on in the Indian context which forms the basis
for R&D work.Meanwhile, the companies that are already here are betting big on India. For
instance:

SAP Labs India is SAPs largest development facility outside Germany.

Adobe Sys t ems has 900 peopl e i n i t s I ndi a R&D oper at i ons t he
hi ghes t number outside the US.



Chipmaker Intel has 3,000 staff in India, the majority in its R&D unit. Some
of Intel India R&Ds recent contributions include complete design of the
Centrinomobile chip called Napa.

STM has built a state-of-the-art design campus in Greater Noida, which once
fullydevel oped, wi l l have 5, 000 engi neer s . The company
has ear mar ked US$ 30million in investments over the next two years.Companies are
lining up to invest in India, and a big chunk of their spending is
directedt o wa r d s s e t t i n g u p R&D f a c i l i t i e s . As p e r t h e d a t a c o mp i l e
d b y t h e Mi n i s t r y o f Communications and IT, against 28 companies that
outlined their investment plans, 17have already infused capital. Six of these companies
have committed over US$ 1
billioneach t owar ds t hei r I ndi a oper at i ons . Thi s i ncl udes Ci s co s commi t
ment of US$ 1. 1 bi l l i on, SemI ndi a s US$ 3 bi l l i on pr opos ed i nves t ment
, I nt el s US$ 1. 25 bi l l i on, Mi c r o s o f t s US $ 1 . 7 b i l l i o n , I BM s US $
6 b i l l i o n , a n d S AP La b s US $ 1 b i l l i o n investment.



Market Overview
Bolstered with such a significant, technically sound resource base, the software industryhas
grown unimpeded. With a compounded annual growth rate of more than 50% between 1992
and 2001, the Indian software sector has expanded almost twice as quicklyas the world-
leading U.S. software industry did during the same period, although from asmaller
base.Indias software industry statistics illustrate the massive strides achieved bythis sector
and the opportunities the future holds. According to NASSCOMs estimatesfor the fiscal year
2000-01, the countrys software industry is worth $8.26 billion, upfrom $100 million ten
years ago. A study conducted by renowned consultancy firmMcKinsey and Co., for
NASSCOM, has proven why India is becoming the off-shoresoftware development out-
sourcers destination of choice. According to the NASSCOM-McKinsey study, the Indian
software industry is expected to gross US$50 billion inexports in 2008! This is based on an
average growth rate of 35 percent per year. Theindustry is well placed to achieve this target

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