A

Project report
on

“Study of IT Industry”

Submitted by

Mr.Ayu Badave Roll No. 03

Mr.Amit Sawant Roll No. 44

Mr.Rohit Shetye Roll No. 47

Mr.Vikram Sawant Roll No. 43

Ms.Priyanka Parate Roll No. 31

Under the guidance of

Prof. Mr. Waingade

K.I.T.’s Institute of Management Education & Research

2007-08
 Certificate

This is to certify that the following students of class B.B.A. II

(A) have satisfactorily completed the project work on “Information
Technology Industry” as prescribed by Prof. Mr.Waingade during
the academic year 2007-08 and this project represent their
benefited work.

1) Mr.Vikram Sawant Roll No. 43

2) Mr.Ayu Badave Roll No. 03

3) Mr.Amit Sawant Roll No. 44

4) Mr.Rohit Shetye Roll No. 47

5) Ms.Priyanka Parate Roll No. 31

Place: Kolhapur
Date:

Prof.Mr.Waingade Dr.A.G.Jayakumari
(Project guide) (Director)

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 Acknowledgement

We take this opportunity to express our sincere immense

gratitude to our project guide Prof. Mr. Waingade for his valuable
guidance.

His erudite suggestion and constant encouragement has

helped us in completing this project successfully.

Our grateful acknowledgement to Director Dr. Jayakumari of

K.I.T.’s I.M.E.R. (Kolhapur Institute of Technology’s Institute of
Management Education & Research)

-All Members

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 Contents

• Certificate 01
• Acknowledge 02
• Objectives 05
• Introduction 06
• General overview of Industry 07
• Huge & growing IT market 10
• Nature of Product 14
• Key emerging Trend 15
• Opportunities for IT in India 16
• Government Policy 22
• Conclusion 24

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 Objectives

• The objective of this project is to understand the insights of a

leading business industry i.e. Information Technology
industry in Indian Economy.

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 Introduction

India has emerged as the fastest growing IT hub in the world, its growth
dominated by IT software and services such as Custom Application Development
and Maintenance (CADM), System Integration, IT Consulting, Application
Management, Infrastructure Management Services, Software testing, Service-
oriented architecture and Web services.

When it comes to IT services, the world is coming to India. According to

Nasscom, the Indian IT-ITeS industry recorded US$ 39.6 billion in revenues in
2006-07, up 30.7 per cent against a projected growth of 27 per cent. The industry
body has projected revenue of US$ 49-50 billion in 2007-08 at a growth rate of
24-27 per cent. Incidentally, the Indian IT industry is growing well ahead of the
global industry, which is growing at about 10 per cent a year.

In 2006-07, software and services exports grew by 33 per cent to register

revenue of US$ 31.4 billion, whereas the domestic segment grew by 23 per cent
to US$ 8.2 billion. Within exports, IT services touched US$ 18 billion, a growth of
35.5 per cent. TCS, Infosys and Wipro maintained their position as the Top 3
exporters in the Nasscom Top 20 IT software and services exporters’ rankings.
The value of Infosys brand went up by 38 per cent to be worth US$ 7.68 billion in
2006-07.

The Nasscom-Crisil report titled 'The Rising Tide - Output and Employment
Linkages of IT-ITeS' says: Every rupee spent by the IT-ITeS sector (on
domestically-sourced goods and services) translates into a total output of Rs 2 in
the economy. And for every job that is created in this sector, four jobs are created
in the rest of the economy.

Expected to generate exports worth US$ 60-75 billion in 2010, the IT-ITeS
sectors will contribute US$ 115 billion to the economy from allied sectors as well.
In terms of employment generation, the industry is expected to create about 11
million jobs (directly and indirectly) over the next three years. The information
technology industry has grown its revenues ten-fold in the past decade from US$
4.8 billion in 1997-98 to US$ 47.8 billion in 2006-07, the report noted.

The IT industry's contribution to GDP rose from 1.2 per cent in 1999-2000
to an estimated 4.8 per cent in 2005-06. A majority of the companies in India
have already aligned their internal processes and practices to international
standards such as ISO, CMM, and Six Sigma. This has helped establish India as
a credible sourcing destination. As of December, 2006, over 400 Indian

6
companies have acquired quality certifications with 82 companies certified at SEI
CMM Level 5 - higher than any other country in the world.

General Overview of Industry

Indian IT: Going From Strength To Strength

• The country’s IT software and services exports from the top-10 firms
crossed US$ 15 billion mark in 2006-07. The top three – TCS, Infosys and
Wipro – earned about US$ 8.7 billon, according to an industry survey and
analysis by Dataquest (DQ).
• Small and medium enterprises (SMEs) (companies with up to 999
employees) in India are set to spend over US$ 8 billion in 2007-08 to beef
up their IT infrastructure, which is 24 per cent higher compared with the
previous year's US$ 6.5 billion, according to a study by Access Markets
International (AMI) Partners.
• Top Indian companies spent US$ 1.58 billion on IT systems in 2006-07, a
growth of 27 per cent over the previous year, with public sector units
(PSUs) forming a major part of the top 50 spenders, according to a survey.
• The global IT services business exceeds US$ 600 billion a year, while the
Indian industry turnover is about US$ 31 billion.
• The Indian IT industry continues to be amongst the largest employers,
directly employing more than 1.6 million and indirectly creating
employment opportunities for an additional 6 million people in related
industries.
• The industry contribution accounts for 5.2 per cent of the national GDP.
• Indian companies continue to spread their presence in foreign locations.
Zensar Technologies, a leading global IT and business process
outsourcing services provider, announced the opening of its Polish

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 operations, based in the city of Gdan’sk - the first of its kind centre in
Poland to be opened by an Indian outsourcing company.

Growth drivers:

According to Nasscom, the growth in India's services exports has been led by
many factors, including:

• A strong demand and increased traction for traditional services like ADM.
• New services like EAI and package implementation.
• New areas like engineering services.
• Indian companies are enhancing their global service delivery capabilities
through a combination of green-field initiatives, cross-border M&A,
partnerships and alliances with local players.
• Global software product giants such as Microsoft, Oracle and SAP have
established their captive development centres in India.
• Leading MNC IT companies have operations in India, accounting for 16
percent of their delivery capabilities in offshore locations, with India
accounting for 70 percent of the total offshore employee base.
• The growth in domestic IT/ITeS spend has been primarily driven by
investments by enterprises in IT infrastructure, line of business
applications, security products and services, IT outsourcing and managed
services and by consumers in mobile and digital products (digicams,
notebooks, smart handheld devices etc.).

Research & Development:

India is fast emerging as a research and development hub for some of the largest
IT companies in the world. The country is drawing 25 per cent of fresh global
investments in R&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
Cisco have been tapping Indian talent for conducting cutting-edge research.
According to Daniel 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:

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 • SAP Labs India is SAP's largest development facility outside Germany.
• US-based Synopsys Inc, a US$ 1.1-billion semiconductor design software
firm, plans to invest US$ 50 million in its India operations. The proposed
investment will be used to expand R&D facilities in the cities of Bangalore
and Hyderabad over the next three years.
• India has emerged as the largest R&D centre for Cambridge Silicon Radio
(CSR), a provider of personal wireless technology, including Bluetooth and
FM receivers, outside the UK.
• Adobe Systems has 900 people in its India R&D operations -- the highest
number outside the US.
• Chipmaker Intel has 3,000 staff in India, the majority in its R&D unit. Some
of Intel India R&D's recent contributions include complete design of the
Centrino mobile chip called Napa.
• Companies are lining up to invest in India, and a big chunk of their
spending is directed towards setting up R&D facilities. As per the data
compiled by the Ministry of Communications and IT, against 28 companies
that outlined their investment plans, 17 have already infused capital. Six of
these companies have committed over US$ 1 billion each towards their
India operations. This includes Cisco's commitment of US$ 1.1 billion,
SemIndia's US$ 3 billion proposed investment, Intel's US$ 1.25 billion,
Microsoft's US$ 1.7 billion, IBM's US$ 6 billion, and SAP Lab's US$ 1
billion investment.

Being on a powerful wicket, the IT/ITeS sector has become extremely popular
with private equity players. During April-June 2007, the sectors accounted for
over 25 deals worth over US$ 550 million, according to a study conducted by
Venture Intelligence, a Chennai-based PE research service.

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10
 Huge and Growing IT Market

Potential market size US$ 300 billion

Revenue in 2006-07 US$ 39.6 billion

Growth 30.7%

Share of IT in 2006-07 5.2% of GDP

2008 projection 7%

Projected revenue (2007-08) US$ 49-50 billion

Growth 24-27%

Current Global Growth rate 10% a year

CAGR (since 1999) 46%

Software Exports (2006-07) US$ 31.4 billion

Growth 33%

Domestic segment US$ 8.2 billion

Growth 23%

Exports projected US$ 60-75 billion

Till 2010

Employment Over 650,000

Expected employment in 3 years 11 million

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 Indian Players
There three main Indian players in IT sector.

1. TCS : World leading IT consulting services and business process

outsourcing company
2. Infosys : Provides consulting and IT services to clients globally as
partners
3. Wipro : Serves over 300 global leaders and is world’s first PCMM,
CMMi and CMM Level 5 Company

MNC presence in India

The Multinational Companies in IT sector are mostly from US and UK.
They provide various Products, Services, Infrastructure and systems. They are
distinguished as below:

Intergraph Corp.,
Kelton USA
Graphics Inc.,

Services
IBM, USA
Capricorn
Systems Inc.,
USA

Manhattan Associates., IBM, USA

USA Oracle Inc.,
USA

Dun & BradStreet.,

USA Microsoft,
Products USA
Deneb Robotics.,
USA NOVELL, USA
SUN Micro System Inc,
USA

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 IBM, USA CISCO,
USA SUN Micro System Inc,
Siemens Nixdorf.,
Germany USA
Fujitsu,
Hewlett Packard, Japan
USA IT Infrastructure
Bull, Hughes Network Systems.,
France USA
Alcatel, Silicon Graphics Inc.,
France USA

Embedded
systems

Cadence Design Systems Inc., Texas Instruments Inc.,

USA USA
Motorola Inc.,
USA

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 Location

City / cluster Key companies in the location

ABN Amro, Morgan Stanley, Citigroup,
Mumbai/Navi Accenture,
Mumbai/Thane Tata Consultancy Services, World Network
Services
Genpact (formerly GE Capital International
(Gurgaon/New Services), Sapient, HCL Technologies,
Delhi/Noida) American
Express, McKinsey research centre, E-Funds
Corporation
JP Morgan, Goldman Sachs, Siemens, Infosys,
Wipro,
Bangalore Tata Consultancy services, Cognizant
Technology
Services, Genpact (formerly GE Capital
International
Services)
Citigroup, Standard Chartered (Scope
International),
Chennai World Bank, Ford, Hewlett Packard, AIG,
Infosys,
Tata Consultancy Services, Cognizant
Technology
Services
Hyderabad/Secundera HSBC, Microsoft, Franklin Templeton, Infosys
bad Wipro,
Tata consultancy services, Cognizant

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 Technology
World Network Services, Cognizant Technology
Pune Services, HSBC, Veritas, sybase, AXA, Mellon
Financial
HSBC, Genpact (formerly GE Capital
Kolkata International
Services), IBM, Infosys, Tata consultancy
services,
Cognizant Technology Services

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 Nature of Product

IT companies provide following types of products & services:

1) Facilities management
2) Unix-based coding
3) Application development package
4) Implementation
5) Migration & Re-engineering
6) Maintenance
7) Consulting
8) Embedded software
9) Network Security
10)Network Management
11)Package Implementation
12)E-business applications
13)Web Enabling legacy
14)Maintenance

Consulting
Embedded software
Network
Security
Network
Management
Package
Application Implementation
development E-business
Package applications
Implementation Web Enabling
Facilities legacy
Migration & Re-
management
engineering Maintenance
Unix-based
coding Maintenance

1960 Mainframe Client / Server Internet

Aligned to technology needs

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 Key emerging trends impacting the Indian IT services and ITeS
industry

While the Indian IT services and ITeS industry is poised for rapid growth
over the next few years, there are emerging trends which are likely to impact their
operating models and the industry players would have to appropriately adjust
their operations to capitalise upon / manage these trends.
Some key emerging trends include:
Demand related

• Off shoring is now mainstream and increasingly an integrated approach is being

adopted across service types. Also, with more experience with the concept, off
shoring projects are moving beyond pilots and there is better and coordinated
planning, execution and monitoring of off shoring projects.

• Transaction processing is growing faster than customer interaction services and

is likely to dominate future growth. Key segments which have contributed to this
growth include finance and HR processing.

• Demand for off shoring has extended beyond the banking and financial services
industry and other key verticals that are likely to be demand drivers in the future
include telecom, healthcare and entertainment /media.

• While a range of sourcing models exist and continue to evolve, the preferred
models are captives and hybrid options.

• There is likely to be greater focus on risk, compliance and information security

issues and therefore risk management is likely to be the dominant theme (both
offshore and on-shore).

Supply related

• Evolving market structure with consolidations, IPOs and other transactions.

• Emergence of other competing countries and need to appropriately manage

people, telecommunications and infrastructure costs to ward of competition from
the same as cost arbitrage is still a significant driver for off shoring.

• Possible demand-supply gap for trained manpower in the medium to long term
and therefore need to invest in enhancing supply of trained manpower.
• Development of a larger base of locations for IT and ITeS with supporting
ecosystems.

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 Opportunities/Advantages for IT in India

The opportunities in the Indian IT services and ITeS industry can be classified
along the following broad categories:

1) IT services
The range and depth of capabilities have enabled the Indian IT services industry
to gain a respectable position in the global IT services market (Indian industry
expected to achieve market share of almost 30 percent by 2008 in key segments
such as application development and application outsourcing as per NASSCOM-
McKinsey estimates). The key factors that have enabled the industry’s success
are end-to-end solutions capability, focus on stringent processes and quality of
execution, global delivery model (combination of onshore and offshore with an
increasing offshore component), high-end, mission critical service capabilities and
strong project management methodologies and expertise.

2) Opportunity segments within IT servicest oriented services

Project oriented IT outsourcing Support and training

services
• IT consulting • IS outsourcing • IT training and
• Systems • Application education
integration outsourcing • Hardware
• Custom • Network support and
application infrastructure installation
development and • management • Packaged
• maintenance software support
• Network and
consulting and • installation
integration

Some multinational corporations who have leveraged the India advantage for IT
services (either through a captive unit or through outsourcing include Siemens,
Citigroup, Microsoft, Cisco, Hewlett Packard, Nortel, Boeing, Airbus.

3) R&D services and software products

Indian R&D services and software product exports, though at a nascent stage, is
expected to grow rapidly (growth forecasts are US$ 8-11

4) Information Technology

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2008-10: Source – NASSCOM). The key opportunity areas within R&D services
and software products include embedded software and systems and offshore
product development. A number of large multinational corporations source a part
of their embedded system requirements from India either through captive design
centers or through vendors. Some of these companies include Samsung, Texas

Instruments, Delphi, STMicroelectronics, Motorola, Intel, Analog devices and

National Semiconductor apart from multinational corporations sourcing
requirements from India, there are over a 100 Indian companies operating in the
embedded software solutions domain. Also, in addition to the export of products
developed by the offshore units on behalf of MNCs, a few Indian vendors (e.g.
Infosys, I-Flex Solutions) have successfully expanded their revenue streams to
include their own software products.

5) Customer interaction services

Customer interaction services are one of the largest segments within the Indian
ITeS industry contributing almost 30 percent to the total revenues in 2004. The
predominance of customer interaction services is gradually decreasing due to
pricing pressures as well as increasing depth of sourcing relationships which
have include a new range of service offerings. However, while the share in the
total pie may be decreasing, the outlook for this segment is still favorable due to
strong demand from customers who have not sourced customer interaction
services in the past as well as expansion of the customer care service offering to
include more complex activities such as higher-end technical support. Select
multinational corporations who have leveraged the Indian advantage for business
process outsourcing services include Citigroup, American Express, General
Electric and Hewlett Packard.

6) Transaction processing
Cost advantage, access to an abundant skill pool and commitment to quality
of delivery have enabled the rapid growth of this segment. The range of
capabilities sourced from India in business process outsourcing has been
illustrated below:
Select multinational corporations who have leveraged the Indian advantage for
business process outsourcing services include General Electric, Citigroup,
Standard Chartered Bank, ABN Amro, Bank of America, American Express,
British Airways and IBM (Illustrative and not exhaustive; Source-News reports).
Content development The Indian ITeS industry offers a range of services to
various multinational organisations catering to their digital content development
needs of website management, production and delivery of ultimedia over new
media, including CDs, DVDs and Internet TVs, movie production and gaming.
Key players offering / sourcing content development services from India include
Walt Disney, Laserwords and Techbooks

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7) Knowledge services (non-IT)
Recent years have witnessed a spurt in sourcing of knowledge based services as
the industry has moved up the value-chain and built high-end capabilities. While
this trend is particularly evident in financial services, sourcing of knowledge
services has also gained ground in industries such as pharmaceuticals and
biotechnology, entertainment and aerospace. The key opportunity areas and their
market potential have been illustrated below:

Opportunity 2003 2010 CAGR CAGR

(US$ bn) (US$ bn) (%)
Basic data search,
integration and 0.3 5.0 50%
management
Market research,
competitive 0.02 0.4 54%
intelligence
Equity research,
actuarial analytics - 0.4 NA
and data
Modeling
Animation and
simulation 0.1 1.4 46%
Remote education,
publishing - 0.3 0.3
Medical content and
services - 2.0 0.3

R&D (other non-IT

areas) 0.1 1.0 39%

Biotech and
pharmaceuticals 0.28 3.0 40%

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8) The Knowledge Advantage
The diagram below shows that there is a large pool of highly talented
software professionals in India. Only one fact is enough to prove this is that India
is a highest producer of engineers that too providing good education. The
diagram shows that there is a constant growth in these professionals since 1990-
91 to 2002-03

Knowledge Professionals Strength

650000
700000
522250
600000
430114
500000

400000 284000

300000 160000
200000
56000
100000

0
1990- 1996- 1999- 2000- 2001- 2002-
1991 1997 2000 2001 2002 2002

Large pool of highly talented software professionals

9) The Cost Advantage

In India, the entire needed infrastructure such as communication,
transportation and other things are available. More over the labour needed is
available in cheap and bountiful. Hence, the cost which any company incurs is
always less than any other Asian or European countries. The diagram below
shows this as an advantage by comparing to other countries.

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 The Cost Advantage

Average wage / year (in thousand US dollars)

30 28
25
25

20

15
8.9
10 7.2 8
6.4 6.5 7.2
5.88 6
5
2.4

0 Romania India Czech Philippines Malaysia Vietnam Ukraine China Israel Ireland Russia
Republic

Source: NASSCOM

Costs for offshore work

30-50% lower than in US/Europe

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10) The Infrastructure Advantage

Standardisation Testing and Quality Certification (STQC)

programme

Non-stop solution to all quality requirements of electronics

industry

Software Technology Parks

Single point
Up to No
Exemption Single custom
100% corporate
from local window bonding
foreign income tax
duties government and
equity up to
and taxes clearance export
permitted March 2010 certification

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 Government Policy

Government initiatives

• The Information Technology Amendment Bill, introduced in the Parliament

on December 15, 2006, proposes to put in place technology applications,
security practices and procedures relating to such applications.
Furthermore, it addresses the issue of technological neutrality in IT laws as
recommended by UNCITRAL Model Law on Electronic Signature.
• A proposal for Electronics & IT Hardware Manufacturing Policy is also
under consideration which aims to
o Rationalise tariff structure on capital goods and inputs.
o Unify manufacturing for domestic market and exports.
o Facilitate registration of international patents.
o Transfer state-of-the-art technology (TOT).
o Enhance Research and Development.
• In order to ensure that the benefits of IT reach the common man, the
Government has initiated a move to make available tools and fonts in
various Indian languages freely to the general public. Tamil, Hindi and
Telugu software tools and fonts have already been released. All Indian
languages are expected to be covered in the next one year.
• To ensure penetration of the IT and ITES in the rural areas, the
Government has formulated a proposal to establish 1,00,000 Common
Service Centres (CSCs) in rural areas, which will serve not only as the
front end for most Government services but also as a means to connect
the citizens of rural India to the World Wide Web. The scheme will be
implemented through Public Private Partnership (PPP).

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Evolving regulatory regime

 IT Act 2000

 EOU status extended to hardware manufacturing units

 USD 2580 mn to be spent on e-Governance initiatives

 Priority sector status given by banks

 Export processing zones established

 487 information communication centres

Case Study

Intel
Intel set up its first R&D centre (Intel India Development Centre – IIDC) in
Bangalore in 1999. Intel is using this facility to work in e-Business applications,
networking and communications, microprocessor and chipset design,
manufacturing automation and systems software. Key programs at the centre
include:

• Design of the next generation microprocessors for server architecture.

• Next generation mobile chipsets for the Intel CentrinoTM Mobile Technology.
• BIOS Display, now installed in over 100 million PCs was developed in India.
• Next generation switching silicon and router products. Extract from “Intel
Technology India Private Limited: US Companies in India

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 Conclusion

The growth of the IT sector in India symbolizes the potential of Indian

industry to perform at world-class standards. Led by some visionaries and
supported by thousands of employees and entrepreneurs, the IT sector embodies
much of what can go right when the spirit of human enterprise is given free rein.

IT can change how the society communicates, collaborates, lives, works,

and plays. However, IT offers little value to the large fraction of the population
that is more concerned with day-to-day survival. It is not surprising, therefore, that
while India is considered a software superpower, in terms of Internet penetration
India is grouped along with Latvia, Thailand and Indonesia as a low penetration
country.

The success of IT at the corporate level in India cannot be translated into a

panacea that will solve India’s myriad economic challenges. Just like copious
rainfall can lead to dramatic floods that cause widespread destruction, an
obsession with IT and the knowledge economy is not useful in the Indian context.
To be truly beneficial, the rain of IT must fall at the right place, in the right
quantity, at the right time, and for right purpose. Economic policies of a
developing country cannot be based on “herd” behavior, and on what is hot in the
international market for that year or decade. Neither does the aggressive pursuit
of IT represent the sole, or even an obvious, pathway to a first class economy
despite the glowing success of high-profile private companies in the IT realm.
Noted economist Paul Krugman, in arguing against the belief that someone who
has made a personal fortune will know how to make an entire nation more
prosperous, probably phrased it best. “A country,” he wrote in an article in the
Harvard Business Review, “is not a company!”

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