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IT enabled Services

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IT enabled Services (ITeS)

April, 2010

Sector structure

The National Association of Software and Service Companies (NASSCOM) is the apex body for software services in India. According to its recently released publication-Strategic Review 2010, the IT-BPO sector's revenue as a proportion of the country's gross domestic product (GDP) has grown from 1.2 per cent in FY 1998 to an estimated 6.1 per cent in FY 2010.

As per the Strategic Review 2010, the BPO sector continues to the fastest growing segment of the industry and is expected to reach US$ 12.4 billion in FY 2010, growing at 6 per cent.

As per NASSCOM's findings published in March 2009, Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach US$ 71.7 billion in aggregate revenue (including hardware). Of this, the software and services segment accounted for US$ 59.6 billion.

As per the Department of Information Technology, the ITeS-BPO segment in the domestic market has witnessed noticeable growth over the past few years. The share of ITeS-BPO industry in the domestic market is estimated to have increased from 3.8 per cent in 2001-02 to 15.3 per cent in 2008-09.

According to a report by research and advisory firm Gartner published in March 2010, the domestic BPO market is expected to grow at 25 per cent in 2010 to touch US$ 1.2 billion by 2011. Further, the BPO market in India is estimated to grow 19 per cent through 2013 and grow to US$ 1.8 billion by 2013.

According to the report, the domestic India BPO services market grew by 7.3 per cent year-on-year in 2009.

Moving up the value-chain

ITeS, which started with basic data entry tasks over a decade ago, is witnessing an expansion in its scope of services. It now offers services such as knowledge process outsourcing (KPO), legal process outsourcing (LPO), games process outsourcing (GPO) and design outsourcing, among others.

The Indian BPO sector has not only added scale in the last nine years, but has also matured significantly in terms of scope of service offerings, buyer segments served and service delivery models. Apart from achieving maturity in the horizontal segment, providers are increasingly developing vertical/domain specialisation to capture greater value.

According to the Department of Information Technology, among the verticals serviced by India's IT/ITES-BPO industry those that account for the largest share of revenue are banking, financial services and insurance (BFSI)-41 per cent, Hi-Tech/Telecom (20 per cent), manufacturing (17 per cent), retail (8 per cent), with smaller contributions coming from media, publishing and entertainment, construction and utilities, healthcare and airlines and transportation. Important industry verticals being serviced by the BPO segment are insurance, retail banking, travel and hospitality, auto manufacturing, telecom and pharmaceuticals. Horizontals such as Customer Interaction and Support (CIS), Finance and Accounting (F&A) and Human Resource Management (HRM) are important areas in the BPO segment.

  • The Indian animation market, estimated at US$ 494 million in 2008, is seen growing at a compounded annual growth rate of 22 per cent till 2012, and is expected to hit US$ 1 billion in 2012, according to a report by NASSCOM and Ernst & Young published in August 2009.
  • According to the same report, the Indian gaming industry was estimated at US$ 167 million in 2008 and is seen growing at a compounded rate of 49 per cent yearly to hit US$ 830 million by 2012.
  • As per a Credit Rating and Information Services of India Ltd (CRISIL) study on the ITeS sector released in May 2009, engineering services outsourcing (ESO) is poised to be the next big opportunity in the Indian outsourcing services industry. The ESO sector is likely to grow at a compounded rate of 26 per cent and post revenues aggregating around US$ 7.5 billion by 2012.
  • The market for recruitment process outsourcing (RPO) continues to grow at a healthy rate with the number of deals signed rising in 2009, according to a study by global consulting and research firm Everest Group titled Recruitment Process Outsourcing (RPO)-Moving Beyond the Pioneer Stage', released in November 2009.
  • The F&A outsourcing (FAO) business is expected to clock a growth of over 20 per cent to reach US$ 3.7 billion, according to the Finance & Accounting Outsourcing Annual Report 2010 by Everest Group.