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Information Technology

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Information Technology

April, 2010

Sector structure/Market size

The Indian information technology (IT) industry has played a key role in putting India on the global map. Thanks to the success of the IT industry, India is now a power to reckon with. According to the Department of Information Technology (DIT), the overall Indian software and services industry revenue is estimated to have grown from US$ 10.2 billion in 2001-02 to reach US$ 58.7 billion in 2008-09—translating to a CAGR of about 26.9 per cent. The industry grew at 12.9 per cent in 2008-09.

According to DIT, exports continue to dominate the revenues earned by the Indian software and services industry. The export intensity (the share of IT-ITeS exports to total IT-ITeS revenue) of Indian software and services industry has grown from 74.5 per cent in 2001-02 to 78.9 per cent in 2008-09. Total software and services exports are estimated to have grown from US$ 7.6 billion to US$ 46.3 billion in 2008-09, a CAGR of 28.6 per cent.

The National Association of Software and Service Companies (NASSCOM) is the apex body for software services in India.As per its ‘Strategic Review 2010' published in February 2010, the India IT-BPO industry is estimated to aggregate revenues of US$ 73.1 billion in FY 2010, with the IT software and services industry accounting for US$ 63.7 billion of revenue.

Moreover, according to a study by Springboard Research published in February 2010, the Indian information technology (IT) market is expected to grow at around 15.5 per cent in 2010, on the back of growing investor confidence and favourable initiatives taken by the government.

The data centre services market in the country, is forecast to grow at a compound annual growth rate (CAGR) of 22.7 per cent between 2009 and 2011, to touch close to US$ 2.2 billion by the end of 2011, according to research firm IDC India's report published in March 2010. The IDC India report stated that the overall India data centre services market in 2009 was estimated at US$ 1.39 billion.

At present, there are 60 million Internet users in the country. According to the Manufacturer's Association of IT (MAIT), the number of active Internet entities rose to 8.6 million by March 2009 from 7.2 million units in March 2008.

Between October-December 2009, total PC sales including desktops, notebooks and netbooks were 2 million registering a growth of 42 per cent over the same period in 2008.

MAIT estimates overall PC sales to cross 7.3 million units in 2009-10 registering a growth of 7 per cent over 6.79 million units sold in 2008-09.

Outsourcing

India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people.

Some big deals in the outsourcing space include:

  • HCL Technologies entered into a five-year deal with media conglomerate News Corp for managing its data centres and IT across British newspapers in December 2009. The deal is pegged to be in the range of US$ 200-US$ 250 million, according to industry experts.
  • In January 2010, HCL Technologies also received a contract worth US$ 50 million from UK-based defence equipment maker Meggitt for providing engineering services.
  • Moreover, in December 2009, Walmart selected three IT vendors in India — Infosys Technologies, Cognizant Technology Solutions and UST Global — for multi-year contracts worth over US$ 600 million.
  • Tata Consultancy Services (TCS), the country's largest software exporter by revenue, was awarded a contract in March 2010 to administer the UK's National Employee Savings Trust (NEST) scheme's administered services under a 10-year deal, worth around US$ 879.5 million.
  • Further in March 2010, Mahindra Satyam, signed a four-year offshore contract with KMD, a Denmark-based information technology company, for US$ 48 million.
  • In April 2010, software exporter Patni Computer Systems won a five-year IT and back-office contract potentially worth around US$ 200 million from US-based health insurance provider Universal American.