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IT enabled Services

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IT & ITeS Industry in India

February, 2013

Introduction

The Indian Information Technology (IT) and Information Technology enabled Services (ITeS) sectors go hand-in-hand in every aspect. The industry has not only transformed India's image on the global platform, but also fuelled economic growth by energising higher education sector (especially in engineering and computer science). The industry has employed almost 10 million Indians and hence, has contributed a lot to social transformation in the country.

Furthermore, Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by automotive, chemicals and consumer products industries.

Industry body National Association of Software and Services Companies (Nasscom) predicts that the ITeS industry will bring in around US$ 225 billion by 2020, wherein 80 per cent of the growth would come from the presently untapped sectors and regions.

Market Size

The Indian IT & ITES industry has continued to perform its role as the most consistent growth driver for the economy. Service, software exports and business process outsourcing (BPO) remain the mainstay of the sector. Over the last five years, the IT & ITES industry has grown at a remarkable pace. A majority of the Fortune 500 and Global 2000 corporations are sourcing IT/ITES from India and it is the premier destination for the global sourcing of IT & ITES accounting for 55 per cent of the global market in offshore IT services and garnering 35 per cent of the ITES/BPO market.

India's IT and BPO sector exports are expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87 billion, according to Nasscom.

Internet industry of India is expected to contribute US$ 100 billion to the country's gross domestic product (GDP) and generate about 22 million jobs by 2015, as per a report titled 'Online and Upcoming: The internet's Impact on India', released by McKinsey and Co.

IT spending in India is projected to reach US$ 71.5 billion in 2013, an increase of 7.7 per cent as compared to US$ 66.4 billion projected for 2012, as per a report by Gartner.

Investments

Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments from major countries.

Between April 2000 and December 2012, the computer software and hardware sector attracted cumulative foreign direct investment (FDI) of Rs 52,377.08 crore (US$ 9.63 billion), according to the Department of Industrial Policy and Promotion (DIPP).

More recently, online retailing, cloud computing and e-commerce are the major driving forces behind the rapidly increasing growth in the IT industry. Online shopping has increased with the emergence of internet retailing and e-commerce.

Some of the major initiatives in Indian IT and ITeS sector:

  • Tata Consultancy Services (TCS) has set up a new delivery centre in Liverpool, expanding its operations in the UK. The new facility will provide a secure applications development and maintenance centre for business applications
  • Mumbai International Airport Ltd (MIAL) has entered into a 10 year contract with Wipro Infotech for the new integrated terminal T2. Under the contract, Wipro will provide managed services across the entire IT landscape at MIAL
  • Mahindra Satyam has acquired 51 per cent stake in Complex IT, a SAP consulting provider in Brazil. This acquisition will focus on developing solutions for the enterprise solutions market within Brazil
  • Mu Sigma plans to set up a development centre in the US. The company also plans to recruit another 1,000 personnel by December 2013, adding to its current headcount of 2,300 employees
  • Wipro has partnered with New Zealand-based Pingar. With this partnership, Wipro has gained access to areas such as artificial intelligence and data mining
  • HCL Technologies has entered into a multi-million dollar engineering services agreement with UK-based Cobham. HCL will support multiple Cobham sites across the globe with a range of services-hardware, software, embedded, mechanical and testing