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Last Updated: October 08, 2015
Michael Saul Dell
Chairman and CEO , Dell Inc
Latest update: September, 2015
• Availability of skilled English speaking workforce has been a major reason behind India’s emergence as a global outsourcing hub
• During FY08-15 number of graduates addition to talent pool in India grew at a CAGR of 9.4 per cent
•India added around 5.8 million graduates to the talent pool during FY15
•Growing talent pool of India has the ability to drive the R&D and innovation business in the IT-BPM space
•India’s technology and BPM sector (including hardware) is estimated to have generated US$ 146 billion in revenue during FY15 compared to US$ 118 billion in FY14, implying a growth rate of 23.72 per cent
•The contribution of the IT sector to India’s GDP rose to approximately 9.5 per cent in FY15 from 1.2 per cent in FY98
•The top six firms contribute around 36 per cent to the total industry revenue, indicating the market is fairly competitive, with TCS being the leader accounting for about 10.1 per cent
Last Updated: September, 2015
SECTORAL REPORT | August, 2015
India is the world's largest sourcing destination for the information technology (IT) industry, accounting for approximately 67 per cent of the US$ 124-130 billion market. The industry employs about 10 million workforce. More importantly, the industry has led the economic transformation of the country and altered the perception of India in the global economy. India's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be the mainstay of its unique selling proposition (USP) in the global sourcing market. However, India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation centres in India.
The IT industry has also created significant demand in the Indian education sector, especially for engineering and computer science. The Indian IT and ITeS industry is divided into four major segments – IT services, business process management (BPM), software products and engineering services, and hardware.
The IT-BPM sector in India grew at a Compound Annual Growth rate (CAGR) of 15 per cent over 2010-15, which is 3-4 times higher than the global IT-BPM spend, and is estimated to expand at a CAGR of 9.5 per cent to US$ 300 billion by 2020.
India, the fourth largest base for new businesses in the world and home to over 3,100 tech start-ups, is set to increase its base to 11,500 tech start-ups by 2020, as per a report by Nasscom and Zinnov Management Consulting Pvt Ltd.
India’s internet economy is expected to touch Rs 10 trillion (US$ 151.6 billion) by 2018, accounting for 5 per cent of the country’s gross domestic product (GDP), according to a report by the Boston Consulting Group (BCG) and Internet and Mobile Association of India (IAMAI). India’s internet user base reached over 350 million by June 2015, the third largest in the world, while the number of social media users grew to 143 million by April 2015 and smartphones grew to 160 million.
Public cloud services revenue in India is expected to reach US$ 838 million in 2015, growing by 33 per cent year-on-year (y-o-y), as per a report by Gartner Inc. In yet another Gartner report, the public cloud market alone in the country was estimated to treble to US$ 1.9 billion by 2018 from US$ 638 million in 2014. Increased penetration of internet (including in rural areas) and rapid emergence of e-commerce are the main drivers for continued growth of data centre co-location and hosting market in India.
Indian IT's core competencies and strengths have attracted significant investments from major countries. The computer software and hardware sector in India attracted cumulative foreign direct investment (FDI) inflows worth US$ 17.575 billion between April 2000 and May 2015, according to data released by the Department of Industrial Policy and Promotion (DIPP).
The private equity (PE) deals increased the number of mergers and acquisitions (M&A) especially in the e-commerce space in 2014. The IT space, including e-commerce, witnessed 240 deals worth US$ 3.8 billion in 2014, as per data from Dealogic.
India also saw a ten-fold increase in the venture funding that went into internet companies in 2014 as compared to 2013. More than 800 internet start-ups got funding in 2014 as compared to 200 in 2012, said Rajan Anandan, Managing Director, Google India Pvt Ltd and Chairman, IAMA.
About 554 start-ups received funding this year compared to 342 during last year. Seed and venture capital funds made investments worth US$ 3.4 billion this year, three times the investment made last year. VC funding to the IT/ITes sector amounted to 55 per cent of total VC funding made this year.
Most large technology companies looking to expand have so far focused primarily on bigger enterprises, but a report from market research firm Zinnov highlighted that the small and medium businesses will present a lucrative opportunity worth US$ 11.6 billion in 2015, which is expected to grow to US$ 25.8 billion in 2020. Moreover, India has nearly 51 million such businesses of which 12 million have a high degree of technology influence and are looking to adopt newer IT products, as per the report.
Some of the major developments in the Indian IT and ITeS sector are as follows:
Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:
India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. Social, mobility, analytics and cloud (SMAC) are collectively expected to offer a US$ 1 trillion opportunity. Cloud represents the largest opportunity under SMAC, increasing at a CAGR of approximately 30 per cent to around US$ 650-700 billion by 2020. The social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020. The Indian e-commerce segment is US$ 12 billion in size and is witnessing strong growth and thereby offers another attractive avenue for IT companies to develop products and services to cater to the high growth consumer segment.
Exchange Rate Used: INR 1 = US$ 0.0152 as on September 18, 2015
References: Media Reports, Press Information Bureau (PIB), Department of Industrial Policy and Promotion (DIPP) statistics, Department of Information and Technology
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
India has the fastest internet traffic growth globally and is expected to have 348 million users by 2017, up from 138 million in 2012.
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