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IT & ITeS Industry in India

November, 2014


Information Technology (IT) has made possible information access at gigabit speeds. It has created a level playing field among nations and has a positive impact on the lives of millions.

Today, a country's IT potential is paramount for its march towards global competitiveness, healthy gross domestic product (GDP) and meeting up energy and environmental challenges.

The Indian 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 the higher education sector (especially in engineering and computer science). The industry has employed almost 10 million Indians and, hence, has contributed significantly to social transformation in the country.

India is one of the fastest-growing IT services markets in the world. It is also the world's largest sourcing destination, accounting for approximately 52 per cent of the US$ 124-130 billion market. The country's cost competitiveness in providing IT services continues to be its USP in the global sourcing market.

India has the potential to build a US$ 100 billion software product industry by 2025, according to Indian Software Product Industry Roundtable (iSPIRT). The software products market in India, which includes accounting software and cloud computing-based telephony services, is expected to grow at 14 per cent in 2014.

Market Size

The Indian IT-BPM industry is expected to add revenues of US$ 13-14 billion to the existing revenues by FY15, according to National Association of Software and Services Companies (NASSCOM).

The industry grew at a compound annual growth rate (CAGR) of 13.1 per cent during FY08-13.Total exports from the IT-BPM sector (excluding hardware) were estimated at US$ 76 billion during FY13. Export of IT services has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding hardware) in FY13. BPM accounted for 23.5 per cent of total IT exports during the same fiscal. The IT outsourcing sector is expected to see exports growing by 13-15 per cent during FY15.

The data centre infrastructure market of India is estimated to reach US$ 2.03 billion in 2015, a 5.4 per cent increase from US$ 1.92 billion in 2014.

The sale of personal computers (PC) in India has registered significant growth as 2.55 million units were sold in January-June, 2014 compared to 2.03 million units in the corresponding period of 2013.

E-commerce space in India is expected to grow at 20-25 per cent over the next 2-3 years in terms of jobs, salaries and growth, which in turn could create at least 150,000 jobs. The current estimated size of the industry is about Rs 18,000 crore (US$ 2.91 billion) and is expected to reach Rs 50,000 crore (US$ 8.08 billion) by 2016 and as the industry grows, the demand for talent would grow proportionally.


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

According to data released by the Department of Industrial Policy and Promotion (DIPP), the computer software and hardware sector attracted foreign direct investment (FDI) worth US$ 13,238.58 million between April 2000 and September 2014.

Some of the major investments in the Indian IT and ITeS sector are as follows:

  • Microsoft plans to offer its commercial and cloud services-Azure and Office 365-from three local data centres by the end of 2015, making it the first technology company to set up cloud data centres in India.
  • Infosys plans to invest Rs 1,400 crore (US$ 228.04 million) in a campus proposed to be built in Noida, Uttar Pradesh. The project is estimated to generate 35,000 direct and indirect jobs.
  • Cognizant has acquired US-based digital marketing agency Cadient Group. The latter is expected to boost Cognizant's presence in the healthcare segment.
  • Visa plans to set up a technology centre in India in 2014 and join a host of global system players who have established technology centres in the country to access its software and engineering talent.
  • Genpact Ltd has signed an agreement with the US-based Automation Anywhere to provide automated business processes for its clients.
  • Nielsen India has acquired Indicus Analytics. This acquisition will add to Nielsen's capabilities for macro and microeconomic research for the public and private sectors.

Government Initiatives

The Government of India has played a key role with public funding of a large, well trained pool of engineers and management personnel who could forge the Indian IT industry.

Its spending on information technology (IT) will reach US$ 7.2 billion in 2015, a five per cent increase over 2014, according to a report by Gartner Inc.

Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:

  • The Government of India through the Board of Approval (BoA) under the Union Ministry of Commerce and Industry has approved Wipro Ltd's plan of setting up a special economic zone (SEZ) in Visakhapatnam.
  • The Government of India has launched the .bharat domain name which will cover eight languages. The domain will help to bridge the digital divide and enhance the reach of the Internet to remote villages.
  • The Government of Andhra Pradesh and Google India have signed a Memorandum of Understanding (MoU) to launch a number of initiatives aimed at bridging the state's digital divide and enabling skill development.
  • The Government of Karnataka and Nasscom plan to launch a series of new initiatives to help shore up the local startup and technology ecosystem in the state, including plans to build one of Asia's largest startup warehouses and also the country's first 'hack-celerator'.
  • The Central Government and the respective state governments are expected to collectively spend US$ 6.4 billion on IT products and services in 2014, an increase of 4.3 per cent over 2013, according to a study by Gartner.

Road Ahead

India continues to be the topmost offshoring destination for IT companies followed by China and Malaysia in second and third position, respectively. Leading IT services firms are expanding their traditional offerings (in India) to include research and development (R&D), product development, and other niche services.

Emerging technologies present an entire new gamut of opportunities for IT firms in India. Social, mobility, analytics and cloud (SMAC) collectively provide 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.
Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020.

Exchange Rate Used: INR 1 = US$ 0.016 as on November 27, 2014

References:Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP) statistics, Department of Information and Technology