Sector structure/Market size

The Indian information technology 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 National Association of Software and Service Companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector has risen from 1.2 per cent of the gross domestic product (GDP) in FY 1997-98 to an estimated 5.8 per cent in FY 2008-09.

Further, the industry body expects the sector to grow between 4 per cent and 7 per cent during 2009-10 and return to over 10 per cent growth next year.

India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Software testing, and Web services.

As per NASSCOM's latest findings:

• 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.
• IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40.9 billion in FY 2007-08 to US$ 47.3 billion in FY 2008-09.

Moreover, according to a study by Springboard Research, the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.

At present, there are 60 million Internet users in the country. According to 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.

MAIT has outlined 'Goal 511', an ambitious target that talks about 500 million Internet users, 100 million broadband connections, and 100 million connected devices by 2012.

A latest study by MAIT estimated that the total PC sale in India is likely to grow by 7 per cent in 2009-10, with total sales expected to cross 7.3 million units.

Outsourcing

According to NASSCOM, software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$ 47 billion in FY 2008-09, contributing nearly 78 per cent to the total software and services revenue of US$ 59.6 billion.

India continues to be the most preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is among the most financially attractive locations when viewed in combination with the business environment it offers and the availability of skilled people, according to global management consultancy AT Kearney.

Some big deals in the outsourcing space include:

• Tata Consultancy Services is understood to have bagged a US$ 248.75 million software implementation contract from the Cardiff City Council, UK.
• Etisalat DB, formerly known as Swan Telecom, has outsourced implementation of its software applications and IT infrastructure to Tech Mahindra as part of a US$ 400 million deal spread over the next 10 years.