Indian IT-BPM industry overview
2014
About NASSCOM
Global IT-BPM industry: Trends and Highlights
Indian IT-BPM industry: Trends and Highlights
India Value Proposition and Impact on Clients
FY2015 outlook: What Lies Ahead
Contents
About NASSCOM
Policy Advocacy
Industry
Development
Enabling
Environment
Global Trade
Development
E-Governance
Emerging
Companies
Security
Premier trade body and chamber of commerce of the IT-BPM firms in India
Over 1,500 members includes Indian firms, MNCs and GICs
Access to an international network through 50 MoUs and linkages with 40 industry
associations across the globe
Social
Development
Driving thought leadership and collaboration for 25 years
Education & Skill
Development
Optimism
Global economy:
2013 - Volatility; 2014 - Cautious optimism
Source: IMF, NASSCOM
196.8
195.8
190.0
World Crude Oil Price Index
4
Commodity prices - Coming down
2012 2013 2014P
1
World GDP growth - Set to increase
3.1%
3.0%
3.7%
2012 2013 2014P
2
World Inflation - Set to reduce
4.0%
3.8%
3.7%
2012 2013 2014P
Index 2005=100
8.1%
7.6%
7.4%
USA
3
Unemployment - Set to decline
US STEM unemployment hovering
between 3-3.5 per cent
Index 2005=100
Worldwide IT-BPM spend
1,375
951
370
159
635
1,390-1,400
996
392
168
655
2013 2012
* IT outsourcing numbers exclude ER&D; hence, not comparable with previous years Source: Booz & Company, Everest Research, IDC, NASSCOM
5.7%
5.9%
4.8%
~1.5%
3.1%
76-80
48-50
2012 2013
IT Sourcing Business Process Sourcing
Global sourcing market
124-130
134-140
81-85
53-55
Worldwide IT-BPM spend crosses USD 2 trillion;
global sourcing market growing 2X of global spend
BFSI, manufacturing, healthcare offset reducing
government IT spend
New lines of businesses, CMOs, SMBs, emerging
geographies/verticals driving IT adoption
IT services
BPM
Packaged
software
Hardware
ER&D
USD billion
USD billion
8-9%
Buyers seek more platform solutions for specific
industry, geographic, and regulatory needs
Outsourcing services based on cloud platform
and cloud model increasingly become the trend
55%
(2013)
Up from
52% in 2012
Indias* share
2013:
USD 2.2
trillion
Growth:
4.5%
>60
Total cross border
M&As;
28% share
in total
8.1%
Relative industry
share in national GDP
38%
Largest share
in total services exports
45%
Offsets nearly half
of Indias oil import bill
IT-BPM industry: Highest impact sector for India
Highest attractor of PE/VC investments
3.1
mn
Largest
private sector employer
Largest private sector
women employer
Promoting balanced
regional growth
Spearheading the
Indian MNC story
$2.4 bn
Total investment;
IT-BPM share:
47%
99
Operational
IT SEZs;
44% in
Tier II/III
>1 mn
60-
70%
Highest
net value add sector
Source: NASSCOM
IT-BPM industry: Resilient, growing, evolving a
USD 118 billion behemoth
50
76
86
24
32
32
FY2010 FY2013 FY2014E
Domestic Exports
108
118
74
E: Estimate
Source: NASSCOM
IT-BPM revenue break-up
USD billion
Growth reflects variable impact of
currency
1.7X growth and CAGR of 12.4
per cent in last 5 years USD 50
billion added
Software and services revenue in
FY2014 - USD 105 billion
SMAC revenue: 5-10 per cent of
total
Industry in a constant state of flux: Aligning to
emerging trends and customer demands
Basic IT services,
maintenance,
security
Support function, cost
benefits
Maintain basic IT services
Functional IT,
networking
Efficiency, workgroup
decision
Productivity optimisation
Productivity
software + ERP
Collaboration,
standardisation,
productivity improvement
Mobile + cloud/SaaS
+ big data + social
IT - trusted strategic partner
Innovation through insight and
rapid execution of ideas
Deliver business outcomes
Convergence of services
Source: NASSCOM
Till 1980s 1980-1990s
1
9
9
0
-
2
0
1
2
2012 onwards -
Digital Era
Emerging players
~1,000-1,200
Small sized
~15,000 players
Mid-sized
120-150 players
Large
11 players
% contribution to
total IT-BPM
revenues
>40 per cent
~35-40 per cent
~9-10 per cent
~9-10 per cent
Notes:
Revenue: Large - >USD 1 bn; mid-sized USD 100 mn-1bn; emerging USD 10-100 mn; small - <= USD 10 mn
Source: NASSCOM
IT-BPM industry structure, FY2013
Worlds largest number of IT-BPM firms - ~16,000;
Indian, MNC, large & small firms dot landscape
Entrepreneurial startups: New breed of
firms infusing energy and innovation
Etoilet from ERAM
Full cycle approach in
sustainable sanitation
RidingO
Online carpooling
platform
Nano Ganesh
Remotely operate
irrigation pumps via
mobile
Saral Money
Handheld micro ATMs
for payment & other
financial services
Technology enabling social innovations
Leading to Increasing collaboration between large firms and startups
~1,000 SMAC focused firms
~900 Internet/web/eCommerce firms
~400 firms focused on education
~100 firms on agri, BFSI, energy,
healthcare
1,411
1,500
918
950
637
680
FY2013 FY2014E
IT exports** BPM exports IT-BPM Domestic***
Industry a net hirer; focus shifting from capacity to
skill
Addition of 1.66 lakh in FY2014
India epicenter of the technology
world- 50 per cent of global tech
MNC, 80 per cent of Indian tech
companies, and 20-30 per cent of
global tech R&D workforce based
out of India
Worlds largest talent pool: >5
million graduates and post
graduates, ~25 per cent domain
specialists
Employee growth supplemented by
non-linear model
Multiple hiring models - just in time
hiring, global hiring, lateral, skill set
focused
Notes:
* Excluding hardware; ** includes IT services, ER&D, S/w products; *** includes S/w products
Source: NASSCOM
Direct Employment (000)*
6%
2,966
3,130
Revival in discretionary spending driving exports
growth USD 10 billion added over FY2013
IT-BPM export revenues*
USD billion
45
52
18
20
13
14
FY2013 FY2014E
IT services BPM S/W prod and ER&D
76
86
Y-o-Y estimated growth at 13 per
cent, USD 10 billion added this year
o IT service - 14.3 per cent
o BPM - 11.4 per cent
o ER&D - 11.1 per cent
o Software products -10 per
cent
Growth segments
o IS outsourcing and testing
growing 40 per cent faster
than overall IT-BPM growth
o Data analytics driving BPM
spend
o UK and Europe: fastest
growing
o Manufacturing, retail,
healthcare driving new
opportunities
Notes:
E: Estimate
* Excluding hardware
Source: NASSCOM
13%
BFSI
41%
Hi-
Tech/Tel
ecom
18%
Manufacturing
16%
Emerging
25%
US
62%
UK
17%
Europe
(excl.
UK)
12%
APAC
8%
RoW
2%
UK, Continental Europe: Seeing increasing
demand; fastest growing at 13.5%, 14.3% ,
respectively
Emerging segments fastest growing at >14%;
demand for mobility, advanced analytics (retail,
hcare); government mandates, green technology
(utilities); digitisation (media)
E: Estimate; *Excludes hardware exports;
1
Emerging includes utilities & construction, retail, healthcare, services, transportation
Source: NASSCOM
Geographic growth drivers- Europe and US; Vertical
growth drivers- traditional and emerging segments
FY2014E per cent share
1
IT service: USD 52 billion, 60% share in exports;
BPM: Driving user experience key differentiator
IT services
1
: Fastest growing segment
BPM
2
: Nearly one-fourth of exports
E: Estimate
Source: NASSCOM
FY2014E: USD 52 billion
FY2014E: USD 19.9 billion
1) High-end services indlue IT consulting, system integration and offshore software product development
2) Others includes network consulting & integration, IT education/training, SOA, web services, eBusiness/eCommerce
3) Others includes HRO, procurement, other horizontal services
Y-o-Y growth of over 14 per cent
IS outsourcing: Fastest growth 18.5 per cent
Software testing: 18 per cent growth
CAD/M and IT consulting: Driven by SMAC,
vertical-specific solutions
Y-o-Y growth of 11.4 per cent
BPaaS/cloud, analytics enabling higher focus
on non-linear growth and platforms
Knowledge services: Growth >15 per cent;
analytics, legal services growing >18 per cent
CADM
37.1%
High-end
services
19.1%
IS
outsourcing
17.7%
S/w
testing
7.3%
Others
18.8%
CIS
41% F&A
23%
Knowledge
services
19%
Others
4%
Vertical
specific
14%
Software products, ER&D: Growth driven by demand
for domain-specific solutions
E: Estimate
Source: Booz & Company, Zinnov, NASSCOM
ER&D exports
USD billion
1.6
1.7
FY2013 FY2014E
Software product exports
USD billion
~9%
5.4
6.0
5.8
6.5
FY2013 FY2014E
12.4
11.2
ER&D
Embedded
s/w+h/w
11%
~200 R&D centres by G500 firms
~50% of exports from telecom, semiconductors
Focus on convergence, efficiencies,
customisation/localisation
Mobility, analytics for enhanced UX
M2M new opportunities in eng. analytics
Bengaluru, NCR-leading product regions; Tier
II/III cities viable product hubs
Enterprise apps, communication & collaboration,
mobility, analytics leading areas of development
Maturity: Firms set up post 2006 crossing INR 5
crores in 4 years; >2X faster than firms set up
pre-2006
Domestic IT-BPM: Slowing demand, high volatility
663
727
175
196
205
225
FY2013 FY2014E
IT Services BPM S/W products
1,043
1,148
~10%
IT-BPM domestic revenues*
INR billion
Below NASSCOM guidance: Expected
to achieve Y-o-Y growth 10 per cent
(INR); negative growth in dollar terms
due to rupee depreciation
Economic uncertainties, slowdown in
decision making, inflation, rupee
volatility, 2014 elections, etc. impacting
discretionary IT spend for both
government and enterprise sector
Segments: IT services growth 9.7 per
cent, BPM fastest growth at 11.9 per
cent
Internet, eCommerce firms driving IT
adoption
SMBs: IT adoption growing ~15 per cent
E: Estimate
* Excluding hardware
Source: NASSCOM
Industry 3.0 model focused on transformation
impact
1. Offerings
Capacity to IP Focused
2. Solutions Focus
Efficiency to
Transformation
3. Delivery
Globalised to
Glocalised
4. Deals
Standalone to Bundled
5. Pricing
From Fixed to
Differentiated Pricing
Strategy
6. Markets
From Known and met to
Unmet and Unknown
7. Talent
Skill over Scale
8. Customers
CIO, CMO, SMB, Non
Fortune 500
9. Operating Model
Size to Agility
Source: NASSCOM
Global presence: Anytime, anywhere services
Driving innovation and differentiation for customers
>140 ODCs added
ODC locations in 78
countries
Million $ clients*: Confidence in India outsourcing model
1,434
2,128
2009 2013
Million dollar
clients increased
by 50 per cent in
last 5 years
Higher revenue per client: Strong demand pipeline
Increasingly mining
client base cross-sell,
up-sell services /
products
Verticalisation BPM: Aligned to clients needs
2009 2013
20-22%
32-33%
Vertical-specific
solutions driving
increased
specialisation
100
127
2009 2013
460
600
2009 2013
nos
nos
% of BPM exports
Notes:
* Based on the data of top 4 IT-BPM firms
Source: Industry reporting; press releases, Company website, NASSCOM
Indexed to FY2009=100
Lower cost
Operational
excellence
Technology
redesign
Business
process
improvement
Business
innovation
Use cases: From cost savings to impacting both
top-/bottom-lines
C
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p
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E
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g
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m
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t
Central electronic
care record for
patients
Implementation of
sub systems of
the entire solution
Operated under
input based
pricing & TAT
SLAs
Limited client
interaction
Cost saving to
client
Low processing
time and
manual effort
IT service integration
for manufacturing
major
Designing & operating
IT service processes
based on ITIL v3 -
QPM & SAP
monitoring tools
Operated under
hybrid pricing
model & TAT SLAs
Managed by CIO &
IT line manager
Reduced cost
Lower downtime
improved business
continuity
Higher control &
governance
Cloud based
operation centre for
canned food major
Cloud application
lifecycle from
application migration
implementation &
support
Operated under as-
a-service pricing
model & TAT SLAs
Managed by CIO &
BU head
Significant top-line
& bottom-line
impact
Zero downtime
elastic demand
management
Integrated digital
marketing platform for
beverages major
Designing, hosting &
managing platform;
customer data
repository; analysis
Operated under
outcome linked
pricing & business
KPIs
Joint planning with
CIO & BU heads
Significant top-line
& bottom-line
impact
Lower campaign
lead time
Deepen customer
relations, outreach
Remote clinical
monitoring centre for
medical device co.
End-to-end ownership
of clinical outsourcing
facility; analyse/
provide reports to
patients & physicians
Operated under
outcome linked
pricing & BLAs
Joint planning with
CIO & BU heads
Pioneering remote
patient monitoring
services reduced
healthcare cost
and increased
customer
satisfaction &
revenue
1
2
3
4
5
Source: BCG
The India Leadership Story: Numero uno destination
across all parameters
Cost
Competitive
Scalability,
Security
Strong
Ecosystem
Human Capital
Customer
First
3-4X
cheaper than US
~75 countries
~600 ODCs
43
Tier II/III cities
>5 million graduates
>3 million workforce
100%
coverage of outsourcing
engagements
Optimum cost
Operational flexibilities, efficiencies
Global delivery network
Best-in-class governance frameworks
Competitive infrastructure
Emerging potential locations
Largest employable pool
Diverse background
Customer centric business outcomes
End-to-end services
Niche, domain capabilities
Maturity
USD 118 billion
industry
Scale: 16,000 firms
Depth of services: across IT-BPM
Vertical-wide presence
u
v
w
x
y
z
BENEFITS
IMPACT ON CUSTOMERS
Source: NASSCOM
Created significant impact for customers
Source: NASSCOM
Savings of USD 200
billion for clients in last 5
years
USD 120 billion
invested by clients in new,
high return projects
Enabled 80 per cent
clients expand to new
geographies
Average client
productivity up by
20-40 per cent
Over 70 per cent
clients have derived
global emerging market
solutions from India
100 per cent
clients gained
productivity
improvements from
India
Solutions from India 50
per cent faster
time to market for
clients
Clients able to set up
business 30 per cent
faster in India
The digital wave - defining India, defining business
The SMAC Opportunity
SMAC reshaping businesses;
consumers and all traditional
approaches - the foundation for a
Digital enterprise
Consumerisation of IT driving growth
Startups setting the pace in SMAC
solutions
INDIA: FAST GROWING DIGITAL ECONOMY
Mobile
130
million
920 million telecom
subscribers
40 million
smartphones
213 million internet
users
3
rd
fastest growing
app market
INR 300 crore+ app
market
300 million+ app
downloads
USD 13 billion
eCommerce
revenue in 2013
36 per cent CAGR
for 4 years
Source: Gartner, IAMAI, IMRB, KPMG, McKinsey, TRAI, Secondary sources, NASSCOM
16.9
0.8
18.4
128
34
2.1
44.2
207
Social Mobility Analytics Cloud
2013 2016P
USD billion
76
86
97-99
FY2013 FY2014E FY2015P
1,043
1,148
FY2013 FY2014E FY2015P
1,251-1,286
FY2015: Continued momentum, optimistic outlook
IT-BPM export revenues*
Growth of 13-15%
E: Estimate, P: Projected
* Excludes hardware
Source: NASSCOM
IT-BPM domestic revenues*
Growth of 9-12%
USD billion
INR billion
Customer outlook
78% of decisions makers confident
investment and growth in 2014
Indian IT-BPM sector
Exports expected to grow by 13-15 per
cent, domestic by 9-12 per cent in
FY2015; revenues to cross USD 130
billion
Industry prerogatives - a) Help clients
go digital, b) Understand and acquire
new customers for clients, c) Grow
their business
Transformational outsourcing (value,
technology, innovation and cost) will
drive future growth
However, concerted efforts required to mitigate
challenges and build emerging opportunities
Source: NASSCOM
Political uncertainty diverting
attention
Key decisions required to support
industry await new government
Stability of macro- economic
variables (currency, inflation,
trade flows)
Reduce volatility, boost growth
Delay in decision making
slowing government projects
Stronger partnership with government
and industry
Change procurement norms
Immigration bill
Work with relevant stakeholders to
ensure negative provisions are
addressed
Skills in demand
Digital technologies; domain skills
Create competencies, develop
collaborations
Leading in an uncertain world
Develop a robust value proposition
Rearticulate India brand
Key Takeaways
With 55 per share in global sourcing market, India continues to be a leading offshoring location
Industry continues to march ahead adds USD 10 billion over FY2013; to aggregate USD 118
billion in FY2014
Indian IT-BPM exports to grow 13 per cent in FY2014 USD 86 billion; industry continues as a net
hirer with 166,000 people added
Emergence of the Digital Enterprise shifting services from standardisations to enabling innovation
through insight and rapid execution of ideas
Customers demand greater innovation: industry responding with IP-led, multi-platform, productised
services; buy-side influencers expanding beyond CIOs to CMOs, other lines of businesses
India value proposition enabling customers multi-billion dollar cost savings, faster time-to-market,
productivity improvements, access to new geographies, localised solutions, etc.
Next level of offerings would be around enabling a digital enterprise adoption of SMAC-enabled
technologies for customers
Leading to transformational changes in business models - IP-based solutions, glocalisation,
differentiated pricing strategy, address unmet, unknown needs, develop domain expertise and
agility
FY2015 an optimistic outlook; exports (USD terms) to grow 13-15 per cent, domestic (INR terms)
set to grow 9-12 per cent
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