Changing landscape and emerging trends indian it ites industry

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Changing landscape and emerging trends

Indian IT/ITeS Industry

Contents

Industry Landscape

06

Emerging Trends

14

Cloud computing

15

Platform BPO

27

India's Software Products industry

34

Tier 2 IT/ITeS destinations ? moving to mainstream

38

Increasing focus on People ? an integral asset to the

51

Indian IT/ITeS industry

The Road ahead

55

Foreword

Partap K Aggarwal Chairman CII NR Committee on ICT & Emerging Technologies & Managing Director, IDS Infotech Ltd

Sanjay K Gupta Co?Chairman, CII NR Committee on ICT & Emerging Technologies & Global Delivery Head, Birlasoft (I) Ltd

Wishing you a very happy and prosperous new year 2011.

The Indian information technology (IT) / IT enabled Services (ITeS) industry has played a key role in putting India on the global map. Over the past decade, the Indian IT-BPO sector has become the country's premier growth engine, crossing significant milestones in terms of revenue growth, employment generation and value creation, in addition to becoming the global brand ambassador for India.

The Indian IT-BPO sector including the domestic and exports segments continue to gain strength, experiencing high levels of activity both onshore as well as offshore. The companies continue to move up the value-chain to offer higher end research and analytics services to their clients.

The Indian IT-BPO industry has grown by 6.1 percent in 2010, and is expected to grow by 19 percent in 2011 as companies coming out of recession harness the need for information technology to create competitive advantage.

India's fundamental advantages--abundant talent and cost--are sustainable over the long term. With a young demographic profile and over 3.5 million graduates and postgraduates that are added annually to the talent base, no other country offers a similar mix and scale of human resources.

Realising the wealth of potential in the IT-ITeS sector, the central and state governments are also working towards creating a sound infrastructure for the IT-ITeS sector. CII aims to make the Indian IT and ITeS industry world class by continuously providing a platform for understanding and adoption of the new developments & best practices worldwide in this sector, taking up issues and concerns of the Indian industry with the relevant ministries at National and State level, coming up with studies, reports and surveys to help understand the potential of Indian IT and ITeS market and the issues faced.

Our first report generated a huge appreciation. The CII - PwC report "Indian IT/ITeS Industry - Changing landscape and Emerging trends", keeping in view the strengths and potential of the Indian IT / ITeS industry, strives to enhance these aspects so as to transform the Indian IT identity to an iconic status.

CII believes that this report would help turn the goals envisaged by the Industry into realities, and result in directing the world's focus on India as the hub of IT.

We thank all the participants associated with this survey for their immense support and vital inputs. We hope that you find this report enriching and meaningful.

Foreword

Jairaj Purandare Executive Director Leader ? Markets & Industries PricewaterhouseCoopers

Hari Rajagopalachari Executive Director Leader ? Technology sector PricewaterhouseCoopers

We wish you all a very happy and prosperous 2011!!

After the stupendous success of our first report on the Indian IT/ITeS industry with Confederation of Indian Industry (CII) titled "Indian IT/ITeS industry ? Evolving business models for sustained growth", we are happy to bring out our second report on the industry.

As one of the key growth engines of the economy, the Indian IT/ITeS industry has been contributing notably to the economic growth accounting for around 5.6% of the country's GDP and providing direct employment to about 2.3 million people and indirect employment to many more.

The sector witnessed an interesting 2010 which saw the industry move beyond the economic slowdown and shift its focus on building revenues, creating innovative service models, broadening geographical reach and optimising cost. Amidst the growth story, however, the falling margins and subdued growth of many small and mid-tier companies served as a wakeup call for that segment. Going forward, we expect to see a consolidation wave in the years to come, where small and medium players would merge to compete for large scale deals and keep up with the changing industry dynamics.

Emerging trends in service delivery like Cloud Computing and Platform BPO are likely to remodel the industry by creating new business opportunities for the IT/ITeS vendors and driving changes in the traditional service offerings. Today, margin pressures are pushing companies to proactively look for ways to contain costs while enhancing output. For long, Tier-2 cities have played around the fringes of mainstream IT/ITeS delivery. Today, we are seeing more and more companies moving into Tier-2 cities to set up delivery centres.

The report is a result of our global thought leadership, real world survey of leading industry practitioners, research and interviews with the facilitators of the industry like the Software Technology Parks of India (STPI) and IT-parks. Through a judicious mix of secondary and primary research, we aim to bring out a holistic perspective on the changing industry dynamics and the emerging trends.

We express our sincere gratitude to CII for selecting us as the Knowledge Partner for the conference and supporting us in the completion of the survey. We would also like to thank all the executives who participated in the survey for providing their valuable insights and views.

Industry Landscape

6 PwC

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