it industryanalysis assignment1

7/28/2019 IT IndustryAnalysis Assignment1

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India Jai Dave

Sector Review – IT(91) 8097670347

[email protected]

03 May 2013

Please see important notice on last page of 5

Sector Overview

IT Industry revenue has grown from 1.2% of GDP in FY1998 to 7.5% of GDP in

FY2012. Indian IT Industry also crossed 100billion USD revenue in FY2012.

IT services exports grew by 19 per cent in FY2012, thus touching the figure of

USD 69 billion USD. It was the fastest growing segment for India in FY2012.

The industry’s share of total Indian exports has risen to 25% in FY2012 from a

meagre 4% in FY1998.

Supply is abundant at lower end of IT services like application development but

at the high end services which require unique skills are still scarce. These high

end services include consultancy, integrating etc. Demand is expected to

remain sluggish as Indian IT industry is export driven and two of its major

buyers viz. US and Europe battling with crisis.

Competition in IT Industry is immense within India due to low barriers of entry

in this industry. Competition in IT Industry is global in nature and have

increased significantly as more and more companies and countries trying to

imitata the Indian offshoring model. As prer NASSCOM, Indian IT companies

will be facing stiff competition from other emerging countries like Hungary,

Romania etc.

A major expense for IT companies is of wages. So, Wage inflation could

increase the cost for the IT companies putting pressure on the bottom line.

Rupee depreciation in the last year helped IT companies as it raised their

revenue. This year the Indian IT companies may not have the same advantageand will have to be hedged against the risk of rupee appreciation.

Government has allowed 100% FDI in electronic hardware and software

development sector. Government had also abolished the the license raj which

attracted more foreign investors. As a result, we have many MNC’s coming to

India and setting up their offices.

Government has recognized the importance and capability of IT sector and has

taken various measures to aid its growth. Telecom sector deregulation and

creation of SEZ’s are two such initiatives. In the FY 2013 budget, government

has shifted its focus towards education and skill development which is

structurally long term positive for the sector. As per NASSCOM, Indian IT sector is expected to generate 130billion USD of

revenue by FY2015. They also forecast the growth of Indian IT/ITES industry to

be around 11-14% in FY2013. It is expected that IT spending will significantly

increase in various segments like automotive and healthcare. The government

will continue to be a major spender keeping its focus on e-governance.

IT sector has been benefiting because of good relations of India with major

powers such as USA, Europe etc. Global IT spending has decreased due to

global recessionary climate. Volatility will be high, especially in the second half

of the FY2013 as election dates would be approaching. The attrition rate which

is very high in IT sector is seeing a decreasing trend since 2008 and they havealso hired less. Indian IT sector, along with skilled and cheap labour also has

demographic advantage. IT sector is also benefited because of lower telecom

tariff.

Competition

Impact of Inflation

Rupee Appreciation

Foreign Investments

Supply and Demand

100billion $ Industry

Increase in Exports

Government Initiatives

Future of the sector

PEST Analysis



India Sector Review 09 May 2011


Figure 1

India IT/ ITeS Industry Size (2007-12) and % of GDP

Source: NASSCOM

Figure 2IT’ impact on Indian economy

Source: NASSCOM

22 22 24 29 32 37

4147

50

59

69

76

6.4%6.7% 6.5%

7.1%7.5%

8.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013E

IT Revenues (USD billion) & its ontribution to GDP (%)

Domestic IT/ ITeS Market IT/ ITeS Exports Revenue % of GDP

CAGR for IT Industry is

16.5% for period 2007- 2012

IT’s impact on Indianeconomy





Figure 3

Growth Drivers for the IT Industry

Source: NASSCOM

Figure 4

Top IT Players in Indian IT Industry

Source: Research, Company reports

•English speaking population in India is more as

compared to the other competing countries.•Apart from that the skilled labor in India is alsocheaper as compared to other countries.

Cheap andskilledlabour

•Most of the known companies in India alwaysfollow to quality conformance standard like CMMand various ISO standards.

Adherenceto Qualitystandards

•The time difference between India and USAgives India the geographic location advantage

UniqueGeographic

location

•Government has realized the importance of ITIndustry and have aided the growth of Industryby Setting up SEZ’s , allowing foreign playersetc.

Supportive

Governmentpolicies

Growth Drivers

The IT Industry can bebroadly classified intofollowing four categories





Figure 5

Source: Research

Analysis of Porter’s 5forces




of 5

Figure 6

Source: Research

Figure 7

SWOT Analysis

Source: Analysis

SWOT Analysis

Porter’s 5 forces analysis

it industryanalysis assignment1

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