I.t. Industry

Agenda

 Value Chain & Structure  Industry Segment  Competition  Growth Drivers  Advantage India  Budget Impact  Issues & Concerns  Regulations  Outlook

Value Chain & Structure Industry Overview Industry Value Chain Structure of the Industry

Overview GDP contribution is 5.5 % for FY08 Total IT Services constituted to $ 31 billion in 2008 US remained the top Importer from India with 61.40 % in 08 BFSI captured the highest market segment with 36% share in 08 0.6 million employed in 07 and expected to grow by 20% in 08 TCS leading the chart with revenues of $ 4.56 billion and growth

@ 41% in FY08

ITSS At a Glance Exports

- $23.1 billion (08) Domestic - $ 7.9 billion (08) Revenue - $ 31.0 billion (08)

Contribution to GDP of ITSS

was 5.4% in FY07 & grew to 5.5% in FY08. Source: NASSCOM

Source: NASSCOM

Growing ITSS Growing @ 32 % in 08 from

30% in 05

Source: NASSCOM

ITSS currently employs

around 0.65 million people

Source: NASSCOM

VALUE-CHAIN EMPLOYEES, SOFTWARE ENGINEER etc.

TIE UP WITH COLLEGES

INTERIORS

FOOD AND BEVERAGES CATERING

CLIENT

FINANCING OF PROJECT

TRANSPORTATION SERVICES

VENDORS

REAL ESTATE

IT sector moving up Value Chain… Present Position

Service offerings

HUB of global I.T. Services R&D , KPO BPO and Large Projects Testing & Entry Level Projects Off-Shoring of Back End Work Low

Sector Competencies

Source: NASSCOM High

Structure of IT industry

$ billion (2007-08)

Structure of ITSS….

Source: NASSCOM

Custom Application Development a major contributor

Source: NASSCOM

Structure of IT Services Sector

BFSI Giving a Boost to IT Services Manufacturing 13%

RevenueByVerticals(2008) Retail 8%

Media Publishing & Entertainment 4%

Construction Utilities 4%

Hi/Tech Telecom 20% Other 21%

Others 13% BFSI 38% Source : NASSCOM

Hi/Tech Telecom follows BFSI

% Growth in various segments of ITSS BFSI Telecom Manufacturing Retail Media Construction Healthcare Airlines Others

: : : : : : : : :

39.3 % 26.71 % 52.7 % 38.3 % 3.2 % 15 % 9.46 % 112.6 % -26.5 %

• Airlines registering 3 digit growth figures due to low base(revenues) • BFSI doing pretty well as per its contribution Source: NASSCOM

Market Competition Increasing Day By DaY Porter’s Five Force Model Herfindahl Index Top Exporting Countries of IT Services

(HIGH) Threats Of New Entrants •Easy to Enter •Availability of Finance •Ease in Resource Availability

(HIGH) Bargaining Power Of Buyers • Govt. • Large Corporate • Emerging Companies • House Hold

(Very High) Rivalry Among Existing Firms • Cut Throat Competition • Large and Small Players of the market • Prefect Competitive market environment

(NO) Threats Of Substitute Products

(LOW) Bargaining Power Of Supplier • • • • •

Telephone Equipment Computer Infrastructure IT companies Catering and Others

EXTENT OF MARKET COMPETITION…. Herfindahl Index TCS

Perfectly Competitiv e Environmen

6.1 11.1 4.9 21.3 7.7 23.8

25.2

Wipro

2.4

Infoys

2.3

HCL

1.7 1.3

Tech Mahindra

Satyam

I-Flex M-Phasis

HI=1850

(2008)

Patni

Top Exporters of IT Services(2008)

Source: NASSCOM

Companies Moving To Tier II/ Tier III Cities Leaders

CHALLENGERS

FOLLOWERS

ASPIRANTS

Ahmadabad

Aurangabad

Allahabad

Chennai

Bhubaneshwar

Bhopal

Dehradun

Hyderabad

Chandigarh

Goa

Durgapur

Kolkata

Coimbatore

Gwalior

Gangtok

Mumbai

Indore

Hubli

Guwahati

NCR

Jaipur

Kanpur

Ludhiana

Pune

Kochi

Mysore

Patna

Lucknow

Nashik

Raipur

Madurai

Pondicherry

Ranchi

Mangalore

Salem

Shimla

Nagpur

Surat

Siliguri

Thiruvananthapuram

Vijaywada

Srinagar

Bangalore

Tiruchirapalli

Varanasi

Vadodara Visakhapatnam

Source: NASSCOM

Growth Drivers Moving The Way Ahead Increase in Global Services Spend Emerging Countries – Demand & Supply Centers Evolving Nature of Outsourcing Contracts Increasing Presence across the Globe Mergers & Acquisition Increase in pool of Talented Human Resources

ADVANTAGE INDIA Breadth of Service Offering:

- Evolved from low end service development to high end integrated solution - Covers a wide spectrum across multiple verticals Quality of Processes:

- Host highest number of ISO Certified Cos. Cost Advantage:

70%

- Cost of an engineer is 20% - 40% compare to EU - Avg. offshore billing rate of $ 20-35 per hour; about 50lower than EU

Contd… Ease of Scalability:

- 6,75,000 graduates/ year out of which 4,00,000 are engineers - Over 50,000 MBA graduates per year - Global 24/7 delivery capability

Infrastructure:

- Establishment of STPI and SEZs - High quality telecom Infra and Support Services

WINNERS  EDUCOMP BARTRONICS

SECTOR OUTLOOOK (NATURAL) BUDGET PROVISION EXCISE DUTY ON PACKAGED SOFTWARE RAISE Service tax introduced on IT services Smart cards for food grain delivery

PREVIOUS

8%

NEW

12%

IMPACT Brings domestic software packages at par with global packages. Negative: cranes software Bottom line of many domestic IT players to

NIL

NA

12%

NA

be hit. Negative: Rolta, TCS, Infosys To start in Chandigarh and Haryana on pilot basis; will improve efficiency of govt. schemes Positive: Bartronics

Issues & Concerns for growing IT Industry Appreciation of Rupee Global recession in demand of Software Services High attrition rate Fake Resumes Decreasing Operating Margins Tough Competition from rest of BRIC Nations

Regulations Benefitting Software Services Establishment of EOU/ STP/ EHTP/ SEZ to encourage Exports of Software

Services

Also to encourage Duty Free domestics of Services Beneficiary of ESOP/ ESOS to be taxed only at the time of sale as capital

gains

FBT is introduced as an ‘additional Income tax’ Payable by an employer @

30%

Contribution to Superannuation Fund up to Rs 1 Lakh/employee exempted

from FBT.

Information Technology Software are exempted from Custom Duty under

amendment in custom duty act

• Tapping new segments – Asia Pacific, Middle East, Europe • Continuation of Govt. soaps in near future • Demand for E-Governance Products • Increasing demand from Domestic market • ITSS Net Export expected to grow $ 60 Billion by 2010

THANK YOU