firm to agree to this condition. The year 1974 marked the beginning of Software exports from India.
Post 2002- 03, the industry had registered a robust growth rate because of increase in the number of clients, large sized contracts and a strong global delivery model.
INDUSTRY SEGMENTATION
IT industry can be broadly classified into three sectors: Software IT Services IT enabled Services (ITeS) - BPO
SOFTWARE
Software Products 1. Infrastructure Software 2. Enterprise Application Software
IT SERVICES
Project Oriented Services 1. IT Consulting 2. Systems Integration 3. CADM 4. Network Consulting and integration 5. Software Testing
ITeS - BPO
Engineering and R $ D services Financing and accounting IT Outsourcing 1. Apllication Management 2. IT Outsourcing 3. Others (SOA, Web services, E-Commerce) HR services Training and Support 1. Hardware Deployment and support 2. Software Deployment and support 3. IT education and training KPO services
1) SOFTWARE
IT Software comprising of the (a) Software Products and (b) Engineering and R & D Services, forms the smallest sector of the Indian IT industry. (a) Software Products: The market for software products is growing rapidly as the Small and Medium Enterprises (SMEs) as well as large organizations are utilizing the services of software in simplifying their works. The sector is highly concentrated with the top 10 firms, dominating the market.
IT Software comprises of the:
(i) Infrastructure Software The Infrastructure software connects the people and systems across an organization. It helps inefficiently executing the business processes, share information and the manage the various touch points with the customers and the suppliers. It can be of the following types: Application development Application integration and middleware Business intelligence tools Database management systems Data integration tools IT operations Security software Operating-system software (ii) Enterprise Application Software: It is software specifically designed to solve an enterprise problem. The application software performs various business functionalities like accounting, production scheduling, customer information management, etc. The Enterprise application softwares currently available are: Customer relationship management Enterprise resource planning Supply chain management Project portfolio management Content, communication and collaboration E-learning (b) Engineering and R & D Services: This sector has recently originated in India. Many players are trying to tap this market by developing their engineering capabilities.
2) IT SERVICES
India is one of the leading providers of IT services. The basic model followed is known as off shoring wherein Indian firms cater to the specific requirements of its clients by employing efficient project and quality management skills for its execution. This segment comprises of: (a) Project- oriented services: These services are delivered as individual projects. The services are catered according to the needs and wants of the clients, and the expertise of the vendor. These services can be delivered onsite or offshore, or can be a combination of both also. These services include the following services:
(i)
IT Consulting: The players in this service line advise clients to streamline their business using IT. They help them in devising IT strategy, IT architecture, IT assessment and planning etc. IT consulting in India is still at a very nascent stage. Major companies which are involved in this service are Wipro, TCS, Satyam, and Infosys. Systems Integration: This comprises a whole bouquet of services which are very specific to the requirements of the end user. The ranges of services included are: Integration of various systems deployed by the organization- CRM, ERP, and SCM etc. Integration of business processes and logistics. Configuration of customized software o Database Maintenance o Integration of legacy systems with the new software or hardware.
(ii)
(iii)
CADM: These services include designing, upgrading and maintenance of software to suit the user requirements. These services dominate the project oriented services market. These services are best suited for off shoring, that is why, these services dominate the Indian export basket. Network Consulting and Integration: These services offer planning, construction and designing of data networks. The range of services in this service line includes: o Network architecture design o Network connectivity o Systems Management o Project Management o Network Maintenance etc.
(iv)
(v)
Software Testing: It checks the quality of a software product or service. It is basically a technical investigation to identify and rectify errors to meet specific quality parameters. Software Testing operates in three spheres: O Response Testing: Ensures that parameters from which the responses are elicited from the target audience are operational as well as efficient enough. O Security Testing: Ensures that all the security parameters are risk free O Load Testing: Ensures that the software can handle the load density so as to reduce the down time
(b) IT Outsourcing: When an organization contracts another organization for managing, deploying and maintaining its IT architecture or system, it is called as IT Outsourcing. It includes: (i) Application Management: It includes management and execution of all activities involved in deploying, maintaining, and upgrading a firms IT systems. (ii) IT Outsourcing: The services offered in this segment vary depending on the requirements of the client. The services offered in IS Outsourcing can be:
Desktop Management Help Desk Support Management of Operation systems Management of Applications systems Management of Anti Virus systems Back up equipment service etc.
(C) Training and Support: It includes three segments: (i) Software Deployment and Support: It involves installing, configuring and maintaining software on the clients systems. (ii) Hardware Deployment and Support: It involves deploying specific hardware devices on the clients systems. IT education and Training: It is designed to educate and train the in house team for organization Information Technology systems. It is imparted to provide organization specific skills.
(iii)
a)
Customer Interaction Services: These services include all the activities related to managing relationship with the customer i.e. capture, storage and analysis of customer information.
b)
Financial & Accounting Services: These services manage financial and accounting aspects of businesses. These services are slowly and steadily gaining pace in the Indian IT industry. It is the second largest contributor to exports in the ITes segment
c)
Human Resource Services: It entails all the activities pertaining to human resource
management. It includes managing employee records, payroll processing, hiring, staffing and training and development of the employees etc.
d) Knowledge Process Outsourcing: The KPO segment offers a bouquet of services, ranging from
market analysis, strategy consulting, business research, content management, medical transcription etc.
PRESENT INDUSTRY
As the year 2012 comes to an end, the Indian IT - ITeS industry has made significant progress during the last decades. According to The National Association of Software and Services Companies (NASSCOMM) India has captured a sizeable share of 58% in 2011 which was up from 51% in 2009 in global technology sourcing and business services market. The year 2012 was marked by slowdown in global economy resulting in weak growth prospects of several world economies including India. The recovery process of Indian economy which began after the financial crisis of 2008 as reflected in the performance of FY11 again took a pause in FY12. Yet the IT-ITes sector not only showed resilience amidst the slowdown but also marked a new milestone of crossing US$ 100 billion revenues in FY12
Higher technology adoption by the Indian government and corporate sector to drive the domestic market According to NASSCOM, currently revenue from the domestic market for the IT-ITeS sector (including hardware) is estimated to account for a share of around 32% at about US$ 31.7 billion, growing at CAGR of over 9% during FY08-FY12. Improved IT infrastructure, increase competition among corporate and enhanced government focus has aided in greater technology adoption in India and making IT services as fastest growing segment in the domestic market.
The quality of IT infrastructure in the country has improved with enhanced Internet connectivity and introduction of 3G services which in turn has driven the growth of BPO segment. Growing usage of mobility devices, netbook, notebook and connectivity devices is expected to contribute to the hardware market growth. Further domestic software segment is also set to rise with advanced applications such as cloud, mobility etc. The focus of the Government, especially on projects involving e-governance across states, provides an opportunity for vendors to expand their foothold in the domestic market. Emerging technology initiatives through the Unique Identification Authority of India (UIDAI) opens avenues for companies in the rural market in the coming years
Businesss Intelligence Application solutions, Design and Business Applicatio development, process Pacakge redesign n managem implementatio n Innfrast ent, ructure system integratio and network n manage ment
Bangalore
Hyderabad
Chennai
Mumbai
Delhi
Pune
Kolkata
Thiruvanathapuram
Indian IT Industry
Threat of substitutes
Suppliers for the industry can be categorized into: (a) Knowledge Professionals, (b) Hardware Manufacturers and (c) Telecom industry players. Knowledge Professionals have a high bargaining power in the IT Software and Services sectors because they demand high level of skill and expertise to render their services. In the Ites - BPO sector, the level of skill and expertise required is low, therefore, they have a lower bargaining power on the industry. For the IT industry to function properly, proper hardware infrastructure is required. Therefore, the bargaining power of hardware manufacturer grows. This is supported by the fact that hardware manufacturing industry is very concentrated (HP, IBM, Dell etc.)While a robust telecom network is a pre-requisite for proper functionality of the IT industry, but the presence of a number of players in the industry reduces their bargaining power.
Threat of Substitutes:
Since the IT industry is driven by technology, which itself is ever evolving, therefore, there is a high risk of substitutes for the industry.
COMPETITIVE STRATEGIES
After studying the competitive landscape of the industry, the following competitive strategies can be followed by the players:
5.
Setting up ODCs:
Offshore Development Centers have helped in instilling customer satisfaction to a great extent. It also has helped in reducing the operating expenses of the companies.
5. Overdependence on US Economy:
Almost 70% of the IT industry revenues come from USA. Therefore, any downscale in the US market, adversely impacts the Indian market too. E.g. recent downsizing and job cuts due to recession in the US market.
6.
India specializes in services but not in products. The nation lacks in product innovation, which can be considered a major area of concern. It will be difficult to maintain competitive advantage if product innovation doesnt occur.
7.
The domestic market is still in the nascent stage in India. This makes the whole industry vulnerable to export market only
RECOMMENDATIONS
1) Building Domain Knowledge:
If the players in the industry have to move up the value chain, the first pre requisite is building up domain knowledge. Only this can help them in satisfying their customers and in turn winning their confidence. Once this is achieved, they will become repeat customers for them.
3) Knowledge Management:
The industry faces a high attrition rate which deprives the company of its talents. Knowledge management is a technique which helps in retaining the knowledge in the firm, even when these knowledgeable persons leave the organization. It is a technique of assembly, preservation, transfer and management of data and knowledge in companies. A boost in the domestic sales can occur with more favorable government policies and also improvement in the infrastructure which is a pre requisite for the growth of IT industry as a whole.
CONCLUSION
The Indian Information Technology industry represents one of the most successful industries showing consistent rapid growth. In a report, Perspective 2020: Transform Business, Transform India, prepared by Mc Kinsey, the export revenues of Indian IT industry will touch US $ 175
billion by the year 2020. The domestic sales revenue will also contribute US $ 50 billion by the year 2020. Therefore, we can say that the industry is shining and will continue to do so as well.