ICT and Globalization

(1)

This material was used by NASSCOM during an oral presentation; it is not a complete record of the discussion.

No part of this document may be circulated, quoted, or reproduced for distribution without prior written approval TM

ICT and Globalization

– Developments and Perspectives from the Indian IT-ITES Experience

Presented to the OECD Working Party on the Information

Economy

(2)

TM

Outline

• Snapshot of Indian IT-ITES Growth

• Recent Trends and Outlook

(3)

TM

$1.9

$2.6

$3.9

$6.0

$4.0

$7.7

$12.8

$23.6

FY00

FY02

FY04

FY06

FY10E

DOMESTIC MARKET*

EXPORTS*

Indian IT-ITES continues to chart record growth; on

track to reach the targeted $60bn in exports by 2010

Billion

Source: NASSCOM

$13-15

$60

34.6%

31.2%

21.1%

22.1%

31.0%

FY00-06

28.9%

FY00-10

CAGR

10 YR TARGET

ACHIEVED

* Includes IT Software and Services, ES and Products, as well as ITES-BPO

(4)

TM

Growth story built on strong fundamentals…

• Access to a large, growing pool of highly qualified talent

• A high degree of quality orientation and demonstrated service

delivery expertise

• Keen emphasis on information security reflected in the

comprehensive legal framework and elaborate security practices

supplemented by enabling intervention

• World class telecommunication infrastructure

• Enabling (and progressively improving) business environment

through strong government support; incentives, favorable

regulations and policy

(5)

TM

…that is also reflected in the rapid evolution of the

Indian IT-ITES service portfolio

1980 1985 1990 1995 2000 2005 & beyond

Mutual Gains

_{Re-invest Mutual Gains}

Strategic Impact

Value

Full Process Outsourcing (F&A, HR) Multiple Process Outsourcing

Rules-based Processing

Problem Solving/Decision Making Customer Contact

Transactional Data Entry Data Entry

Cost Control

Cost Control Focus on Core CompetenceFocus on Core Competence Business TransformationBusiness Transformation

Out-Tasking

BPO

Transformational BPO

Application Support Technical Support Customer Contact / Hardware & Installation Support

Maintenance

R&D Services Product Development & Testing Design & Integration

IT

BPO

Source: neoIT

Research and Analytics Engineering Services

Note: Services listed are indicative not exhaustive

1980 1985 1990 1995 2000 2005 & beyond

Mutual Gains

_{Re-invest Mutual Gains}

Strategic Impact

Value

Cost Control

Out-Tasking

BPO

Transformational Outsourcing

Maintenance

IT

BPO

Source: neoIT

Note: Services listed are indicative not exhaustive

1980 1985 1990 1995 2000 2005 & beyond

Mutual Gains

_{Re-invest Mutual Gains}

Strategic Impact

Value

Cost Control

Out-Tasking

BPO

Transformational BPO

Maintenance

IT

BPO

Source: neoIT

Note: Services listed are indicative not exhaustive

1980 1985 1990 1995 2000 2005 & beyond

Mutual Gains

_{Re-invest Mutual Gains}

Strategic Impact

Value

Cost Control

Out-Tasking

BPO

Transformational Outsourcing

Maintenance

IT

BPO

Source: neoIT

(6)

TM

IT services exports lead, growing at 32-33%; range of

services offered has expanded significantly

13.3

10.0

7.3

215

398

297 FY 2004

FY 2005

FY 2006E

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TM

ITES-BPO exports grew by 37% last year, to reach USD

6.3bn; growth driven by scale and scope expansion

216

316

415

3.1

4.6

6.3 FY 2004

FY 2005

FY 2006E

Revenues (USD Billion)

(8)

TM

Growth in ES and software products reinforces the

industry’s move up services value chain

4.0

3.1

2.5

115

93

81 FY 2004

FY 2005

FY 2006E

Revenues (USD Billion)

Employees ('000)

Made-in-India

Products

10-15%

Offshore Product

Development

20-25%

Engg and R&D

Services

60-70%

FY 2005

(9)

TM

Recent trends and market indicators indicate a positive

outlook for the sector

• Large unaddressed market potential in offshore IT-BPO sustaining

demand led growth

– Evolution of global delivery expanding adoption of new services

delivered from offshore

• Unbundling of IT outsourcing mega-deals with increasing share of

India based delivery

– $100bn in contract value up for renewal over next two years

– Increased participation of Indian vendors in these bids

– MNCs also looking at significant ramp-up in India based delivery

• Strength in client wins, cross-border M&A trends, stable pricing with

marginal upward bias, and a gradual (favorable) shift in the

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TM

Significant headroom for growth, less than 10% of the

global addressable market captured till date

Addressable markets of at least

US$300 billion

* Financial year, April 1 to March 31

** Includes addressable markets in currently offshoring industries *** Includes Philippines China Russia Eastern Europe Ireland Mexico

Key drivers

• Offshoring of

– Large ‘white spaces’

in major industries

– More complex and

high-risk services

– Fragmented and

high-interaction

processes thanks to

advances in telecom

and workflow

management

technologies

Addressable

market

Current

size

**Global offshore IT industry, FY* 2005**

9x

~150-180

18.4

6.4

12.0 Others*

India

US$ billion

Global BPO industry, FY 2005**

12x

~120-150

11.4 Addressable

market

Current

size

6.2

5.2 Others*

India

US$ billion

ESTIMATES

(11)

TM

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TM

‘Managing growth’ is the key challenge

• Strengthening the global delivery model and addressing

impediments to greater globalization of services

• Building on India’s core value proposition

– Enhancing the skill pool advantage

– Strengthening business infrastructure

– Reaffirming the philosophy of operational excellence

• Effecting equitable distribution of gains from ICT

– Catalyzing domestic market development

– Decentralizing industry growth