Mumbai
NASSCOM, the premier trade body and ‘voice’ of the IT software and service industry in India, today announced the key findings of the Strategic Review 2007. The highlights of the findings indicate that the Indian IT industry has grown its revenues ten fold in the past decade, from USD 4.8 billion in FY 1997-98 to USD 47.8 billion in FY 2006-07. Its contribution to GDP is estimated to have grown from 1.2% to 5.4% in the same period. The report will be formally released at its fifteenth annual summit “NASSCOM 2007: India Leadership Forum”, scheduled from February 7-9, 2007 in Mumbai.
Commenting on the key findings of the Strategic Review 2007, Mr. B Ramalinga Raju, Founder and Chairman of Satyam Computer Services and Chairman, NASSCOM, said “The last decade is testament to the growing impact that the Indian IT industry is having on the global and local economies. The industry is perfectly poised to tap new opportunities in the offshoring and domestic segments for greater wealth and IP creation for the country.”
Mr. Kiran Karnik, President, NASSCOM said, “Indian IT industry’s consistent growth in both exports and domestic segments and its ongoing expansion into new potentially high growth opportunities reaffirms the continued confidence and global competitiveness of the Indian IT sector. We are confident that the industry will achieve its ambitious target of USD 60 bn in exports in 2010. The challenges faced by industry are being addressed jointly by the industry, government and other stakeholders through both short and long term solutions. Optimistic market signs indicate there is more headroom for growth, through large unaddressed areas and the possible unbundling of IT-BPO mega-deals with increasing shares of global delivery. The other positive sign is the maturing of the domestic IT industry. For the first time ever, the domestic industry has broken out of the hardware linked growth pattern and Indian firms are playing an increasing role within this segment.”
The Strategic Review 2007 reviews the industry’s performance in 2006, estimates the growth expected in the current fiscal (FY07), details the service line trends observed across the various industry segments over the past year, presents an assessment of India’s competitiveness as a sourcing destination, analyzes the sustainability of each individual factor contributing to India’s leadership position and provides a view of the outlook projected for the global and Indian IT-ITES industries. It outlines the opportunities, challenges and agenda for key stakeholders to further extend India’s leadership in this space.
KEY HIGHLIGHTS OF THE NASSCOM STRATEGIC REVIEW 2007
IT Industry-Sector-wise break-up
| USD billion | FY 2004 | FY 2005 | FY 2006 | FY 2007E |
| IT Services | 10.4 | 13.5 | 17.8 | 23.7 |
| -Exports | 7.3 | 10.0 | 13.3 | 18.1 |
| -Domestic | 3.1 | 3.5 | 4.5 | 5.6 |
| ITES-BPO | 3.4 | 5.2 | 7.2 | 9.5 |
| -Exports | 3.1 | 4.6 | 6.3 | 8.3 |
| -Domestic | 0.3 | 0.6 | 0.9 | 1.2 |
| Engineering Services and R&D, Software Products | 2.9 | 3.9 | 5.3 | 6.5 |
| -Exports | 2.5 | 3.1 | 4.0 | 4.9 |
| -Domestic | 0.4 | 0.8 | 1.3 | 1.6 |
Total Software and Services Revenues Of which, exports | 16.7 | 22.6 | 30.3 | 39.7 |
12.9 | 17.7 | 23.6 | 31.3 |
| Hardware | 5.0 | 5.9 | 7.0 | 8.2 |
| Total IT Industry (including Hardware) | 21.6 | 28.4 | 37.4 | 47.8 |
Total may not match due to rounding off
*NASSCOM estimates have been reclassified to provide greater granularity
- Historical values for a few segments have changed due to availability of updated information
Steady growth: The Indian IT-ITES sector (including the domestic and exports segments) is expected to exceed USD 47.8 billion in annual revenue in FY07, an increase of nearly 28 percent in the current fiscal
- Contribution to GDP estimated to be 5.4% up from 4.8% last year.
- Service and software exports remain the mainstay of the sector contributing USD 31.3 billion and beating forecast to register a 32.6% growth
- Increasing traction in offshore product development and engineering services is supplementing India’s efforts in IP creation. This segment is growing at 22-23 percent and is expected to report USD 4.9 billion in exports, in FY 2006-07.
- MNC investments reach an unprecedented scale; over USD 10 billion announced in FY 2006-07, to be invested over the next few years.
Service-line expansion: Aiding service providers to take on larger and more complex deals, and is driving up the average size of contracts awarded to Indian firms. Indian Service Providers have grown their share of contracts of values in excess of USD 50 million dollars from 1% in 2002 to 7% in 2006.
- High offshore component of delivery and superior execution in multi-location delivery continue to be key differentiators
- Broad-based industry structure - IT led by large Indian firms, BPO by a mix of Indian and MNC third-party providers and captives, reflects the depth of the supply-base
- Even though larger players continue to lead growth, gradually increasing their share in the industry aggregate; several high-performing SMEs also stand out
Employment Trends & NASSCOM Initiatives: Total IT Software and services employment to reach 1.6 million in FY07. The industry in collaboration with the government and other stakeholders has initiated several initiatives to further enhance the availability and access to suitable talent for IT-ITES in India
- The NAC (NASSCOM Assessment of Competence has been nationally rolled our in November 2006, after a successful pilot. This is being taken to a number of states in 2007
- A comprehensive skill assessment and certification programs for entry-level talent and executives (low-middle level management) is underway
- An image enhancement program to build greater awareness about the career opportunities in this segment is underway
- NASSCOM has been working with the academia across the country under its IT Workforce development initiative to encourage and facilitate greater industry interaction; NASSCOM has signed MoUs with UGC and AICTE to take forward these initiatives
- NASSCOM has suggested the concept of experimenting with adapting the Special Economic Zone concept (deregulation and removal of restrictions) for education, and create Special Education Zones. The long term steps that are needed include much higher government investment in education, major education reform and better compensation and research grants for teachers/researchers
- NASSCOM has proposed the setting up of a chain of finishing schools for IT professionals to make them more employable with a simple 3-4 months of honing of technical skills and imparting soft skill training, helping bridge the manpower supply-demand gap by at least 30-40%. It has been proposed that such finishing schools be set up by the IITs and National Institutes of Technology.
Employment figures-Software and Services sector
| Sector | FY 2004 | FY 2005 | FY 2006 | FY 2007E |
| IT Services | 215000 | 297000 | 398000 | 562000 |
| ITES-BPO | 216000 | 316000 | 415000 | 545000 |
| Engineering Services and R&D, Software Products | 81000 | 93000 | 115000 | 144000 |
| Domestic Market (including user organizations) | 318000 | 352000 | 365000 | 378000 |
| Total* | 830000 | 1058000 | 1293000 | 1630000 |
*Figures do not include employees in the hardware sector
Domestic Market Matures: Complements the continued growth in IT-ITES exports and for the first time ever in FY 2006 showed signs of breaking out of the hardware led growth and the trend of software and services gaining share is expected to continue
- The total size of the domestic market is expected to cross USD 15.9 billion in FY 2006-07, a growth of 21 percent over FY 2005-06
- Traditionally, this segment has been led by MNCs. However, Indian firms are gradually gaining ground. Overtime this segment could become a larger SME play, as the mid-sized firms increase their levels of IT adoption
Global Markets: While US and UK remain the dominant markets for IT-ITES exports, revenues from newer markets are growing rapidly
| FY03 | FY04 | FY05 | FY06 |
| Americas | 69.10% | 69.40% | 68.30% | 67.18% |
| Europe | 22.20% | 22.60% | 23.10% | 25.13% |
| Rest of the World | 8.70% | 8.00% | 8.60% | 7.69% |
Growth Verticals: BFSI, Telecom and Hi-Tech continue to account for approximately 60% of the pie. Other verticals such manufacturing, retail, transportation, healthcare and utilities are also growing rapidly
Emerging Locations: As global delivery matures, newer locations are emerging; however India is expected to remain the undisputed leader
Going forward: For India to fully capitalize on the opportunity and sustain a disproportionate lead in the global IT-ITES space, stakeholders need to continue working towards timely and coherent execution of initiatives to address supply-side concerns across the following areas
- Augmenting Talent Supply
- Creating world-class infrastructure
- Strengthening information security
- Enhancing operational excellence
- Providing regulatory support
- Catalyzing domestic market development
- Fostering an ecosystem for innovation
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Updated on:
12 Feb, 2007
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