labels: nasscom
IT, ITeS sector to top $36 billion in ''06 news
09 February 2006

Nasscom's Strategic Review 2006, which reviews the Indian IT sector's performance in 2005, estimates the growth in FY2006 to exceed $36 billion.

It details the various trends in various segments of IT last year, assesses India's competitiveness as a sourcing destination, analyses the sustainability of the factors contributing to India's IT leadership position and provides projections for global and Indian IT-ITeS.

Highlights of the Strategic Review 2006:

  • Steady growth: The Indian IT-ITES expected to exceed $36 billion in annual revenue in FY06, an increase of nearly 28 percent in this current fiscal.
  • Exports to account for nearly two-thirds of the total revenues.
  • IT-ITES sector to contribute to 4.8 per cent of GDP in FY06.
  • Engineering and R&D, software products hold significant opportunity for India -- growing at 37 per cent and 43 per cent (CAGR FY 2003-06E), respectively.
  • Indian IT-ITES sector on track to achieve the targeted $60 billion in exports by FY 2010.

IT industry: sector-wise

$billion

FY '04

FY '05

FY '06E

IT Services

10.4

13.5

17.5

-Exports

7.3

10.0

13.2

-Domestic

3.1

3.5

4.3

ITeS-BPO

3.4

5.2

7.2

-Exports

3.1

4.6

6.3

-Domestic

0.3

0.6

0.9

Engineering services and R&D, software products

2.9

3.9

4.8

-Exports

2.5

3.1

3.9

-Domestic

0.4

0.8

0.9

Total software and services revenues

exports from software and services

16.7

22.6

29.5

12.9

17.7

23.4

Hardware

5.0

5.9

6.9

IT industry (including Hardware)

21.6

28.4

36.3

(Total may not match due to rounding off)

Employment trends:

  • Total IT software and services employment to reach 1,287,000 in FY06.
  • Industry has already initiated several initiatives to further enhance the availability of and access to suitable talent for IT-ITeS in India.
  • A comprehensive skill assessment and certification programs for entry-level talent and executives (low-middle level management) launched.
  • An image enhancement programme to build greater awareness about the career opportunities in this segment.
  • Nasscom is working with the academia across the country to encourage and facilitate greater industry interaction.

Employment in software and services (hardware excluded)

Sector

FY 2005

FY 2006E

IT services

297000

398000

ITeS-BPO

316000

409000

Engineering services and R&D and software products

93000

115000

Domestic market (including user organisations)

352000

365000

Emergence of newer locations:

  • As global delivery matures, newer locations are emerging; however India remains the undisputed leader.
  • India maintains its distinctive lead amongst offshore destinations.
  • Strong fundamentals will help sustain India's value proposition.
  • 28 per cent of the suitable talent available across all offshore locations (outranks the nearest destination by a factor of 2.5).
  • Keen emphasis on security and quality.
  • Sustained cost competitiveness, gains from increased productivity, utilisation and scale expansion.

Growth of domestic market:

  • Complementing the continued growth in IT-ITeS exports is a growing domestic market.
  • Domestic market coming into its own, to grow by nearly 22 per cent in FY 2006.
  • Strong demand over the past few years has placed India amongst the fastest growing IT markets in the Asia Pacific region.
  • Growth in the domestic market is witnessing the early signs of service line depth that characterises maturing markets.
  • Global product companies are also looking to introduce localised versions of their software products to drive usability and penetration.
  • Several large domestic contracts announced last year were won by MNCs.

Indian IT multinationals mature:

  • Traditionally India-centric, indigenous players beginning to build noticeable presence in other locations -- through cross border acquisitions and organic growth in other low-cost locations.
  • Global majors continuing to significantly ramp-up their offshore delivery capabilities -- predominantly in India.
  • Portfolio of services sourced globally continued to expand into higher-value, more complex activities.

From outsourcing to global sourcing:

  • Transition from outsourcing to global sourcing to drive the next phase of evolution in process quality frameworks and practices.
  • Having aligned their internal processes and practices to international standards such as ISO, CMM, Six Sigma, etc., companies in India are seeking to further increase the quality and productivity benchmarks by introducing adaptations more suitable for remote service delivery.

Projections:

  • For India to fully capitalise on the opportunity and sustain a disproportionate lead in the global IT-ITES space, we need to focus on five key areas:
  • Enhancing the talent pool advantage -- focus on skill development to better leverage the worlds largest working population.
  • Strengthening urban infrastructure in existing (tier I) and emerging (tier II and tier III) cities and continued emphasis on proactive regulatory reform to facilitate greater ease of doing business.
  • Driving a philosophy of operational excellence amongst industry players (across the board) to ensure that India based delivery sustains world-leading benchmarks in performance.
  • Catalysing domestic market development.
  • Actively promoting an uncompromised agenda towards global free trade.


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IT, ITeS sector to top $36 billion in ''06