IT, ITeS heads for $50-billion mark

NASSCOM, the chamber of commerce of the Indian IT software and services industry in India, says the IT, ITeS sector will reach $50-billion mark in FY 07-08.

The chamber of commerce of the Indian IT software and services industry in India, NASSCOM, has announced the findings of its annual survey on the performance of the Indian software and services sector (excluding hardware) and outlook for FY 2007-08.

As a part of the survey, NASSCOM also released the annual ranking of Top 20 IT Software and Service exporters in India in FY 2006-07 (excluding ITeS-BPO revenues).

TCS maintained its position as the leading exporter followed by Infosys and Wipro respectively.

According to the annual NASSCOM survey, the Indian

IT-ITeS industry (including domestic market) recorded an overall growth of 30.7 per cent as against a projected growth of 27 per cent, clocking revenues of $39.6 billion in FY 2006-07 up from $30.3 billion in FY 2005-06. The software and services exports segment grew by 33 per cent to register revenues of $31.4 billion in FY 2006-07 up from $23.6 billion in FY 2005-06. The domestic segment grew by 23 per cent to register revenues of $8.2 billion in FY 06-07 up from $6.7 million.

Within the export segment, IT services exports have grown by 35.5 per cent to clock revenues of $18 billion; while ITeS-BPO exports up by 33.5 per cent registering revenues of $8.4 billion. Engineering services and products exports clocked revenues of $4.9 billion, growing at 23 per cent in FY 2006-07.

The survey also projects that the overall IT software and services sector will grow by 24-27 per cent clocking revenues of $49-50 billion in FY08.

ITES "The Indian software and services industry continued its outstanding performance in FY 07. Marked by double digit growth, FY 07 witnessed India''s enhanced role in global trade with continued momentum in new contracts and renewals, increased traction in a broader range of services, expansion of geographic footprint, increased mergers and acquisition, both domestic and cross-border, and heightened interest among private equity investors to drive newer growth opportunities.

The industry continued to be amongst the largest employers, directly employing more than 1.6 million and indirectly creating employment opportunities for an additional 6 million people in related industries. The industry also significantly impacted socio-economic development by contributing 5.2 per cent to the national GDP"

Talking about the prospects of software and services industry in the current fiscal, Mr. Kiran Karnik, President, NASSCOM, said, "The software and services industry continues to exceed forecasts year after year and we are confident that the forecast (exports + domestic market) of $50 billion in FY07-08 will be achieved, as will the target of $60 billion exports by FY09-10.

From a market opportunity perspective, the indicators continue to be positive with a potential addressable market of over $300 billion, driven by growth of existing business and new services line opportunities. While India continues to be the most preferred destination for global IT sourcing due to its talent pool, top-quality management and security and quality focus, there are certain short to medium term challenges that need to be addressed swiftly.

These include rupee appreciation, suitability of available talent, infrastructure development and sustenance of a positive policy/regulatory environment. These require timely, consistent and continued effort from all stakeholders including industry, government, academia and NASSCOM".

• Industry records a revenue of $39.6 billion in FY 2006-07; exceeds forecast of 27 per cent to register a growth of 30.7 per cent
  
• Industry revenues projected to grow at 24-27 per cent in FY 2007-08
• TCS, Infosys and Wipro maintain their position as the Top 3 exporters in the NASSCOM Top 20 IT software and services exporters rankings

Ranking methodology of the Top 20
NASSCOM sends out a detailed Snap Survey questionnaire annually to all its member companies, accounting for 95 percent of the Indian IT software and BPO industry revenue. Information collated through the questionnaire includes: aggregate performance; service lines; verticals and geographies. The Snap Survey form also takes into account the contribution of the 100 percent owned overseas subsidiaries after deducting all the double accounting.

1.	Tata Consultancy Services Ltd.
2.	Infosys Technologies Ltd.
3.	Wipro Technologies Ltd.
4.	Satyam Computer Services Ltd.
5.	HCL Technologies Ltd.
6.	Tech Mahindra Ltd.
7.	Patni Computer Systems Ltd.
8.	I-flex Solutions Ltd.
9.	L&T InfoTech Ltd.
10.	Polaris Software Lab Ltd.
11.	Hexaware Technologies Ltd.
12.	Flextronics Software Systems Ltd. (Aricent)
13.	Mphasis BFL Ltd.
14.	Mastek Ltd.
15.	Siemens Information Systems Ltd.
16.	NIIT Technologies Ltd.
17.	Prithvi Information Solutions Ltd.
18.	Genpact
19.	i-Gate Global Solutions Ltd.
20.	Birlasoft

This list does not include some companies whose corporate headquarters are located outside India, but have significant India-centric delivery capabilities, and have not shared their India-centric revenue figures.

Had they been ranked based on their India revenues, companies such as Accenture, Cognizant, HP, IBM and Perot would have also appeared in this ranking.

Highlights of industry performance in FY 2006-07
Employee numbers

Sector-wise break-up

$billion	2005-06	2006-07	2007-08
IT Software and Services Exports[1]	17.3	22.9	28-29
ITeS-BPO Exports	6.3	8.4	10.5-11
Domestic Market	6.7	8.2	~10
TOTAL (IT Services + ITeS-BPO + ES, Product Exports + Domestic Market)	30.3	39.6	49-50

Note: Totals may not add up due to rounding off

Key highlights of the NASSCOM survey

Industry employee base estimated at nearly 1.6mn in FY07

• Employment in the exports segment estimated at over 12,00,000 which translates into a year-on-year increase of ~34 per cent
  
• IT software and services added over 177,000
  
• ITeS-BPO added ~138,000
  
• Indirect employment attributed to IT-ITeS estimated to be 4x, translating to ~6mn additional jobs

Industry performance

• Exports grew by over 33 per cent - was the main factor in the industry performance exceeding expectations
  
• Year marked by scope and scale expansion
  
• India is an integral part of most major global sourcing strategies
  
• Increasing traction in application management and infrastructure services
  
• Strong growth in FAO demand; steady expansion in emerging service lines (legal, risk management)
  
• Overseas M&A complementing organic growth

Market indicators support a positive outlook for global IT-BPO demand

• Large unaddressed market potential for global sourcing
  
• Continued momentum in new contract signings, renewals / restructuring
  
• M&A activity in key client industries / PE activity to drive new opportunities; focus on mid-market
  
• Concerns of US economic recession moderating, corporate performance and outlook is positive

India continues to maintain its distinctive lead as the destination of choice on parameters like talent suitability, maturity and business environment

• 28 per cent of the suitable talent available across all offshore locations
  
• Outranks the next destination by a factor of 2.5
  
• Broad service portfolio
  
• Keen emphasis on security, quality
  
• Leveraging the experience curve to derive gains from operational excellence
  
• Rupee appreciation a concern

Six key focus areas for sustained leadership have been defined as

• Enhance the talent pool advantage by focusing on soft skill development
  
• Rapid growth in key business infrastructure strengthening - plan for emerging cities and aim for proactive regulatory reform to facilitate business in India
  
• Operational excellence to be driven amongst industry players to ensure world leading benchmarks in performance in India based delivery model
  
• Catalyzing domestic market development
  
• Emphasis on quality and information security
  
• Fostering an ecosystem to breed innovation

Projections for FY 2007-08 estimate overall software and services to grow by 24-27 per cent to $49-50 bn

• Lower growth rate masks the fact that incremental revenue of $10 bn is higher than ever before
  
• Exports growth projected at 26-29 per cent; IT software & services $28-29bn; ITeS-BPO $10.5-11bn
  
• Domestic market growth forecast at 20-22 per cent with transportation, retail, hospitality to supplement strong demand in financial services & telecom

[1] Includes Engineering services and Product Exports (FY 06 - $4.0 billion; FY 07 - $4.9 billion)