IDC Report 2006 FNL On Domestic Services Market Opportunities

NASSCOM-IDC Study on
Domestic
Dome stic Services Market Opportunity
NASSCOM-IDC Study on
Domestic Services Market Opportunity
Copyright ©2006
NASSCOMTM
NATIONAL ASSOCIATION OF SOFTWARE AND SERVICE COMPANIES
International Youth Centre,Teen Murti Marg,Chanakyapuri
New Delhi -110 021 India
Phone: 91-11-23010199 • Fax: 91-11-23015452
E-mail: research@nasscom.in
Website: www.nasscom.in
First Print : August 2006
Published by
NASSCOM, New Delhi
NASSCOM is India’s National Association of Software and Service Companies, the

premier trade body and the chamber of commerce for the IT software and services
industry in India. NASSCOM is a truly global trade body with around 1050
members, of which over 200 are global companies from the US, UK, EU, Japan,
China and other countries.
Disclaimer
The information contained herein has been obtained from sources believed to be
reliable. NASSCOM disclaims all warranties as to the accuracy, completeness or
adequacy of such information. NASSCOM shall have no liability for errors,
omissions or inadequacies in the information contained herein or for
interpretations thereof.
The material in this publication is copyrighted. No part of this can be reproduced

either on paper or electronic media without permission in writing from NASSCOM.
Request for permission to reproduce any part of the report may be sent to
NASSCOM.
2 NASSCOM - IDC Study on the Domestic Services Market Opportunity

he success achieved by the Indian IT-ITES sector over the past decade has
T established India as an indispensable part of the new world IT order, not
only for global sourcing of services but increasingly also for innovation and new
FOREWORD
product development. However, much of this success is attributed to the
meteoric growth in exports - and that has overshadowed the latent
opportunities unlocked and growth observed in the domestic market over the
past few years.
This study undertaken by IDC India outlines the domestic services market
opportunity for IT-ITES in India and provides a snapshot of the current trends
observed, and the future outlook for the market. Additionally, this study has
also tried to analyze the views of user organizations - to understand the
perceived gaps between the services offered by providers and those expected
by the users.
The statistics and analyses presented in this report have not only brought out
some valuable insights, but have also helped identify and confirm a few key
themes on which we have to focus our efforts. This will ensure that the
domestic segment remains both a beneficiary of as well as a contributor to
India's continued IT-ITES dominance.
Kiran Karnik
President
NASSCOM
NASSCOM - IDC Study on the Domestic Services Market Opportunity 3

ike many earlier initiatives that helped to spearhead the growth of the Indian IT Services
PREFACE L and ITES-BPO industries, NASSCOM, the premier association of Indian IT Services and
ITES-BPO companies approached IDC India with a fresh brief. The challenge was to design
and conduct a study to gauge the current size and future potential and direction of the
domestic IT Services and ITES-BPO markets.
The findings of the study more than justified the excitement of the IDC India research team,
when viewed in the context of a whole new growth opportunity emerging in the domestic
space for the Indian IT Services and ITES-BPO players.
The key learning from this study has undoubtedly been unearthing the current scale and the
future scope of the domestic IT Services and the domestic ITES-BPO sectors, slated to touch
INR 15,604 crores and INR 6,608 crores, respectively by end of 2006.
However, the Indian domestic IT Services market or the share of spending which goes to
make up the revenues of India's domestic IT service providers, is estimated to be only 45%
of the total IT Services spending of Indian businesses. The total spending on IT Services by
businesses consists of payouts to a service provider plus salary and training costs of in-
house IT staff and the associated overheads.
For IT service providers this represents a great challenge and as well as an opportunity to
develop and showcase their skills to domestic customers, and remove the commonly held
perception that IT Services vendors have a lack of focus on domestic markets or that there
is little return from outsourcing IT operations.
By eradicating the gap between real versus perceived value of IT outsourcing, vendors can
play a critical role in helping the CIO showcase IT investments as a tool enabling strategic
business advantage. The IT Services market in the country can thus gradually evolve from
low-value, long-term service engagements through high-value, one-time service
engagements on to high-value, long-term service engagements.
Another revelation from the current study was about the ITES-BPO space, which has been
historically associated with exports. There is huge opportunity waiting to be tapped, as
globalisation demands higher efficiencies and competitiveness from Indian businesses.
Unlike the IT Services exports market where price arbitrage plays an important role, the
domestic market will be driven more by access to specialist skills and helping businesses
free up their scarce resources for focusing on core business activities.
IT Services and ITES-BPO players urgently need to work together with customers,
government and other stakeholders to remove some of the perceived inhibitors and help
develop a conducive environment for healthy, long-term growth of the domestic industry.
Kapil Dev Singh

Country Manager
IDC (India) Ltd.

CONTENTS
Foreword
Preface
Snapshot of IT-ITES Spending Trends in India 7
Spotlight on the Domestic IT Services Market Opportunity 11
Market Landscape and Opportunity Assessment

Key Service Lines
Key Vertical Markets
Vendor Landscape
Key Findings from End-user and Service Provider Surveys
Spotlight on the Domestic ITES-BPO Market Opportunity 31

Key Service Lines
Vendor Landscape
Key Findings from End-user and Service Provider Surveys
Appendix 47

Snapshot of IT-ITES Spending
Trends in India
ith an estimated growth rate of over 20 percent in 2005, India has emerged
W as one of the fastest growing IT markets in the Asia Pacific region.
India has emerged as one of

the fastest growing IT markets
in the Asia Pacific region
Increasing adoption against a backdrop of low penetration levels and a rapidly

growing economy, is expected to sustain India's pole position as a key market with
domestic IT (including hardware, software and services) spends forecast to grow at
a CAGR of over 17 percent over 2005-2010.
The India Domestic IT Market, 5-Year Forecast
100,000 30%
YoY Market Growth Rate (%)
24% 25%
Market Size (INR Crore)
23% 23%
20%
17%
15%
50,000 14% 14% 15%
10%
5%
0%
2004 2005 2006 2007 2008 2009 2010 CAGR
Hardware 17%
Software 21%
Services 17%
Others 52%
Growth 8%
Note: The CAGR figures in the chart are for the period 2005-2010
While spending on hardware is projected to remain strong, domestic IT demand is

witnessing a gradual transformation from being predominantly hardware driven

towards a solutions oriented approach - resulting in a growing emphasis
on services.
Hardware accounts for nearly 54 percent of the total IT market in 2005 and is
forecast to grow at a healthy 17 percent in the next 5 years (2005-2010). The
hardware market growth will be sustained by the continuing investments in IT
infrastructure and would result in increased penetration of IT.
The domestic software market is expected to grow at 21 percent and the domestic
IT services market at 17 percent (CAGR 2005-2010). The 'others' segment is
constituted by consumables accessories and individual IT education, and forms a
small part of the overall IT market.
The liberalization of Indian economic policy, de-regulation of key sectors and

Economic liberalization, de- progressive moves towards further integrating India with the global economy have
regulation of key sectors and been key catalysts of increased IT adoption in the country. This is best reflected in
the fact that most indigenous players in telecom and banking, two key sectors with
increasing integration with the
significant multinational corporation (MNC) participation, have significantly
global economy have been
upgraded their levels of IT adoption to offer best-in-class services comparable to
key catalysts of increased IT
those offered by the global competition and these two sectors together account for
adoption
approximately 35-40 percent of the domestic spend on IT services.
Similar competitive pressures in other more recently deregulated service sectors

such as airlines and insurance, and the uptake in the manufacturing and industrial
sectors; and the several large e-governance initiatives launched by the government
under the National E-Governance Plan (NEGP) are expected to provide sustained
growth in domestic demand for IT services over the next few years.
The expanding scope and scale of the domestic IT market is also reflected in the
Broad basing of the industry evolving nature of spending patterns in the domestic market - with a steady shift
and successful execution of
from being predominantly hardware led towards a solutions approach that is
characterized by a growing role of services.
planned e-governance
initiatives are expected to
The entire IT delivery system is gradually moving towards services, with entities like
sustain strong growth
system integrators playing major roles either as front-ends to IT solution deals or
as key influencers in the market. Service providers are increasingly becoming the
client interface in many big solutions deals, and are playing a greater role in terms
of being the first contact for the end-users. In many cases, the first-line contact
influences the overall dynamics of the deal, including the purchase of hardware
and software components of the desired IT architecture. As a result partners and
channels are beginning to play an increasingly important role in the ecosystem.

Domestic demand for IT in
India is witnessing a gradual
transformation - with a
growing emphasis on services
Further, growth and maturity (currently witnessed in a few sectors) of demand is

also driving some structural changes in the domestic IT market. The following table
captures the highlights of the changes observed.
While the steady growth observed over the past few years and the underlying
drivers supporting sustained growth over the forecast period reflect a positive
outlook for the domestic market. Growth projections may be further accentuated
by addressing some basic issues highlighted by the findings of the surveys
conducted as a part of this study.
The following sections of this report analyze the market opportunity and likely
development models forecasting the growth in domestic demand for key IT and
ITES-BPO services over the next few years, outline the major issues highlighted by
service providers and user organizations, and propose actions required by the
stakeholders to address the issues raised - that could help accelerate the
domestic services market development.

Spotlight on the Domestic IT Services
Market Opportunity
IT services formed one of the fastest growing segments of the domestic IT

market with a revenue growth estimated at over 25 percent in 2005 over
2004, outpacing the growth seen in the hardware and software segments.

IT services spends (for the vendor addressed segment) in the domestic
Domestic outsourcing gaining market are estimated to have grown from INR 10,361 crores (USD 2,300
traction - services emerged as million) in 2004 to INR 12,984 crores (USD 2,900 million) in 2005.
the fastest growing revenue
segment in 2005
In addition to the vendor addressed market, it is estimated that in-house

However, in-house spending spending on IT services (including training costs, salaries of in-house IT
on IT services still accounts staff and associated overheads) still accounts for more than half of the
for more than half of the corporate IT spend in India, while the outsourced / vendor addressed
corporate IT spend in India spends account for just 45 percent of the total.
1
IT spending in India has historically been predominantly hardware led. While external spend
on services by Indian corporate houses has been relatively low most organizations have built
internal functions to support their IT infrastructure investments and consequently still source a
number of these services from in-house teams. While the value of work undertaken by these in-
house teams has been estimated (to provide a true representation of the domestic market
potential), to maintain definitional consistency, the market sizing and forecasting for the IT
services opportunity is based on the vendor addressed segment only - with the in-house spends as
a additional share potentially addressable by the vendors.

Over the next five years, the vendor addressed market is projected to grow
at a CAGR of 17 percent, to cross INR 27,979 crore (USD 6,200 million) by
2010.
With growing IT adoption and

expected increase in
penetration of in-house spends
by IT providers, the domestic
market is projected to grow at
a CAGR of more than 17
percent over 2005-10
Key Service Lines

Based on the size and growth, the above services categories can be broadly
divided into:
• High growth-large size category: Integration services (systems
integration and network integration)
• High growth-small size category: Enterprise-wide outsourcing,
applications management
• Low growth-large size category: Hardware deployment and support,
custom application development

• Low growth-small size categories: IT education and training
With a large part of the
System integration (SI) activities are one-time project-based engagements.
While today almost 90 percent of system integration engagements have IT market still in the early stages
services vendors involved, in some cases the in-house IT teams are also of adoption, domestic demand
present at varying levels. for system integration services
is expected to remain strong
This segment will continue to show significant growth in India, especially over the forecast period
because of the low levels of IT maturity. The focus of the IT services vendors
has to be to convince their customers that end-to-end integration can be
handled by the IT services vendors, with minimum involvement for the
customer’s IT team. SI vendors will need to proactively provide advice and
offerings to clients.
System Integration: An Example

Name of the Vendor: TCS
Name of the Client: Central Bank of India
Type of Engagement: System Integration
• TCS is implementing a core banking solution for the Central Bank of India covering over 1,000
branches. The solution, set to be implemented, will include B@NCS from the Sydney-based
Financial Network Solutions (FNS), the Exim Bills Trade Finance software from China Systems,
and eTreasurybv from TCS.
• The scope of the entire project covers 1,000 branches of the CBI network, including the retail,
corporate, trade finance and delivery channels for Internet banking, phone banking and
mobile banking (SMS and WAP). TCS, along with CMC, will redesign and deploy a bank-wide
corporate network, covering about 1,367 locations, by designing, building, and maintaining
the data center and disaster recovery center and facilities management services to the bank
over five years.
• The centralised core banking system implementation is expected to result in efficient and
personalised customer service, 24x7 banking through multiple delivery channels, faster time-
to-market, and superior relationship management at the bank.
The network consulting and integration market in India has witnessed rapid
growth in the past few years, growing by 41 percent in 2004 (over 2003)
and an estimated 37 percent in 2005 (over 2004). Looking ahead, the
telecom vertical is expected to drive strond demand for network integration
services. According to the erstwhile Cellular Operators Association of India
(COAI) (now Indian Cellular Association (ICA)) projections, the mobile
subscriber base in India is slated to grow from 48 million in 2004 to 207
million by 2007. This reflects significant potential for ramp-up of the
telecom infrastructure by operators, leading to a huge demand for network
integration services.
Demand for IT consulting
Demand for IT consulting services, as a discrete activity, is still quite low in services, as a discrete activity,
India and much of these services are delivered as a part of other is still quite low
engagements such as system integration.

IT Consulting Deals: An Example
Name of the Vendor: Wipro
Name of the Client: Ashok Leyland
Type of Engagement: IT Consulting
• Wipro Infotech has a 30-month contract with Ashok Leyland for strategic cost reduction.
• The contract involves developing a vision and road map for strategic cost reduction and
supplier relationship management at Ashok Leyland. The consulting and markets division of
Wipro Infotech implementing the project will look at all the elements of material costs. It will
provide consultancy and a technology solution where the market's dynamic pricing tool engine
and cost management tools will be used.
• Wipro Infotech will also be equipping and training the strategic sourcing and purchasing team
at Ashok Leyland, with the best-in-class purchasing practices and technologies, and
transferring knowledge to them in a planned manner.
Growth in domestic demand for The custom application development market in India grew by 28 percent in
custom application development 2004 over 2003. While the projected growth in domestic demand for
services is projected to be custom application development services is projected to be relatively
relatively slower… slower (compared to other service lines) - attributed to a trend towards
…SME segment and emerging
increased adoption of packaged applications, this segment is expected to
sustain significant share of the market as demand from the SME segment
vertical markets expected to
and vertical markets such as retail and the government picks up.
drive growth
Custom Application Development: An Example

Name of the Vendor: HCL
Name of the Client: Bangalore Development Authority
Type of Engagement: Application Development
• Bangalore Development Authority (BDA) has selected HCL to design an integrated man-
agement information system to automate the business processes in its various departments
by reducing current paper work by almost 80 percent.
• The solution provided by HCL identifies the business workflow, i.e., the stages in the various
departments along with the various attributes/parameters associated at each stage.
• The project encompasses interfacing with the present IT infrastructure at BDA with respect to
the existing applications. Some of the current applications include OCMS (an applica-tion for
online complaint management), IVRS (interactive voice response system, an application with
voice response capabilities for complaint management), GIS (geographical information
system) and e-KIOSK.
Application management (AM) is the traditional form of AO and refers to the

ongoing support of portfolio of applications. These applications may be
custom-built, off-the-shelf packaged products, or a combination of third-
party products and customized components. Application outsourcing (AO)
describes the provisioning of an outsourcing service around software
applications and includes both application management and software as a
service (SaaS).

The core value proposition of AO is the maintenance and daily operation of
business applications and services, including business needs analysis
consulting, system configuration, application enhancement, problem
management and resolution, user and operations support, portfolio
enhancements, remote system monitoring, database performance
management, service level agreement (SLA) reporting, escalation
management, system tuning, etc.
As customers scale-up their usage of corporation wide IT applications, Demand for application
demand for application management services is likely to increase. management services is likely
to increase…
Though few in number, market activity over the past two years has
witnessed the emergence of large, end-to-end outsourcing deals - at the
higher-end of the enterprise domain. While this trend is expected to
continue, a lot will depend on how the experiences of the early deals pan
out for the customers as well as the service providers.
End-to-end Outsourcing: An Example

Name of the Vendor: IBM
Name of the Client: Bharti
Type of Engagement: End-to-end IT Outsourcing
Size: Estimated to be in the range of US$700-750 million for a ten-year period
• Till date, the biggest IT activity in the telecom sector has been the IBM-Bharti deal. For the
Bharti case, IBM is maintaining hardware, software, and provisioning IT services, including
Early days yet for end-to-end
billing, CRM, data warehousing, e-mail and intranet services. IBM is also managing Bharti's
outsourcing… a lot will depend
data centers and IT helpdesks and enhancing its disaster recovery capabilities.
on how the experiences of the
• The total deal size for the 10-year period is likely to be in the range of US $700-750 million.
early deals pan out
For the first five years, it is likely to be in the range of US $250-275 million.
• The agreement specifies that payments made to IBM India will be linked to the percentage of
revenue generation by BTVL and pre-defined service level agreements. The percentage-linked
revenue payment is modeled to decrease with BTVL's increase in revenue.
• The deal includes all customer-facing IT applications, like billing, customer relationship
management and data warehousing. In addition, Internet, e-mail and online collaborations are
also included.

Name of the Vendor: Wipro
Name of the Client: YES Bank
• YES Bank outsourced its entire technology requirements for offices and branches across India
to Wipro Infotech. Wipro is implementing core infrastructure and hardware, doing branch
rollouts, networking, managing the data center and backup support for disaster recovery. The
deal protects the bank from all obsolescence and redundancies in technology and insulates it
from carrying forward legacy systems.
• Wipro would deploy comprehensive technology solutions to meet Yes Bank's business
requirements. This would include the IT infrastructure and hardware, branch rollout, net-
working, managing the data center besides the backup support for disaster recovery.
• The service level agreements ensure integrated 24x7 support for the bank.
• The deal is spread over a 7-year time-frame.

Name of the Vendor: HP
Name of the Client: Bank of India
Size: US$150m in a 10-year Outsourcing Agreement
• In the Bank of India deal, HP is implementing and managing data warehousing and document
imaging as well as providing integrated channel management, including tele-banking, Internet
banking and ATMs. It also supervised the implementation and management of Finacle across
750 branches in India.
• HP will implement and manage a core banking system across the bank's 750 branches
in India.
• The contract also envisages building and managing a data center, disaster recovery site,
helpdesk, and call center. HP will also manage IT infrastructure and networks across Bol's
branches, supply and maintain technology products including servers, desktops and
peripherals, and provide asset refresh and obsolescence protection for IT assets.
Over the near future, much of the demand for outsourced services is
expected to be in the form of discrete activities such as network and
desktop management.
Discrete Outsourcing Engagements: An Example

Name of the Vendor: NCR
Name of the Client: HDFC Bank
Type of Engagement: Facilities Management/Network Management
• HDFC Bank, among other banks, has outsourced its entire ATM management to NCR. It has
over 1,000 ATMs over 192 cities. NCR is providing the bank with a total suite of serv-ices,
including ATM monitoring and management, caretaker services, deposit processing services,
consumables, as well as cash replenishment.

Among the verticals, financial services, manufacturing, communications
and media, and the Government account for the bulk of the IT services
spending. These industries contribute more than 90 percent of the total IT
services spending in the region.
Financial services,
manufacturing,
communications and media,
and the Government account
for more than 90 percent of
the total spend
While these verticals will continue to be the prime drivers for IT spending in
general and IT services spending in particular, the future growth will also be
catalyzed by specific sectors such as retail, travel and tourism, healthcare,
and education. From a vertical perspective, the key factors that enhance IT
services spending are:
• Criticality of IT for operations and competitiveness: While IT has
become important for every type of business; certain verticals such as
banks and telecom service providers have a higher dependence on IT
systems. Consequently, their IT services spend is higher. For these
sectors, their customer interfacing systems are increasingly
dependent on IT systems.
• De-regulation: The de-regulation of sectors has a direct impact on IT
spend in many cases. It leads to an increase in competition and also
opens the doors to the forces of globalization. The competitive
environment creates the necessity for highly proficient IT systems. This
has already happened in banking and telecom services and is taking
place in the insurance sector. Future de-regulation of segment such as
retail can result in spurt in IT spending from these verticals.
Banks have been at the forefront of technology adoption and have been
amongst the first to deploy new technologies and systems. This, coupled
with the rapid growth of the banking sector, especially retail banking, has
made the segment a star vertical as far as IT implementations are
concerned. The banking sector has been growing rapidly in the country and

projections indicate that there will be over 70,000 bank branches and
almost 200,000 ATMs by 2009.
It is pertinent to note that while the banking sector is at the forefront of IT

adoption in the domestic market, IT penetration is not equitable across the
sector. The three broad categories of MNC and large private sector banks,
public sector banks, and the co-operative banks and small private sector
banks in general reflect declining levels of IT adoption.
The MNC and large private banks have already reached comparatively high
levels of IT maturity with core banking solutions and other banking
applications in place across their branches.
The following table depicts the business imperatives and IT challenges

faced by banks in this segment.
Within PSU banks, a few have gone far with IT adoption and reached
comparable levels of IT maturity with the large private sector banks. A large
majority of these banks, however, are still lagging behind when it comes to
IT adoption.

The co-operatives and small private banks represent a relatively nascent
market. The following graph depicts a pictorial representation of the IT
adoption patterns in the banking sector.
There is an increased thrust on network integration and managed services

as more and more banks and financial institutions are increasing their
focus on modernizing their IT infrastructure and providing state-of-the-art
connectivity. Deployment, operations, and ongoing support are some of the
key service activities that have come up in this segment. A number of
financial institutions and banks have been adopting CRM solutions and
other front-end tools to boost relationship management with existing
customers and to garner new business.
Other factors driving IT spends in the banking sector is the adoption of IT

enabled processes and systems such as real time gross settlement,
Internet-enabled remittance facilities, the automated clearing house direct
debit programs, check truncation facilities, etc.
The insurance sector is also witnessing increased IT spending activity

around the modernization of existing IT infrastructure, and added spending
on hardware and security solutions.
The domestic manufacturing sector reflects a wide variation in IT maturity,

with certain segments, such as the automotive sector, on a higher IT
maturity level and certain traditional sectors, such as textiles, at lower
levels of IT maturity. Further, there is also a visible difference between the
IT spending patterns of large organizations and the SME segment in the
manufacturing sector.

The telecommunications sector is the third largest segment driving IT
spends in the domestic market. Over the past few years, this segment has
witnessed rapid and progressive regulatory reform, entry of multiple
players and has encouraged intense competition - which has led to
significant price declines and volume growth. While the explosive growth
(~4-5 million mobile subscribers are being added every month) is
supported by a large under penetrated population, players are also
witnessing increasing levels of subscriber churn - making high levels of
service quality an important factor in retaining and growing the
customer base.
The demonstrated gains from the use of IT to sustain high levels of

operating efficiency; reduce costs and scale-up operations are reflected in
the high levels of IT adoption in the sector.

Government spending on IT in the domestic market has had a slow uptake,
but represents significant potential - both as a direct driver of scale as well
as the potential to drive IT usage across the grassroots levels which can
trigger a domino effect on subsequent spending.
Recognizing the importance of the role that ICT can play in the country's
development, the Indian government has initiated the National
E-Governance Action Plan. The NEGP, approved for implementation over
2003-07, seeks to lay the foundation and provide the impetus for long-term
growth of e-Governance within the country, by creating the appropriate
governance and institutional mechanisms, setting up the core
infrastructure and policies, and implementing a number of mission mode
projects (MMPs). These MMPs have been deployed under the central
government, the State departments, as well as several integrated projects
spanning multiple ministries, departments or agencies.
The central government projects cover programs such as national ID,

central excise, income-tax, DCA-21, passports/visa and immigration,
pensions, banking, and insurance, while the state-level includes projects
such as land records, property registration, transport, agriculture,
municipalities, gram panchayats, commercial taxes, treasuries, police and
employment exchange. The integrated projects, on the other hand, include
e-business, common service centers, India portal, e-procurement
and e-courts.
MISSION MODE DESCRIPTION MINISTRIES/

PROJECTS DEPARTMENT
CENTRAL GOVERNMENT
Income Tax A pan-India network to cover 745 Income tax Ministry of Finance/Central
offices in 510 cities and 12000 online users Board of Direct Tax
over a hybrid network comprising optical fiber
leased lines, ISDN for backup and VSAT
connectivity for remote locations
Passport Visa and Electronic recordkeeping and verification of Ministry of External

Immigration Project passport and immigration information Affairs/Ministry of Home
Affairs
DCA21 Modernization and computerization program of Department of Company

Ministry of Company Affairs; envisages Affairs
electronic-filing of companies' documents
through an entirely paperless process
National Citizen Project objectives include preparing a National Ministry of Home

Database Population Register (NPR), National Register of Affairs/Registrar General
Indian Citizens (NRIC), National Register of of India (RGI)
Residency (NRR) - for non-citizens and providing
a National Identity Number (NIN) to each person,
a Multi-purpose National Identity Card (MNIC) to
each citizen, and a Multi-purpose Residency
Card to non-citizens

PROJECTS DEPARTMENT
Central Excise Computerization of Income tax system including Department of
dissemination of tax related information, Revenue/Central Board of
dissemination of taxpayer specific information, Excise and Custom
PAN and TAN related services, preparation of
returns of income e-filing of returns of income, e-
filing of TDS returns/ demat of TDS certificates
e-payment /refund of taxes, grievance redressal
mechanism and direct tax advisory services
STATE GOVERNMENT
Land Records Project aims to facilitate on demand distribution Ministry of Rural
of land record entries and related information, Development
online filing of mutation applications,
submission and tracking of complaints, location
details of plots along with ownership
Road Transport Computerization of Driving License (DL) and Ministry of Road Transport
Registration Certificate (RC); Creation of State and Highway
and National Databases inter connecting all
RTOs in the State and all states subsequently
Property Registration Electronic record of property ownership details Department of L Resources
Agriculture To Establish a Nation Wide Communication Department of Agriculture and

Network for Effective and Speedy Information Cooperation
Exchange in Agricultural Marketing Related
Areas; to Empower Farming Community with
Market Information, thereby expanding
Marketing Opportunities for obtaining better
Returns; A Joint Collaboration Between the
Directorate of Marketing and Inspection (DMI),
National Informatics Centre (NIC), State
Governments
INTEGRATED SERVICES
Common Service To help drive ICT access and usage at the grass Department of Information
Centers root level, the Department of information Technology
Technology (DIT), Government of India, has
initiated a nationwide program to create a
network of access points termed Common
Services Centers (CSCs) throughout the country.
It is envisioned that these centers will serve as
outlets for the provision of e-government,
entertainment, education, telemedicine, e-
commerce, info-services, etc. ubiquitously. The
draft framework brought out by the DIT aims to
create an enabling environment for the
establishment of 100,000 CSCs in rural areas
by the year 2007 and outlines the policy
framework, strategy and contours of financial
support of government for rapid proliferation of
CSCs across the country.

PROJECTS DEPARTMENT
E-Biz To promote e-business adoption by establishing Department of Industrial
a single-window for G2B services for Central, Policy and Promotion /
Department of Information
State, and Local Governments; to enable on-line
Technology
event-driven interactions by re-engineering and
forms and procedures thereby reducing time for
establishment, and reducing burden of
compliance
Source: Department of Information Technology, Ministry of Communications

and Information Technology, Government of India
Note:
The above list is indicative and may not be exhaustive. Please visit www.mit.gov.in for details.
Selection Criteria for the Mission Mode Projects:

• Impact in terms of number of people likely to be affected by project
• Impact in terms of likely improvement of the quality of service
• Impact on the economy or economic environment in the country
• Impact in terms of the likely cost-benefit of investments in the project
• Readiness and willingness of ministry/ department to position a National Mission Project
• Feasibility of implementing the project from a financial, administrative and political perspective
within a reasonable time frame
In addition to the MMPs, most state governments, ministries and

government departments are actively engaged in implementing e-
Governance solutions. While many of these are already in regular
operation, others are at various stages of implementation while an even
greater number are at a conceptual stage.
As noted earlier, these four sectors (financial services, manufacturing,

telecommunications and the Government) account for over 90 percent of
the current IT spends in the domestic market. Other sectors with significant
growth potential include retail and hospitality, healthcare, education and
entertainment.
Vendor Landscape
The vendor landscape of IT services providers in India is quite fragmented
and broadly comprises two categories: the ~20 Tier I players accounting for The vendor landscape serving
42 percent of the market (~30 percent accounted for by the top 10), and the domestic market is quite
the Tier II vendors comprising smaller, predominantly regional, players
fragmented with the 20 Tier I
accounting for the remaining 58 percent of the revenues.
players accounting for just 42
percent of the market…
Tier I vendors comprise both Indian service providers as well as MNC
companies operating in India.

India is home to many world-class IT service vendors who have a domestic
…smaller, predominantly focus (though it is a small percentage of their overall revenue, it is
regional players and niche significant from the point of view of the Indian market). The prominent
players account for the rest of
Indian IT service vendors serving the domestic market include Wipro, the
Tata Group (TCS/CMC/Tata Infotech), the HCL Group (HCL Infosystems and
the market
HCL Comnet), Infosys, Ramco Systems, etc.
The MNC vendors are quite active in the domestic market. Having set up
their operations primarily as product vendors (software/hardware), these
companies, following their global strategy and leveraging on their product
strengths, have been able to capture a substantial chunk of the domestic
services sector. The prominent names in this category are IBM Global
Services HP and Accenture. Also there is significant revenue coming from
supporting products installed in India for vendors like SAP, Oracle, Sun, etc.
Tier II vendors comprise the SME system integrators (SIs), independent

software vendors (ISVs) and niche service providers.
The SME SIs and ISVs constitute a very significant part of the domestic IT
services market and work on two fronts:
• As sub-contractors for the Tier 1 vendors, they handle specific domains
within a larger contract won and front-ended by the Tier 1 vendors.
• As primary service providers to small and mid-size enterprises, they
leverage their regional presence, lower costs, and offer personal
attention to smaller clients.
Niche service providers are a small segment, with specific vertical or

horizontal expertise and focus on niche markets.
The Engagement Linkages

The way the supply side, i.e. the IT services engagements, and the demand side are linked de-
fines the current scenario in the domestic IT services market. These linkages and the resultant
markets are as below:
• Direct Engagements by the Tier 1 Vendors: These are the engagements where the larger
vendors deal with the users directly. However, purely direct engagements are not very
common, except in the IT consulting space. These engagements cover the larger users only.
• Partnered Engagements-Tier 1 and Tier 2 Vendors: This is the largest market in this
ecosystem. In most of the IT services engagements, while the Tier 1 vendors front-end the
deal, other Tier 1 vendors, Tier 2 vendors, and the smaller regional vendors act as sub-
contractors. These engagements cover the entire gamut of IT services, and cover the larger
enterprises as well as medium-sized companies.
• Direct Engagements-Tier 2 Vendors: These are the engagements where the Tier 2 vendors
deal with the users directly. These engagements primarily cover custom application
development, integration and support, hardware and software support, as well as network and
desktop outsourcing. These engagements are mainly seen in the SME users segment.

Key Findings from End-user and Service Provider Survey's
As noted earlier, a significant portion of the domestic corporate IT spends A significant portion of the
still lies in-house, predominantly driven by a perceived lack of focus by domestic corporate IT spends
service providers on the domestic market and a perceived absence of still lies in-house,
value generated by outsourcing.
Cost (price) and quality of services were highlighted as the biggest pain
areas in dealing with service providers. Lack of people with suitable skills
and delayed service / response were the other two primary pain areas
reflected in the end-user survey responses.
…predominantly driven by a
perceived lack of focus by
service providers on the
domestic market and a
perceived absence of value
generated by outsourcing.
This appears paradoxical as a majority of the end-user organizations

acknowledge the capabilities of service providers, believe that the available
vendors have the relevant experience and expertise and feel that the
vendor pricing is justified for the services delivered.
Interviews with end-users and service providers revealed some interesting

insights that explain these paradoxes.

Based on the survey responses, cost (price) of service delivery is the
primary pain area for user organizations. Yet over three-fourths of the
respondents either felt that the pricing justified the services offered (44.7
percent) or were indifferent (34 percent).
Prices Charged by IT Service Vendors-Perceptions
Attitudes towards outsourcing Price is often perceived as a barrier due to the perceived lack of value
in the domestic market are delivered by outsourcing services in the domestic market. As the labor cost
considerably weakened due to arbitrage (observed in offshore outsourcing contracts) is not available in
the mismatched expectations
domestic outsourcing, the upfront cost savings to customer organizations
are also much lower. As a result the arguments in favor of outsourcing in
about cost savings
the domestic market are considerably weakened due to the mismatched
expectations about cost savings.
Further, while the capabilities, skill sets and staff available with service
providers are not lacking, the service levels delivered have at times been
below expectations. This is attributed directly and indirectly to the
(perceived) higher emphasis by vendors on servicing their export
customers. For instance, the staff assigned to servicing the domestic
customers is often rotated / changed frequently - either because they are
re-assigned to other (export) customers once they have gained some
experience, or because they change jobs (often attracted by higher salaries
offered by an export focused service provider). This in turn impacts the
quality of service in the form of delays / lags in service support.
Availability of adequately trained in-house staff and general satisfaction

Higher (perceived) emphasis
with the economics of an in-house solution were cited as the top two
by vendors on servicing their factors favoring the use of in-house teams - across service categories,
export customers also acts as further supporting significant inertia to move away from status quo (use of
a deterrent in-house staff).

With price and quality of service and delivery personnel being the primary Price and quality of service
factors guiding an outsourcing decision for end-user organizations the gaps and delivery personnel are the
(both real as well as perceived) between services expected and delivered primary factors guiding an
are critical factors to be addressed to drive growth in this segment. outsourcing decision for end-
user organizations
There has been a visible shift by user organizations in a few sectors

towards greater adoption of the outsourcing model, driven by increasing
competition (e.g. telecom, banking, etc.) their preference to focus on and
improve efficiencies in their core business (also witnessed in some
manufacturing sectors) while leaving the management of the evolving and
increasingly more complex IT architectures to experts. This has been
supported by the service providers demonstrating tangible results (ROIs).
This trend can be further strengthened by focusing on developing and
providing the required staffing, focusing on the specific needs of domestic

market clients, demonstrating the potential business value (beyond cost
savings alone) from IT investments and showcasing successful
engagements.
Notwithstanding the 'pain-

areas', a majority of the user While there is room for improvement, the observed strength in domestic IT
organizations acknowledged spending (from the steady revenue growth) and its positive outlook is
the value derived from their IT reinforced by the fact that a majority of the user organizations are
investments acknowledging the value derived from their IT investments - specifically
from the amounts spent on services.
While most firms do not have a standard measure for gauging the ROI
earned from their IT services spends, they rely on derivative measures such
as productivity improvement and satisfaction measures, and typically use
multiple measures to gauge IT spending effectiveness.
Looking ahead, the development of the domestic IT services market will

need to become more broad-based. To achieve sustained development,
new verticals will need to be penetrated as it is not sufficient to increase
business from only the currently addressed verticals.

A large proportion of the current IT services market is predicated on the
banking, financial services and telecom verticals. While IT services for these
verticals will continue to show strong growth, new verticals will need to be
developed to increase the rate of growth of the IT services market in India.
As the Indian economy opens further opens up, other verticals including
manufacturing, travel and tourism, healthcare, entertainment will
increasingly look towards IT to increase competitiveness. For both new and
existing verticals, the small and medium business (SMB) segment will
represent an important source of growth for the domestic IT services market.
Further, IT services vendors need to assist the CIO(s) in understanding and

building a case (internally at their organizations) about the potential to
generate increased business value from IT investments. Service providers
also need to extend strong end-to-end service capabilities to their domestic
customers, as the IT services market moves to high-value, annuity
engagements.
As the level of IT investment increases, there is a change in the perceived role

of IT from a support function to an enabler of 'competitive advantage'. There
is increasing pressure on the CIO(s) to justify the IT investment by
demonstrating the value delivered from IT investments. The increased
expectations from IT, requires them to move from routine IT operations to
strategic IT management. The challenges they face in making this
transformation has to do with the existing complexities in their IT
environments, which make the IT departments and the CIOs spend most of
their time and effort in day-to-day operations.
The IT services vendors have a key role to play in helping the CIO (s) make this
transformation. New offerings and service delivery models need to be
developed that can assist the CIOs in streamlining their IT operations to such
a level that they can then devote their IT investments and efforts to
transformational initiatives.
The evolution of the IT services landscape is defined by the market

graduating from low-value long-term services (such as basic maintenance
and support) to high-value one-time services (such as system integration) and
then on to high-value long-term services (such as discrete and end-to-end IT
outsourcing).
Larger and mature IT users are beginning to seek end-to-end IT services and
this will be a major growth engine for the market. This segment will be
dominated by a few large IT services vendors who have the size and the
capabilities to address this demand. The vendors most likely to gain from this
shift are those who will have the capability to offer end-to-end services.

Spotlight on the Domestic ITES-BPO
Market Opportunity
TES-BPO is arguably the most commonly discussed topic in corporate

I boardrooms across the world. India's compelling value proposition, early
mover advantage and continued success have established it as a distinct
leader in this space. This is evident from the fact that the total revenue
earned by this sector in India is estimated to have grown from a little over
INR 4,200 crores (~USD 900 million) in FY2001 to nearly INR 32,000
crores (~USD 7.2 billion) in FY2006.
However, with exports averaging over 90 percent of the total revenues,

while the Indian outsourcing exports story is well documented, relatively
little has been compiled about the domestic market potential for these
services.
This section of the report provides an overall perspective of the current

state of ITES-BPO adoption in the domestic market in India and assesses
the prevailing demand drivers and inhibitors, analyzes the primary service
lines and the current supply-side landscape. This section also highlights
the key findings from the end-user organization and service provider
surveys and interviews conducted by IDC over the course of this study.
Defining ITES-BPO in the Context of this Study
A business outsourcing engagement transfers responsibility for ongoing management and

execution of a business activity, process, or functional area to an external service provider, ideally
to gain efficiency and improve performance. Business outsourcing contracts may involve the
transfer of fixed assets and personnel from the customer to the service provider.
Contract terms for business outsourcing engagements typically range from one year to more than
ten years. A business outsourcing engagement can include an entire corporate function, such as
human resource (HR), procurement, or logistics, or discrete segments/activities within the
business functions, such as benefits administration, strategic sourcing, or warehousing.
Depending on the nature of the engagement, IDC internationally classifies outsourcing

engagements into two categories. Engagements involving the transfer of management and
execution of one or more complete business processes or entire business functions to an external
service provider are categorized as core BPO. In such deals, the service provider is often part of
the decision-making structure surrounding the outsourced business function, and performance
parameters are primarily tied to customer service and strategic business value delivered.
Strategic business value is recognized through results such as increased productivity, new
business opportunities, new revenue generation, cost reduction, business transformation, and/or
the improvement of shareholders' value.

Certain contracts involve the transfer of management and execution of activities or single
business processes that tend to be high-volume and/or automated, to an external service provider.
IDC distinguishes these contracts from core BPO, categorizing them as processing services-with
high volume processing of select activities/processes (as opposed to complete business
processes or entire business functions) being their key characteristic. The performance
parameters for processing services are primarily tied to tactical measures, such as accuracy,
adhering to timelines, and the efficiency of high-volume service capabilities. These are typically
standardized and involve little or no customization within a client engagement.
Given the nascent nature of this sector in India, this study does not make the distinction between
BPO and processing services, and instead focuses the market opportunity assessment on a
broader aggregation of such activities where service delivery may be enabled by IT to make it
location independent and disaggregated from the internal workflow of a company - making the
activities 'outsource-able'. Further, the market opportunity assessment is not restricted to the
value of work delivered by external service providers, but also incorporates the work undertaken
by companies in-house - through their captive operations.

Domestic ITES-BPO market in According to IDC estimates, the domestic ITES-BPO market in India was
India was valued at a little valued at a little over INR 2,321 crores (~USD 500-550million) in 2004.
over INR 2,300 crores in This segment of the market is estimated to have nearly doubled over the
2004 and is forecast to cross past two-three years and is forecast to cross INR 6600 crores (~USD 1,400
INR 6600 crores in 2006 million) in 2006.
ITES-BPO DEFINITIONS CATEGORIES/SERVICE

SERVICES LINESINCLUDED IN
THE SCOPE OF
THIS STUDY
Cutomer Care These services support customer care activities • Billing inquiries
and business processes associates with the • Account maintenance
customer center. Dominated by inbound contact
• General information enquiry
(yet inclusive of out bound interaction as well),
customer care typically takes place via the
telephone, but may also occur via e-mail, chat, fax,
self-help, or mail.

Sales & The includes the services that augment or manage • Account activation/balance
Marketing the business processes that are associated with a transfer
companie’s need to market and sell its goods and • Product/Service direct sales
services. Specific services may address leads
• Up-selling
development and qualification selling products
and services, channel development, post-sale • Cross-selling
support, customer service, advertising, brand
management, public relations, direct marketing,
promotional development, corporate
communications, conference sponsorship,
business development and market research.
Human HR management services as those sevices that • Payroll processing

Resources support the core HR activities and business • Benifits administration
processes associated with HR administration.
• Employee communication
administration
Finance and F&A services as those associated with a • Accounts payable, Accounts
Accounting company’s need to manage to flow of money into receivable
out of the organisation. • Credit and collections,
Billing/Invoicing
Others Categories not included in the above • Administration

• e-Learning
• Order management
Drivers and Inhibitors of Domestic ITES-BPO Growth in India
Drivers
• Increasing awareness of domestic consumer: greater awareness and experience of world
class customer service levels: The entry of multinationals in sectors such as telecom and BFSI
has provided consumers in India with an increased choice of service providers as well as the
experience of relatively higher levels of customer service (comparable to those in advanced
markets). Since customers are now beginning to expect and demand these levels of customer
service, companies will be forced to support scalable levels of customer contact and related
back office processes. Thus generating significant primary demand for ITES-BPO by end-user
industries in the domestic market.
• Freeing up resources to focus on core: Outsourcing the non-core processes allows client
organizations to significantly free-up management bandwidth and resources to focus on their
core business. The responsibility for operational execution and its related issues such as
managing scale expansion, attrition, productivity, etc., are offloaded to the external service
providers. If the demonstrated success in delivering business value through ITES-BPO, to
overseas customers, is evidenced in the domestic market as well-it is likely to provide a fillip
to growth in this segment.
• Access to an organized set of vendors providing ITES-BPO services as specialists: The

development of ITES-BPO as a service industry in itself is enabling end-user industries to
leverage the services of specialist providers to execute several non-core activities. In an
increasingly competitive environment, the ability to execute such relationships efficiently is
expected to contribute to a significant competitive advantage and will drive growth in domestic
demand for ITES-BPO.
• Opening up of newer segments of domestic demand: Several public sector enterprises (PSUs)

have recently invited bids for outsourcing core ITES-BPO processes. The scale of business in
these organizations and the sizeable opportunity in similar organizations that still remains
untapped, but is likely to open up in the near future, is also expected to drive growth in
domestic ITES-BPO demand.
Inhibitors
• Lack of experience with outsourcing: Inexperience of potential client organizations with

organized/large scale outsourcing may constrain the growth of the domestic market. This may
be manifested in several ways, such as mistrust regarding sharing of data, inability to identify
appropriate processes and/or vendors in the selection process, drafting of inadequate SLAs,
etc. Any or all of these factors may lead to some bad experiences of client organizations acting
as a deterrent to other client organizations attempting such a move.
• Relatively lower cost arbitrage in the domestic business compared to offshore outsourcing:
The absence of a comparable labor cost advantage in the domestic business (as compared to
that enjoyed by US/UK customers) makes selling these services a little more difficult.
However, research with some vendors indicates that though the potential for cost savings
actually exists, demonstrating these savings requires some degree of customer education to
ensure that the total cost of service delivery is compared with the cost of using an external
service provider. Further, the potential for cost savings increases as the scale of operations
increases.
• Absence of third-party service providers with significant scale: Unlike the export-oriented
vendor landscape where there are several third-party players with a scale of operation of over
~5,000-6,000 employees, the largest vendors serving the domestic market still have only
~3,000-4,000 employees each. For this segment to grow rapidly, the vendor landscape will be
required to develop equally rapidly to keep pace with the forecast demand.
• Slow build-up of scale in contracts in the domestic market: Given that the cost advantage in
the domestic business is relatively lower, this segment is more prone to margin pressures. As
a result, the ability to rapidly achieve scale opportunities is essential for service providers to
make this a viable business opportunity. Although a few recent deals and announcements
indicate sizeable scale of business, a slowdown in large-scale deals could inhibit growth in the
domestic market.
• Government procurement policies: There is a concern that restrictive procurement policies

adopted by some government departments, such as insisting on high levels of earnest money
deposits (leading to additional capital costs), may deter some service providers from bidding
for their contracts (this has been observed in the IT services space as well).
• Other obstacles that could slow growth in the domestic market: Lack of interoperability norms
that restrict service providers from offering a national tollfree access number, lack of
adequate funding avenues for domestic market players.
Domestic demand for ITES- Key Service Lines

BPO is currently driven by
Domestic demand for ITES-BPO is currently driven by basic voice-based
basic voice-based services,
services, with customer care and marketing and sales accounting for
with customer care and
nearly 70 percent of the market.
marketing and sales
accounting for nearly 70
percent of the market

Sales and marketing forms the largest segment of the domestic ITES-BPO
market, accounting for nearly 37 percent of the segment revenue in 2004.
Though predominantly focused on outbound voice-based activities aimed
at up-selling and cross-selling various products, services offered (in the
domestic market) in this segment are being expanded to include other CRM
activities to better leverage available customer behavior data.
The customer care segment accounts for a third of the domestic ITES-BPO
market. Given the increasing emphasis on customer satisfaction in highly
competitive sectors such as BFSI, telecom and consumer durables, this
segment has witnessed growth in demand over the last few years.
This is further complemented by the rapid proliferation of globalization. The

Indian customer, increasingly exposed to global markets and the high levels
of customer service offered overseas, is demanding similar levels of
service from the Indian providers.
Since setting up a 24x7 customer service department is a costly

proposition, and manpower provisioning and scaling up are also very
challenging, companies are turning towards professional service providers
to deliver these services in an organized and efficient manner.
HR outsourcing is a rapidly growing segment of the domestic ITES-BPO

market. Currently, much of the growth in this segment is driven by the
demand for basic payroll processing services, with only a few larger
BPO/ITES deals covering HR transactions. However, it is expected that the
market will move from basic payroll processing to more high-end contracts,
where the HR outsourcing provider will manage the entire employee
systems as complete functional solution providers.
Interestingly, this segment is dominated by specialist HR firms, such as

Hewitt, Ma Foi, Cross Domain, etc., who have expanded their portfolio to
offer these services. Since this category of providers also has the HR
domain experience, it is expected that these companies will be able to

rapidly integrate their BPO capabilities to offer complete solutions
in this space.
Outsourced F&A services are focused on transaction processing and are

driven predominantly by demand from the retail banking and credit card
products in the BFSI sector.
Credit Card Processing: The rapid growth of the credit card market has
resulted in a phenomenal increase in the transaction processing work,
such as processing of payments and collections. Banks increasingly
outsource the billing and collections to regional players.
Electronic Bill Payment (EBP): Offered by many of the leading banks, this is
an area that has witnessed significant traction for outsourcing. Today some
of India's leading private sector banks such as ICICI, HDFC, Citibank, ABN
Amro, etc., as well as public sector banks, such as SBI and Punjab National
Bank, have already outsourced their EBP services to specialist firms like
BillJunction and BillDesk. These service providers follow a pay-per-use
transaction model. Depending on the customer base, both banks and
utilities are charged anything between Rs 4-7 per transaction. In case of a
low frequency of transactions, the service provider will charge a minimum
annual fee as security.
It is pertinent to note that there are several professional firms that offer
services such as accounting and audit, tax consulting, etc. that could
technically fall within the definition of ITES-BPO (as they may be provided
for a professional fee on a termed contract). However, these services have
not been included in our analysis.
As the industry evolves, other processes will be increasingly outsourced. In

India, there are small discrete outsourcing contracts in specific areas.
However, these are still quite small. Specific examples of activities included
in this category are:
Participant/audience contact for television game shows, such as the

famous 'Kaun Banega Crorepati', ' Indian Idol', etc., are outsourced by the
respective channels, to specialist service providers such as Dialnet; who
manage services like the interactive Voice Response (IVR) systems for their
customers.
Order management: While this 3PL (third party logistics) service is still in
the developmental stage in India, there are specific cases where logistics
vendors are taking total end-to-end logistics deals and where order
management is a highly IT-enabled process.

The domestic ITES-BPO business is at a nascent stage, with not many BFSI, telecom, and consumer
industry segments having adopted outsourcing on a large scale. BFSI, durables are the early
telecom, and consumer durables are the early adopters of ITES-BPO and adopters of ITES-BPO and
currently account for nearly three-fourths of the business in this area. currently account for nearly
Services demanded by these segments are concentrated in segments such three-fourths of the business
as customer care, sales and marketing, and transaction processing. Other in this area
emerging vertical markets with significant potential for the already defined
service lines include aviation, hospitality, retail, and IT and ITES.
Accounting for over 47 percent of the market, BFSI is the single largest
vertical for ITES-BPO demand in the domestic sector. The aggressive push
by private sector banks in an attempt to gain market share and the
retaliatory efforts by the public sector banks have been the primary drivers
of demand in this vertical. Key service lines for this segment include
customer care, sales and marketing, and transaction processing.
On the sales and marketing front, a large part of the outsourcing goes to
smaller regional players, who primarily act as marketing agents for the
banks. These agents also handle a large part of the initial processing work
for the banks.
Deals in Domestic ITES-BPO Space: Banking

Customer: State Bank of India
Vendor: MphasiS BPO
Deal Size: Rs. 2500 million
Duration: Multi Year (3-5)
Engagement type: The engagement involves the handling of customer support operations, mainly
the voice-based inbound services.

The huge growth of the mobile telephony sector in India is continuing
unabated. The growth is expected to sustain as telecom penetrates to
smaller cities and towns. Telecom service providers are now facing the
challenge of scaling up their systems to meet this growth without losing
their increasingly demanding customer base to competition. With
technological offerings becoming universal, customer service is becoming
a key differentiator for players. As a result, this vertical is a key driver of
demand for customer care and sales and marketing services. This domain
has already witnessed a couple of large outsourcing deals in the recent
months and the trend is expected to continue.
Deals in the Domestic ITES-BPO Space: Telecom Vertical

Customer: BSNL
Vendor: Spanco Tele-Sparsh
Duration: three years
Engagement type: The engagement has been undertaking to provide call center services to BSNL
customers. Under the contract, Spanco will be responsible for BSNL's domestic call center
operations. The company will cater to BSNL's mobile and broadband subscribers' inbound calls.
The contract will cover all four of BSNL regions-West (Pune), East (Kolkata), South (Bangalore), and
North (Gurgaon).
Domestic ITES-BPO Sector: The Largest Deal

Customer: Bharti Tele-Ventures
Vendor: Nortel and four BPO vendors (IBM-Daksh, Mphasis, HTMT, TeleTech)
Deal Size: Rs. 10,000 million
Duration: Spread to four to five years
Engagement type: An agreement has been signed with four BPO vendors to outsource Bharti's call
center operations. As part of the customer service agreements, HTMT will set up the contact
centers at Chennai and Hyderabad; IBM Daksh at Chandigarh, Kolkata, and Pune; TeleTech in the
NCR; and MphasiS in the NCR and at Bangalore. Nortel will deliver technology and expert
resources required to provide customer services to Bharti's customers via voice, advanced speech
recognition, multimedia contact center, unified messaging, computer-telephony integration, IP-
enabled video communication, and receiving and rout-ing calls to the respective customer service
partners, 5000-6000 seats will be created with the four BPO vendors. All BPO partners will have
the same processes, as they will function on the same Nortel platform. The agreements will cover
all of the 12 million Airtel customers in the 23 circles.
This is by far the largest deal in the domestic BPO space and the sheer size of this deal and the
comprehensive nature of the deal is expected to act as a reference point and help give a further
boost to the domestic BPO market.
Having initially tested waters small internal teams, the manufacturing

sector, covering areas such as consumer durables, packaged consumer
groups and automobiles, have started signing discrete ITES-BPO
outsourcing contracts. Customer contact activities for support, loyalty
initiatives and promotional campaigns are the key activities being
outsourced in this segment.

Deals in the Domestic ITES-BPO Space: Consumer Durables
Customer: Whirlpool
Vendor: Infovision
Deal Size: NA
Duration: Since 1999
Engagement type: Infovision is providing customer support activities to its client. These include a
customer interaction center, inbound complaint management and queries and outbound dealer
calling. Infovision also manages the client's customer database, helps in managing merchandise,
conducting contests, and generating analytical reports.
Deals in the Domestic ITES-BPO Space: Pharmaceuticals

Customer: GlaxoSmithKline Consumer Health Care Ltd.
Vendor: Magus Customer Dialog
Deal Size: NA Duration: NA
Engagement type: An employee suggestion scheme in a manufacturing setup, with 750+ em-
ployees, which generated 17,000+ suggestions in three years in that company. Initially this was
taken care of by the HR department. A need was felt to outsource this function to some other party.
GSK gave the contract to Magus Customer Dialog Pvt Ltd. In the factories, the workmen have a lot
of ideas to improve productivity, efficiency and re-duce waste. Magus gathers these input from
them and sends them to the concerned depart-ment heads to get their comments. After a
thorough study by a panel of members, some ideas are accepted for implementation. The best
implemented ideas are rewarded by the management.
Other areas with significant potential to drive ITES-BPO demand include

sectors such as airlines, retail, hospitality, media, healthcare and ITES-BPO
itself.
Deals in the Domestic ITES-BPO Space: Airlines Vertical

Customer: Air India
Vendor: Sparsh (Spanco Tele)
Duration: Three years
Engagement type: Sparsh (The domestic BPO arm of Spanco Tele) is already providing the in-
bound customer service to all domestic passengers of Air India. Under the new contract, Spanco
handles inbound services, such as calls relating to flight information, booking and reservations,
hotel and limo bookings, baggage, and tele-check-in, and complaints.

Deals in Domestic ITES-BPO Space: Media Vertical
Customer: Star Plus (KBC)
Vendor: Dialnet Communications Ltd.
Engagement type: IVR platform based services
Duration: During the span of the show (almost a year)
Benefits Gained by the Client: Star Plus hosted the biggest game show - "Kaun Banega Crorepati",
the Indian version of 'Who Wants to be a Millionaire' which used the IVR platform of Dialnet for the
callers to participate in the quiz on the phone for screening of the contest-ants. Dialnet handled
over 100 million calls during the span of the show, a record of sorts for the value-added voice
applications market in India.
Other prominent IVR applications for Star TV: Include the Dabur Star Parivaar Poll, Samsung Star
Plus Tumse Hai Zindagi Contest, Krishna Arjun Singapore Contest, Asian Paints Screen jodi No. 1
Contest, Whirlpool GR8 Women Awards, among others.
Domestic ITES-BPO: Emerging Verticals-Healthcare

Customer: Apollo Hospitals
Vendor: Customer First
Deal Size: NA
Duration: NA
Engagement type: This will be clone via a specific toll-free number, proposed to be termed as
"Apollo Doctors." The work done by Customer First will involve information dissemination,
resolution of customer queries on various plans, coordinating customer requirements with the
hospital team and electronic marketing, among others.
Domestic ITES-BPO: Emerging Verticals-Media

Customer: Space TV (JV-Star group and Tata Group)
Vendor: Tenders invited
Deal Size: Multi-billion
Duration: Spread over four to five years
Engagement type: The work is scheduled to begin with over 300 people across the country. The
company is looking at a partnership model for its call center operations, primarily to pro-vide
improved performance and to deliver greater efficiencies. It is to spread across 23 states and over
100 cities and towns in the country. The services to be offered include programming options, pay-
per-view movies and events, Space TV free view, local channels, Space TV Para Todos service,
international services, channel line-up, channel descriptions, ordering addi-tional receivers,
installing equipment, advanced technologies, technical support, technical help forums, on-screen
messages, parental controls, favorite channels feature and phone-line connection, etc.
Vendor Landscape
Third-party service providers
According to IDC analysis, third-party service providers account for 70-80
account for 70-80 percent of percent of the domestic market and captive units (as defined in the study)
the domestic market account for the balance 20-30 percent of the market.
The third-party vendor landscape for ITES-BPO in India may be classified

into four categories:

• Players predominantly focused on the domestic market; may have some
international customers/business
• Players predominantly focused on exports with some domestic business
• Niche horizontal-focused service providers, such as HR payroll
processing services
• Smaller regional players, largely undertaking low-end short-term
projects
The first category comprising ITES-BPO players is predominantly focused on

the domestic market and accounts for 20-30 percent of the market. This
category includes players such as Sparsh (Spanco Tele), CustomerFirst,
Magus, InfoVision, etc.
Over the past year, several vendors who have so far focused on the
international markets have also started showing interest in the domestic
market. A few have also bid for and successfully won key contracts in recent
months. However, the domestic business still accounts for a very small
proportion of their overall business. With the demand for export markets
remaining strong, their domestic-export mix is not expected to change in a
hurry. Prominent players in this category include MphasiS, IBM Daksh,
HTMT, etc. While the combined market share of these players was less than
five percent in 2004, continued focus and wins such as those witnessed in
the past few months are likely to the market share of this segment grow in
the coming years.
Niche horizontal-focused service providers: Are mainly HR outsourcing

firms. HR outsourcing, primarily driven by payroll processing services, has
seen significant growth and is expected to move up the value chain with the
vendors offering more complete solutions. The major players in this space
are Hewitt, Ma Foi, Cross Domain, Pro Lease, etc. These firms account for
10 to 15 percent of the market.
There are also small regional players who mainly handle activities such as
direct marketing and related activities, collections, content development,
etc. The significant area within this category is the direct selling agencies
employed primarily by the banks and telecom service providers.
Key Findings from End-user and Service Provider Survey's

As a part of this study, IDC surveyed 400 end user organizations and 25
service providers to determine their perspectives on ITES-BPO in the
domestic market.

While much of the data inputs have been incorporated in the estimates
presented earlier, there were several interesting observations about user
and service provider attitudes towards domestic ITES-BPO.
• Domestic companies think that outsourcing will not give them too much
of a cost advantage and are skeptical about outsourcing because of the
security and returns issues.
• Most of the ITES-BPO vendors perceive that the domestic market is not
ready and is unattractive as compared to the export market.
• Users find that the ITES-BPO firms in India are not really interested in
the domestic business. This point of view is partly correct; because
many of the larger export focused ITES-BPO firms still do not want to
look at the domestic market.
• At the same time, there are ITES-BPO vendors who have a definite focus
on the domestic market, and if the Indian firms wish to outsource any
business process there are enough vendors in this space with high
quality facilities and resources to cater to their needs.
• The domestic ITES-BPO sector is being driven by a few companies in
select domains, such as telecom, banking, airlines, consumer durables,
etc. While some of these firms have a very positive outlook towards
business process outsourcing, a vast majority of the Indian firms are still
not clear about their plans for ITES-BPO.
Highlights of the end-user organization surveys and in-depth interviews

with business executives and members of senior management at some of
the large user organizations were2 :
• While ITES-BPO penetration (to external/independent entities) is still
very low, a sizeable proportion of end user organizations have an
internal division to focus on these specific business processes.
• Expressed intent to move from an in-house captive sourcing model to
outsourcing is very low.
2
While the respective business managers and/or the CEOs were considered the ideal respondents
to address the questions on ITES-BPO, most of the responses obtained from this sample (even for
ITES-BPO) have been provided by the CIO/IT managers. This was because most organizations
did not have a separate office (e.g. project management office) or a separate person responsible for
managing external ITES-BPO engagements. As a result, the tabulated responses may strongly
reflect the perspectives of the CIO/IT managers and may vary from the views of the business
managers.
IDC analysts subsequently interviewed business managers in some of the large end-user firms and
observed a relatively more positive outlook towards outsourcing (as compared to the observations
from the data tabulated from the responses from the CIOs/IT managers).

• Satisfaction with existing systems, lack of trust in outsourced service
providers, high cost of services, unavailability of suitable vendors and
lack of skilled personnel (with vendors) were the most commonly cited
reasons for not looking at outsourcing.
• Demonstrated focus on serving the domestic market and showcased
examples of successful engagements with domestic customers are key
factors that would make outsourcing a more attractive alternative for
end users.
While less than 5 percent of the respondent organizations spend on ITES- While ITES-BPO penetration
BPO (non-captive), nearly a third of the respondents have a separate (to external/independent
internal department for specific business processes. entities) is still very low,…
110 respondents had a separate internal department (not necessarily a

captive unit) to look after their specific business processes. This indicates …a sizeable proportion of end
that a significant number of organizations have realized the importance of user organizations have an
having a separate division to handle specific processes such as customer internal division to focus on
support. In other words, the customer support function for many firms is these specific business
clearly becoming a separate division. This is, in fact, the precursor to processes.
outsourcing, and a positive trend.
As can be seen from the table above, the presence of a separate division
to handle business processes is more evident in the case of larger
companies.

Less than 10 percent of the respondent organizations are considering
Expressed intent to move from plans to shift from in-house sourcing to an external service provider.
an in-house captive sourcing
model to outsourcing is low.
Of the above respondents who have been handling business processes

internally, 90 percent respondents are very comfortable with their internal
operations and are not keen on outsourcing them to external service
providers. Only ten companies showed a positive response towards
outsourcing their activities to a third-party vendor. Most of the companies
planning to shift to the outsourcing model will take from one to two years
to do so.
Satisfaction with the existing The most important reason for not outsourcing any of their non-core
systems, lack of trust in
activities to some third-party vendor is that they never felt a need to
outsource, and this response came from 82 percent of the companies.
outsourced service providers,
high cost of services were the
The second most important reason is the lack of trust is external service
most commonly cited reasons
providers, as indicated by the response of almost 45 percent of the
for not looking to outsource.
respondents.
Almost 27 percent said that external service providers seek a high price for
their services, while 18.2 percent cited the non-availability of the vendors
and the same percentage responded that external vendors didn't have
personnel with the desired skill set.
Demonstrated focus on serving the domestic market and showcased

examples of successful engagements with domestic customers are key
factors that will make outsourcing a more attractive alternative for end
users in medium- as well as large-sized organizations.

Appendix
I. Profile of survey respondent

II. Responses to the survey

GLOSSARY
IT Services Engagement Types: Detailed Definitions (Source: IDC Services
Taxonomy)
IT Consulting
IT consulting services include advisory services around information
technology. Examples of IT consulting include evaluating an IS
organisation's help desk operation or determining the best technology to
meet a company's order-fulfillment process. IT consulting can also include
product-specific consulting.
• Exceptions and Exclusions

Some regions include consulting around solution services in the IT
consulting market (e.g., Japan) and others do not (e.g. Asia-Pacific).
Systems Integration (SI)

SI services include the planning, design, implementation, and project
management of a solution that addresses a customer's specific technical
or business needs. SI involves systems and custom application
development, as well as implementation and integration of enterprise
packaged software. An SI contract is a large-scale project contract.
• Exceptions and exclusions. None.

Network Consulting and Integration Services (NCIS)
These services involve the activities associated with planning for,
designing, and building enterprise local and wide area data networks
(commonly known as LANs and WANs), including multiservice, converged
wireless and wireline networks that allow for voice, video, and data
applications (such as VoIP and unified messaging) to be propagated across
a single, common infrastructure. In addition, the network consulting and
integration market includes services provided to the telecommunications
industry for the planning and building of the public integrated voice and
data networks and wireless infrastructures used by telecommunications
service providers to provide services to their customers. These services will
be presented as a separate line item within the NCIS market size and
forecast.
The activities covered in this market include operations assessment,
network planning and design, installation, configuration, project
management, staging, and security implementation.
• Exceptions and Exclusions

Excluded from this definition are services provided for the planning,

building, or operations of nonconverged enterprise voice networks and
their supporting devices (e.g., traditional PBXs).
Custom Application Development (CAD)

CAD services deliver customised development of software applications and
interfaces, as well as enhancements to existing packaged applications or
pre-engineered templates.
• Exceptions and Exclusions. None.

IS Outsourcing (ISO)
IS outsourcing services involve a long-term, contractual arrangement in
which a service provider takes ownership of and responsibility for
managing all or part of a client's information systems infrastructure and
operations. These are broad engagements that typically include
responsibility for the systems, network, and application components of the
IS infrastructure.

Network and Desktop Outsourcing Services (NDOS)
NDOS involves the set of activities that are associated with outsourcing the
support and management of one or more elements of the client/server and
network communications infrastructure of an organisation.
• Exceptions and Exclusions.

In Asia/Pacific and Europe, the Middle East, and Africa (EMEA), IDC covers
network management and desktop management as separate services
markets.
Application Management (AM)

AM's core value proposition is the maintenance and daily operation of
business applications. AM refers to the ongoing support of an application
or system of applications. These applications can be custom products built
to suit the needs of the client organisation, packaged applications, or a
combination of third-party products and customised components.

Often, AM services are embedded in much larger contracts that could
encompass such services as network operations and maintenance,
desktop and hosting services, business process outsourcing, and help
desk support. In such cases, IDC would not count the data as part of the
discrete AM forecast.

Software as a Service (SaaS)
Like AM, SaaS refers to the ongoing support of applications. The core value
of these services is also maintenance and daily operation of business and
consumer applications. The following are core defining characteristics of
SaaS:
• The main value of SaaS is the provisioning of network-based access to

and management of a commercially available (e.g., not custom)
application.
• SaaS activities are managed from central locations, rather than at each
customer's site. Customers access applications remotely.
• SaaS activities are characteristically closer to one-to-many services than
one-to-one services. These include architecture, pricing, partnering, and
management characteristics.
• There are three main components of SaaS: application service
provisioning (ASP), Webnative applications, and hosted Web services
applications.

Hosting Infrastructure Services/System Infrastructure Services
Provisioning
Hosting infrastructure services provide access to systems infrastructure
and/or management that supports infrastructure-related services,
including Web hosting, storage services, content delivery networks,
network management, desktop management, and systems management.

Hardware Deploy and Support (HWD&S)
This market captures support (i.e., telephone support, remote diagnostics,
electronic support, onsite support, predictive/preventive maintenance,
parts repair, inventory/asset management services) and installation
contracts associated with hardware. The hardware included comprises
servers, PCs (desktop and portable), PDAs, storage devices, printers and
peripherals, copiers, and networking equipment.

In the United States, this market includes a submarket: network product
support. Outside the United States, it is a single market. The US submarket
is defined as follows:

Network Product Support Services (NPSS)
Includes telephone support, remote diagnostics, electronic support, onsite
support, predictive/ preventive maintenance, parts repair, and
inventory/asset management services.
Software Deploy and Support (SWD&S)

These services encompass spending on technical support and deployment
services for all types of software.
• Exceptions and Exclusions - None.

IT Education and Training
IT education and training services include the content processes or
structures that support employee, client, or supply chain development to
meet identified business requirements related to developing,
administrating, or using information technology.

This category excludes business skills training, learning services, or
learning infrastructure engagement.
ITES-BPO DEFINITIONS CATEGORIES/SERVICE

SERVICES LINESINCLUDED IN
THE SCOPE OF
THIS STUDY
Cutomer Care These services support customer care activities • Billing inquiries
and business processes associates with the • Account maintenance
customer center. Dominated by inbound contact
• General information enquiry
(yet inclusive of out bound interaction as well),
customer care typically takes place via the
telephone, but may also occur via e-mail, chat, fax,
self-help, or mail.
Sales & The includes the services that augment or manage • Account activation/balance
Marketing the business processes that are associated with a transfer
companie’s need to market and sell its goods and • Product/Service direct sales
services. Specific services may address leads
• Up-selling
development and qualification selling products
and services, channel development, post-sale • Cross-selling
support, customer service, advertising, brand
management, public relations, direct marketing,
promotional development, corporate
communications, conference sponsorship,
business development and market research.

Human HR management services as those sevices that • Payroll processing
Resources support the core HR activities and business • Benifits administration
processes associated with HR administration.
• Employee communication
administration
Finance and F&A services as those associated with a • Accounts payable, Accounts
Accounting company’s need to manage to flow of money into receivable
out of the organisation. • Credit and collections,
Billing/Invoicing
Others Categories not included in the above • Administration

• e-Learning
• Order management
IDC DEFINITIONS-VERTICALS
FINANCE
This is a macro vertical composed of banking, insurance, and financial
markets, defined as follows:
• Banking refers to all credit institutions by any name that accepts
deposits from individuals or entities and use those funds for any of
various forms of financial and/or monetary intermediation. Examples
include central banks, retail banks, commercial banks, savings banks,
savings and loan associations, and credit unions. Banking also refers to
credit institutions that back or execute loans without having received
deposits (e.g., consumer finance companies and central credit card
services).
• Insurance comprises all establishments primarily in the business of
offering non-compulsory insurance of any kind (e.g., life, fire and
casualty, medical service, and pension funds).
• Financial markets include a variety of institutions that facilitate and
execute capital transfers (e.g., security and commodity exchanges and
money markets including currency exchange).
Manufacturing
Manufacturing is a macro vertical that can be divided in a number of ways.
IDC has selected two broad divisions, discrete and process manufacturing,
as the most relevant for IT purposes and defines them as follows:
1. Discrete manufacturing is manufacturing in which products are
produced through the assembly of distinct and/or individual parts.
Examples include machinery, automobiles, and apparel. Discrete
manufacturing can be considered to be a superset encompassing
transportation equipment, office automation and computers, other

electronic equipment and components, and other discrete
manufacturing, each defined as follows:
a) Transportation equipment involves the manufacturing of complete
equipment designed to move passengers and/or freight as well as
major parts required for its assembly. The parts included are those
integrated into the body of the equipment and those that power it;
ancillary parts and components (e.g., tires, windows, and batteries)
are treated in other manufacturing subdivisions as appropriate.
b) Office automation and computers refers to the assembly of digital
computers, associated peripherals, and office-related equipment,
such as typewriters and word-processing equipment, copiers,
automatic teller machines (ATMs), and point-of-sale (POS) devices.
IDC does not count the manufacture of information technology (IT)
products for use by employees of the manufacturer as part of the IT
market.
c) Other electronic equipment and components refers to the
manufacture of equipment that generates, stores, and/or transforms
electric energy, with the exception of computers.
d) Other discrete manufacturing refers to the elements of discrete
manufacturing remaining after setting aside transportation
equipment, office automation and computers, and other electronic
equipment and components.
2. Process manufacturing is manufacturing in which the basic product is
created primarily through one or more continuous activities, including
milling, curing, weaving, smelting, and/or refining. Process
manufacturing can be considered to be a superset of the chemical
industry, petroleum refining, and other process manufacturing, each
defined as follows:
a) Chemical industry includes organisations creating chemicals and
their combinations, including pharmaceuticals.
b) Petroleum refining is the process of refining petroleum and
manufacturing primary derivatives, such as lubricating oils.
c) Other process manufacturing refers to the elements of process
manufacturing after the chemicals industry and petroleum refining
have been set aside.
Retail/Wholesale
Retail/wholesale is a macro vertical, comprising retail and wholesale of
goods, defined as follows:
1. Retail includes enterprises involved in the sale or resale of goods,

sometimes with related services (e.g. preparation of food prior to
service in a restaurant or maintenance of goods sold) primarily,
although not necessarily exclusively, to individual consumers. Because
the same company can play roles in both retail and wholesale
distribution, the distinction is made on the primary sales targets. If the
enterprise's activity is primarily a service, such as repairs, it is counted
by IDC as within the service sector for the purpose of global roll-ups,
even if a minor amount of consumer product sales occurs.
2. Wholesale includes enterprises primarily involved in the sale of goods to
other enterprises or organisations, whether for resale (e.g., by retail
companies or other wholesale organisations), for value add by
manufacturing entities, or for internal consumption.
Healthcare
Healthcare is represented by healthcare providers, including individual
practitioners, clinics, health maintenance organisations (HMOs), hospitals,
hospices, home care services, and related
analytic and/or diagnostic laboratories. Note that, as a separate industry,
pharmaceutical preparation is counted in process manufacturing, while the
distribution of pharmaceuticals is divided
between wholesale and retail.
Government/Education
Government/Education is a macro category comprising government and
education, defined as follows:
• Education refers to all institutions dedicated to academic and/or
technical/vocational instruction, with the exception of certain training
environments that are better treated as social services (e.g., job training
for the unemployed).
• Government is a category consisting of all public administration,
defense, and justice activities. With few exceptions, where governments
play the same role as private entities (e.g. in owning and running
utilities, hospitals, schools, or means of transportation), priority is
accorded to keeping all similar functions together (thus, in the examples
cited, the government owned-and-run organisations would be counted
in utilities, health, education, and transportation, respectively). The key
exception in IDC's worldwide roll-ups is social services, for which
government-financed activities tend to function differently from social
services with other origins. The government grouping divides further into
the following:
• Central governments are the governmental structures associated with
national self-identity and responsible for all citizens, typically
headquartered in one or more capital city, but radiating throughout

society. Where applicable, the worldwide roll-ups will also include
supranational bodies here when they have a discernible regulatory
and/or legislative role
• Local governments are any governmental structures (e.g., state,
province, county, city, and town) other than and lower in rank than the
central government. In the case of a city-state such as Singapore, IDC
assigns all governmental activities to the central government and leaves
the local government as a null set.
UTILITIES
Utilities include organisations created to generate and/or disseminate
broad social necessities such as electricity and water.
Telecommunications
Communications include services providing point-to-point contact by
telephone, telegraph, or any convergence device. The value of the
hardware used to transmit or receive telecommunications is counted in
discrete manufacturing
OTHER
Other is a macro vertical composed of media, transportation, resource
industries, services, and home, defined as follows:
1. Media include entities engaged in creating cultural content, associating
themselves with it, and/or disseminating it through various means,
including broadcasting, publishing, and visual projection. Dissemination
of cultural content not directly associated with it (e.g. distribution of
printed and other matter through postal services) is not differentiated
from other transportation services. The value of the hardware used to
transmit or receive the content is counted in discrete manufacturing.
2. Transportation is the operation of means of moving freight and/or
passengers, with services defined as preliminary and support services
provided to assist transportation companies in operating efficiently
and/or end users in making use of transportation facilities (e.g. storage
and warehousing, travel agencies, and tour operators).
3. Resource industries include fuel extraction; agriculture, mining, and
other extractive industries; and construction. The following are
definitions for these groupings:
a) Fuel extraction is the exploration and extraction of natural fuels (i.e.,
coal, gas, and petroleum).
b) Agriculture, mining, and other extractive industries involve the
process of cultivating or otherwise exploiting natural resources.

c) Construction is the contracting and building of commercial, public,
and residential structures and other projects (e.g., highways),
including closely related specialized activities such as painting,
roofing, and electrical work when entities specialising in providing
these services through large contracts are involved. The difference
between, for example, a special trade contractor for electrical work
and an electrician providing maintenance services (in "personal
services," defined below) is congruent with the distinction between
wholesale and retail distribution.
SERVICES
Services include business services and personal services with the following
definitions:
• Business services are business-to-business services (occasionally with
major components servicing individuals as well), often staffed at higher
echelons with individuals requiring special certification.
• Personal services focus primarily on the consumer (occasionally with a
notable business-to-business component).

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NASSCOM-IDC Study on

First Print : August 2006

NASSCOM is India’s National Association of Software and Service Companies, the

The material in this publication is copyrighted. No part of this can be reproduced

2 NASSCOM - IDC Study on the Domestic Services Market Opportunity

NASSCOM - IDC Study on the Domestic Services Market Opportunity 3

Kapil Dev Singh

4 NASSCOM - IDC Study on the Domestic Services Market Opportunity

Snapshot of IT-ITES Spending Trends in India 7

Spotlight on the Domestic IT Services Market Opportunity 11

Market Landscape and Opportunity Assessment

Spotlight on the Domestic ITES-BPO Market Opportunity 31

NASSCOM - IDC Study on the Domestic Services Market Opportunity 5

India has emerged as one of

Increasing adoption against a backdrop of low penetration levels and a rapidly

The India Domestic IT Market, 5-Year Forecast

While spending on hardware is projected to remain strong, domestic IT demand is

NASSCOM - IDC Study on the Domestic Services Market Opportunity 7

The liberalization of Indian economic policy, de-regulation of key sectors and

Similar competitive pressures in other more recently deregulated service sectors

8 NASSCOM - IDC Study on the Domestic Services Market Opportunity

Further, growth and maturity (currently witnessed in a few sectors) of demand is

NASSCOM - IDC Study on the Domestic Services Market Opportunity 9

IT services formed one of the fastest growing segments of the domestic IT

Market Landscape and Opportunity Assessment

In addition to the vendor addressed market, it is estimated that in-house

NASSCOM - IDC Study on the Domestic Services Market Opportunity 11

With growing IT adoption and

Key Service Lines

12 NASSCOM - IDC Study on the Domestic Services Market Opportunity

System Integration: An Example

NASSCOM - IDC Study on the Domestic Services Market Opportunity 13

Custom Application Development: An Example

Application management (AM) is the traditional form of AO and refers to the

14 NASSCOM - IDC Study on the Domestic Services Market Opportunity

End-to-end Outsourcing: An Example

NASSCOM - IDC Study on the Domestic Services Market Opportunity 15

• The deal is spread over a 7-year time-frame.

End-to-end Outsourcing: An Example

Discrete Outsourcing Engagements: An Example

16 NASSCOM - IDC Study on the Domestic Services Market Opportunity

NASSCOM - IDC Study on the Domestic Services Market Opportunity 17

It is pertinent to note that while the banking sector is at the forefront of IT

The following table depicts the business imperatives and IT challenges

18 NASSCOM - IDC Study on the Domestic Services Market Opportunity

There is an increased thrust on network integration and managed services

Other factors driving IT spends in the banking sector is the adoption of IT

The insurance sector is also witnessing increased IT spending activity

The domestic manufacturing sector reflects a wide variation in IT maturity,

NASSCOM - IDC Study on the Domestic Services Market Opportunity 19

The demonstrated gains from the use of IT to sustain high levels of

20 NASSCOM - IDC Study on the Domestic Services Market Opportunity

The central government projects cover programs such as national ID,

MISSION MODE DESCRIPTION MINISTRIES/

Passport Visa and Electronic recordkeeping and verification of Ministry of External

DCA21 Modernization and computerization program of Department of Company

National Citizen Project objectives include preparing a National Ministry of Home

NASSCOM - IDC Study on the Domestic Services Market Opportunity 21

Agriculture To Establish a Nation Wide Communication Department of Agriculture and

22 NASSCOM - IDC Study on the Domestic Services Market Opportunity

Source: Department of Information Technology, Ministry of Communications

Selection Criteria for the Mission Mode Projects: