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6/2/2012

Business Trends in IT/ITES industries in India

Tech Trends
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India as an emerging market offers a large pool of IT savvy resources. IDC India and NASSCOM predict that Indian Domestic IT/ITES industry will grow from 99,254 INR crores in 2008 to 2,06,398 INR crores in 2013 which constitutes 39% of total revenue. The IT/ITES Exports Revenue constitutes remaining 61% of revenue share by 2013. As of today, in India IT/ITES industries are highly localized and clustered in seven Indian cities. These places include Bangalore, Hyderabad, Chennai, Gurgaon/Noida/New Delhi, Kolkata, Mumbai and Pune. Due to infrastructure limits and scarcity of land the geographical spread is gradually expanding to cover Ahmedabad, Bhubaneshwar, Chandigarh, Coimbatore, Jaipur, Kochi, Madurai, Mangalore, Mysore and Trivandrum. It is estimated that over 80% of IT units in India are SMEs and they constitute only 30% of the entire IT exports from India. Access to high quality education has created a growing pool of resources. Further economic liberalization and initiatives at central and state levels to improve the ease of doing businesses have catalyzed Entrepreneurship. The spread of egovernance and improvement in infrastructural capabilities has resulted in significant growth in entrepreneurial activities. The IT/ITES industry has a major impact on the labor market in India. It is estimated that nearly 8 to 10 million employees directly or indirectly support the IT/ITES industry in India. In contrast to this, India saw the highest attrition rate of 23% in first quarter of 2010-2011 in IT industry. Some of the challenges faced by mid-sized companies in current market scenario include competition from low cost countries, growing attrition rates along with employability issues, increasing cost

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of operations, high client concentration to deliver services(52%), higher cost of acquiring new clients and changes in structure of demand. Alternative means of adopting new technology that incurs lesser cost is rampant. With this cloud computing once again plays an important role. However this is with reference to mid-tier companies. The larger companies do rely on clients, but the extent of client concentration is lower and is about 28% (PwC, 2011). Migrating legacy systems and transformations reflecting changes in processes are of very high priority to them. With the advent of entrepreneurs, competition increases as innovations increase. This has created way for incubation centers and venture capital creation to help emerging businesses get the funds required and collaborate with them to gain first-mover advantage in local and global market.