The global IT industry witnessed the repercussions of the global economic crisis that slowed down the growth in worldwide IT spend to 2.9% in 2009 as compared to 7.3% in 2007. IT services, which form the single largest segment (37.8%) of the total global spending on information technology, remained stagnant during 2009 as compared to 6% growth registered in 2007.

The first edition of Dun & Bradstreet’s ‘CTO Black Book 2009’ provides an overview of the recent trend and future outlook of the Indian IT industry along with profiles of 164 IT companies. The publication also consists of an insight on the financial performance of 132 listed Indian IT companies from the IT services and hardware segments. These 132 companies were selected based on the availability of their comparable financials for the past five years as well as their 365 days average market capitalization as on 31 Mar 2010. Based on the nature of the IT industry, the selected companies were further classified into large, medium and small based on the widely-used 80:15:5 principle on their market capitalization. The aggregate sales of these companies constitute approximately 68% of the Indian IT industry revenue (excluding ITeS-BPO) in FY09, thus providing a fair representation of the financial performance of the industry itself.

Some key findings from the insights include:

The repercussions of the global economy crisis was felt on Indian IT industry as the sample IT companies grew at a slower rate of around 23% in FY09 as compared to average annual growth of over 32% recorded in the preceding three years.

• Small companies were the worst hit as their share in the total sales declined from 14.08% in FY05 to 11.8% in FY09. This decrease in market share is mainly due to pricing pressure and competition from Large companies resulting in decrease in exports
• Aggregate exports accounted for approximately 75% of the overall sales in FY09 of the sample IT companies
• In the tough times, managing cost becomes priority to keep margin intact. The Medium companies have done better compared its counterparts in managing total expenses during FY09. The total expenses for Medium companies grew by 17.15% in FY09 as compared to 25.68% and 31.07% for Large and Small companies respectively
• During FY09, employee compensation constituted around 47.2% of sample IT companies, in which large IT companies spent 57.7% of their total expense on employee compensation whereas mid-sized companies spent 34.3%
• Growth in employee compensation of Medium companies slowed down from 33.3% in FY08 to 14.4% in FY09
• Operating cash flow of the selected IT companies improved approximately by three times during FY05 to FY09 from Rs 81.9 billion to Rs 242.6 billion
• Average networth of the IT companies grew at a CAGR of 32% during FY05-09

On a positive note, the Indian IT industry has emerged more resilient and focused from the global financial crisis and are increasingly adopting more innovative business model to expand their market share.

‘CTO Black Book 2009’ has attempted to capture the essence of India’s IT sector. D&B India is confident that the publication will provide the right platform for the Indian IT industry, and will continue to endeavour towards recording the changing dynamics in the Indian IT industry.

Yashika Singh
Head - Operations - Economic Analysis Group
Dun & Bradstreet India