Food Processing Engineering IT & ITeS-BPO Textile     PREFACE | FOREWORD | EXECUTIVE SUMMARY| METHODOLOGY|CLUSTER OVERVIEW | COMPANY LISTING|LAUNCH EVENT|EDITORIAL TEAM| SPONSORS Alphabetical Listing Total Employees Turnover Revenue Range Region Exported Offerings

Overview of the IT & ITeS-BPO Industry

The Indian Information Technology (IT) and ITeS-BPO sector plays a vital role in the growth of the Indian economy. The industry’s contribution to the country’s GDP has grown significantly from 1.8% in FY00 to around 5.4% in FY07. The Indian IT & ITeS-BPO industry has shown a growth of 28% with the total revenue aggregating to US$ 47.8 bn in FY07.

A changing global business scenario and the liberalisation of Indian economic policy, favouring the outsourcing trend, acted as key drivers for growth in the Indian IT industry. Cost advantage, availability of skilled manpower, quality of services, duty exemptions and a global delivery model, combination of on-shore and off-shore activities, with an increasing off-shore component, are some of the key factors that enabled the IT & ITeS-BPO to sustain growth. Global giants like Microsoft, SAP, Oracle and IBM have already established their research & development centers in India.

Source: NASSCOM, Dun and Bradstreet Research

Key Highlights of the sector in FY07

• Revenue from the Indian IT software and services sector (including the domestic and exports segments and excluding hardware) reached nearly US$ 40 bn during FY07 and is expected to grow by nearly 27% to US$ 49-50 bn in FY08.
  
  
• Services and software products are the main contributor to exports of the sector. The exports of the sector have increased from US$ 23.6 bn in FY06 to US$ 31.3 bn in FY07, registering a growth of 33%.
  
  
• Achieving increased traction in offshore product development and engineering services have supplemented India’s efforts in IP creation. The exports in this segment have increased from US$ 4 bn in FY06 to US$ 4.9 bn in FY07.

Source : NASSCOM

• US and UK are the dominant markets for IT & ITeS-BPO exports. However, revenues from newer markets are growing rapidly
  
  
• In FY07, MNC investments have crossed US$ 10 bn and are expected to increase in the next few years.
  
  
• The total number of IT & ITeS-BPO professionals employed in India was estimated to have grown from 1,293,000 in FY06 to 1,621,000 in FY07.
  

Verticals

The major verticals served by IT & ITES-BPO industry are banking, financial services and insurance segment followed by Hi-Tech/Telecom and manufacturing.

Source : NASSCOM

Issues & Challenges

• Rising attrition rate is one of the major concerns for IT & ITeS-BPO industry. For instance, TCS reported an attrition rate of 11.5%, up from 10.6% from the previous year while the attrition rate at Infosys was 13.7% in FY07 as compared to 11.2% in FY06.
  
  
• The continuation of the tax holiday is uncertain which may slow down the future expansion plans. With dissimilarity in tax regimes, the existing STPI units would opt to re-invent themselves as SEZ units. It should be also noted that low-cost competitors like China are rapidly emerging as an alternative destinations.

Future Outlook

According to NASSCOM, the Indian IT & ITeS-BPO exports are likely to touch US$ 60 bn by 2010. The growing demand for global outsourcing, favorable government policies, skilled manpower, quality services and the growing effect of technology-led innovation are some of the key factors for the growth of IT & ITeS-BPO sector.

The favorable government policies have helped Indian IT & ITeS-BPO sector to grow rapidly. According to the Planning Commission of India, the Indian IT & ITeS-BPO sector would generate another 2.5 mn direct employment opportunities. Thus, this sector will require a huge investment.

Cluster Insights

Cluster Insights are aimed at highlighting the performance and expectations of the small and medium enterprises operating in the IT & ITeS-BPO sector in the Kolkata cluster. The sample considered for this analysis are the IT & ITeS-BPO companies profiled in this publication; the variables considered for analysis include operational structure, business practices, and future plans.

Key Characteristics of the Kolkata IT & ITeS-BPO cluster

• The average revenue growth of the IT & ITeS-BPO companies during the last two years has been around 41%.



• 66% of the IT & ITeS-BPO companies were involved in exports.



• 50% of the IT & ITeS-BPO companies have been involved in exports.



• 35% of the companies earned more than 50% of their revenue from the international market.



• America is the most preferred export destination.



• BFSI, manufacturing and telecom are the top 3 preferred verticals.



• 27% of the companies were established between 1990 & 2000.

Ownership Pattern

The ownership pattern of the IT & ITeS-BPO companies in the Kolkata cluster was inclined towards the private limited company.

In the last two years, proprietary firms recorded the highest revenue growth of 44%.


• Interestingly, 30% of the private limited companies earned more than 50% of their revenue from exports.
  
  
• Majority of the proprietary firms cater to the manufacturing and telecom verticals.

Sub-segment:

Majority of the companies provide software products

• 39% of the companies providing IT Services and 29% of the companies providing software products earned more than 50% of their revenue from the international market.
  
  
• Companies operating in software products and IT services specialise in catering to the BFSI sector, while those in the hardware segment mainly cater to the manufacturing verticals.



• In the last two years, companies dealing in IT Services have shown the revenue growth of 45%.

Turnover Bracket

Companies in the turnover bracket of Rs 5 – 10 mn had the maximum representation in the sample.

Source : NASSCOM

• Most of the companies in the turnover bracket of Rs 50 - 100 mn cater to the telecom sector, while those in a turnover bracket of Rs 5 – 10 mn cater to BFSI.
  
  
• 52% of the companies in the turnover bracket of Rs 5 – 10 mn earned more than 50% of their earnings from exports.

Growth and Future plans

The companies expect an average revenue growth of 57% in the next two years.

• 21% of the companies registered a revenue growth of more than 50% in the past two years.
  
  
• 44% companies expect their revenue to grow by more than 50% in the next two years.
  
  
• Strategies envisaged for future growth plans range from diversification, entering new markets, developing new marketing initiatives and acquisition. According to the study, 40% of the companies are planning to enter new markets while 35% are having diversification plans in the near future.

Cluster benefits and hindrances

Manpower training, technology, taxes & duties, proper infrastructure and marketing initiatives turned out to be the key beneficial factors from the cluster whereas availing of government subsidies were cited as the key hindrances.