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AgendaValue Chain & Structure

Industry Segment

Competition

Growth Drivers

Advantage India

Budget Impact

Issues & Concerns

Regulations

Outlook

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Value Chain & StructureIndustry Overview

Industry Value Chain

Structure of the Industry

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OverviewGDP contribution is 5.5 % for FY08

Total IT Services constituted to $ 31 billion in 2008

US remained the top Importer from India with 61.40 % in 08

BFSI captured the highest market segment with 36% share in 08

0.6 million employed in 07 and expected to grow by 20% in 08

TCS leading the chart with revenues of $ 4.56 billion and growth @ 41% in

FY08

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ITSS At a Glance

Exports - $23.1 billion (08)

Domestic - $ 7.9 billion (08)

Revenue - $ 31.0 billion

(08)

Contribution to GDP of ITSSwas 5.4% in FY07 & grew to

5.5% in FY08.

Source: NASSCOM

Source: NASSCOM

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Growing ITSSGrowing @ 32 % in 08 from

30% in 05

ITSS currently employsaround 0.65 million people

Source: NASSCOM

Source: NASSCOM

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EMPLOYEES,SOFTWAREENGINEER etc.

FINANCINGOF

PROJECT

VALUE-CHAIN

FOODAND

BEVERAGES

CATERING

TIE UP

WITH

COLLEGES

TRANSPORTATION

SERVICES

INTERIORS

VENDORS REAL

ESTATE

CLIENT

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IT sector moving up Value Chain

Off-Shoring of BackEnd Work

Testing & EntryLevel Projects

BPO and LargeProjects

HUB of global I.T.Services

R&D , KPO

PresentPosition

Low Sector Competencies High

Service

offerings

Source: NASSCOM

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Structure of IT industry

$ billion (2007-08)

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Structure of ITSS.

Source: NASSCOM

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Custom Application Development a major contributor

Structure of IT Services Sector

Source: NASSCOM

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BFSI Giving a Boost to IT Services

BFSI 38%

Hi/Tech

Telecom 20%

Manufactur ing

13%

Retai l 8%Media Publishing

Entertainment 4%

Construction

Utilities 4%

Others13%

Other 21%

Revenue ByVerticals (200

Source : NASSCO M

Hi/Tech Telecom follows BFSI

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% Growth in various segments of ITSS

Source: NASSCOM

BFSI : 39.3 %

Telecom : 26.71 %

Manufacturing : 52.7 %

Retail : 38.3 %

Media : 3.2 %

Construction : 15 %

Healthcare : 9.46 %

Airlines : 112.6 %

Others : -26.5 %

Airlines registering 3 digit growth figures due

to low base(revenues)

BFSI doing pretty well as per its contribution

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Market Competition Increasing Day By DaY

Porters Five Force Model

Herfindahl Index

Top Exporting Countries of IT Services

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(Very High)Rivalry Among ExistingFirms Cut Throat Competition Large and Small Players of the

market Prefect Competitive market

environment

(HIGH)Bargaining PowerOf Buyers Govt. Large Corporate EmergingCompanies House Hold

(LOW)Bargaining PowerOf Supplier Telephone Equipment Computer Infrastructure IT companies

Catering and Others

(HIGH)Threats Of NewEntrantsEasy to EnterAvailability of FinanceEase in Resource

Availability

(NO)Threats Of

SubstituteProducts

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EXTENT OF MARKETCOMPETITION.

PerfectlyCompetitive

Environment

Herfindahl Index

2 5 .2 3 .

2 1 .1 1 . 6 .1

4 .9 2 .4

2 .3

1 .7

1 .3

7 .7

T C

W ip r

In f o

S a t y a

H C

T e c h M a h

I-Fle

M-P h as i

P a tnHI=1850 (2008)

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Top Exporters of IT Services(2008)

Source: NASSCOM

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Companies Moving To Tier II/ Tier III CitiesLeaders CHALLENGERS FOLLOWERS ASPIRANTS

Bangalore Ahmadabad Aurangabad Allahabad

Chennai Bhubaneshwar Bhopal Dehradun

Hyderabad Chandigarh Goa Durgapur

Kolkata Coimbatore Gwalior Gangtok

Mumbai Indore Hubli GuwahatiNCR Jaipur Kanpur Ludhiana

Pune Kochi Mysore Patna

Lucknow Nashik Raipur

Madurai Pondicherry Ranchi

Mangalore Salem Shimla

Nagpur Surat Siliguri

Thiruvananthapuram Vijaywada Srinagar

Tiruchirapalli Varanasi

Vadodara

Visakhapatnam Source: NASSCOM

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Growth Drivers Moving The Way Ahead

Increase in Global Services Spend

Emerging Countries Demand & Supply Centers

Evolving Nature of Outsourcing Contracts

Increasing Presence across the Globe

Mergers & Acquisition

Increase in pool of Talented Human Resources

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ADVANTAGE INDIA

Breadth of Service Offering:- Evolved from low end service development to high end

integrated solution

- Covers a wide spectrum across multiple verticals

Quality of Processes:

- Host highest number of ISO Certified Cos.

Cost Advantage:- Cost of an engineer is 20% - 40% compare to EU

- Avg. offshore billing rate of $ 20-35 per hour; about 50-70%

lower than EU

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Contd

Ease of Scalability:

- 6,75,000 graduates/ year out of which 4,00,000 are engineers

- Over 50,000 MBA graduates per year

- Global 24/7 delivery capability

Infrastructure:

- Establishment of STPI and SEZs

- High quality telecom Infra and Support Services

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SECTOROUTLOOOK(NATURAL)

WINNERS EDUCOMPBARTRONICS

BUDGETPROVISION

PREVIOUS NEW IMPACT

EXCISE DUTY ONPACKAGED

SOFTWARE RAISE

8% 12%

Brings domesticsoftware packages at

par with global

packages.

Negative: cranessoftware

NIL 12%

Bottom line of manydomestic IT players to

be hit.Negative: Rolta, TCS,

Infosys

NA NA

To start in Chandigarh andHaryana on pilot basis; will

improve efficiency of govt.schemes

Positive: Bartronics

Service taxintroduced on IT

services

Smart cards for

food grain delivery

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Issues & Concerns for growing IT Industry

Appreciation of Rupee

Global recession in demand of Software Services

High attrition rate

Fake Resumes

Decreasing Operating Margins

Tough Competition from rest of BRIC Nations

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Regulations Benefitting Software Services

Establishment ofEOU/ STP/ EHTP/ SEZ to encourage Exports of SoftwareServices

Also to encourage Duty Free domestics of Services

Beneficiary of ESOP/ ESOS to be taxed only at the time of sale as capital gains

FBT is introduced as an additional Income tax Payable by an employer @30%

Contribution to Superannuation Fund up to Rs 1 Lakh/employee exempted fromFBT.

Information Technology Software are exempted from Custom Duty underamendment in custom duty act

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Tapping new segments Asia Pacific, Middle East, Europe

Continuation of Govt. soaps in near future

Demand for E-Governance Products

Increasing demand from Domestic market

ITSS Net Export expected to grow $ 60 Billion by 2010

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THANK YOU