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TM

ICT and Globalization– Developments and Perspectives from the Indian IT-ITES Experience

Presented to the OECD Working Party on the Information EconomyParis, June 2006

TMCopyright © NASSCOM 2006

Outline

• Snapshot of Indian IT-ITES Growth• Recent Trends and Outlook• Opportunities and Challenges


$1.9 $2.6 $3.9$6.0$4.0

$7.7

$12.8

$23.6

FY00 FY02 FY04 FY06 FY10E

DOMESTIC MARKET* EXPORTS*

Indian IT-ITES continues to chart record growth; on track to reach the targeted $60bn in exports by 2010

Billion

Source: NASSCOM

$13-15

$60

34.6%

31.2%

21.1%

22.1%

31.0%FY00-06

28.9%FY00-10CAGR

10 YR TARGET

ACHIEVED* Includes IT Software and Services, ES and Products, as well as ITES-BPO

TOTALPERIOD


Growth story built on strong fundamentals…

• Access to a large, growing pool of highly qualified talent• A high degree of quality orientation and demonstrated service

delivery expertise• Keen emphasis on information security reflected in the

comprehensive legal framework and elaborate security practices supplemented by enabling intervention

• World class telecommunication infrastructure• Enabling (and progressively improving) business environment

through strong government support; incentives, favorable regulations and policy

…delivered at a sustained and compelling cost-value proposition


…that is also reflected in the rapid evolution of the Indian IT-ITES service portfolio

1980 1985 1990 1995 2000 2005 & beyond

Mutual Gains Re-invest Mutual Gains

Strategic ImpactStrategic Impact

Valu

eVa

lue

Full Process Outsourcing (F&A, HR)

Multiple Process Outsourcing

Rules-based ProcessingProblem Solving/Decision Making

Customer Contact

Transactional Data Entry

Data Entry

Cost ControlCost Control Focus on Core CompetenceFocus on Core Competence Business TransformationBusiness Transformation

Out-Tasking

BPO

Transformational BPO

Application Support

Technical Support

Customer Contact / Hardware & Installation Support

Maintenance

R&D Services Product Development & TestingDesign & Integration

ITBPO

Source: neoIT

Research and AnalyticsEngineering Services

Note: Services listed are indicative not exhaustive

1980 1985 1990 1995 2000 2005 & beyond



Valu

eVa

lue




Customer Contact


Data Entry


Data Entry


Out-Tasking

BPO

Transformational Outsourcing

Application Support

Technical Support


Maintenance


ITBPO

Source: neoIT



1980 1985 1990 1995 2000 2005 & beyond



Valu

eVa

lue




Customer Contact


Data Entry


Data Entry


Out-Tasking

BPO

Transformational BPO

Application Support

Technical Support


Maintenance


ITBPO

Source: neoIT



1980 1985 1990 1995 2000 2005 & beyond



Valu

eVa

lue




Customer Contact


Data Entry


Data Entry


Out-Tasking

BPO

Transformational Outsourcing

Application Support

Technical Support


Maintenance


ITBPO

Source: neoIT




IT services exports lead, growing at 32-33%; range of services offered has expanded significantly

13.3

10.0

7.3

215

398

297

FY 2004 FY 2005 FY 2006E

Revenues (USD Billion)Employees ('000)

IS Outsourcing6%

Support and Training

11%

Custom Application

Development49%

Systems Integration

2%

Network Consulting and

Integration2%

IT Consulting3%

Application Management

27%

FY 2005

Source: NASSCOM


ITES-BPO exports grew by 37% last year, to reach USD 6.3bn; growth driven by scale and scope expansion

216

316

415

3.1

4.6

6.3

FY 2004 FY 2005 FY 2006E


Human Resource Adminsitration

3%

Finance and Accounting

40%

Others11%

Customer Interaction Services

46%

FY 2005

Source: NASSCOM


Growth in ES and software products reinforces the industry’s move up services value chain

4.0

3.1

2.5

115

93

81

FY 2004 FY 2005 FY 2006E


Made-in-India Products10-15%

Offshore Product Development

20-25%

Engg and R&D Services60-70%

FY 2005

Source: NASSCOM


Recent trends and market indicators indicate a positive outlook for the sector

• Large unaddressed market potential in offshore IT-BPO sustaining demand led growth– Evolution of global delivery expanding adoption of new services

delivered from offshore

• Unbundling of IT outsourcing mega-deals with increasing share of India based delivery– $100bn in contract value up for renewal over next two years– Increased participation of Indian vendors in these bids – MNCs also looking at significant ramp-up in India based delivery

• Strength in client wins, cross-border M&A trends, stable pricing with marginal upward bias, and a gradual (favorable) shift in the outsourcing debate


Significant headroom for growth, less than 10% of the global addressable market captured till date

Addressable markets of at leastUS$300 billion

* Financial year, April 1 to March 31** Includes addressable markets in currently offshoring industries

*** Includes Philippines China Russia Eastern Europe Ireland Mexico

Key drivers• Offshoring of

– Large ‘white spaces’ in major industries

– More complex and high-risk services

– Fragmented and high-interaction processes thanks to advances in telecom and workflow management technologies

Addressable market

Current size

Global offshore IT industry, FY* 2005

9x~150-180

18.4

6.4

12.0

Others*

India

US$ billionGlobal BPO industry**, FY 2005

12x~120-150

11.4

Addressable market

Current size

6.2

5.2

Others*

India

US$ billion

ESTIMATES

Source: NASSCOM McKinsey Report 2005


ICT can also play a significant role in socio-economic development


‘Managing growth’ is the key challenge

• Strengthening the global delivery model and addressing impediments to greater globalization of services

• Building on India’s core value proposition– Enhancing the skill pool advantage

– Strengthening business infrastructure

– Reaffirming the philosophy of operational excellence

• Effecting equitable distribution of gains from ICT– Catalyzing domestic market development

– Decentralizing industry growth

– Ensuring that ICT benefits reach the ‘bottom-of-the-pyramid’

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ICT and Globalization - OECD. · PDF fileICT and Globalization ... growing pool of highly qualified talent ... Control Focus on Core CompetenceFocus on Core Competence Business TransformationBusiness