India’s Domestic IT-BPO Marketold.nasscom.in/sites/default/files/researchreports/Executive Summary_2.pdf · increasing demand for IT-BPO products and services. The next decade will

Winds of Change

India’s DomesticIT-BPO Market

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Winds of Change

India’s DomesticIT-BPO Market

2 INDIA’S DOMESTIC IT-BPO MARKET

Copyright ©2011

International Youth Centre, Teen Murti Marg, Chanakyapuri

New Delhi - 110 021, India

Phone: 91-11-23010199, Fax: 91-11-23015452

Email: [email protected]

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India is well-acknowledged as a destination for global IT-BPO sourcing, commanding over 55 per cent

of the total sourcing market. However, a new hot spot, in the form of the domestic IT-BPO market, is

emerging in the country. This is fuelled by the phenomenal growth of India’s GDP coupled with an ever

increasing demand for IT-BPO products and services. The next decade will be a period of disruptive growth

for this segment, with annual IT-BPO investment in India expected to increase from ` 1,321 billion in

FY2011 to ` 4,621 billion by FY2020.

The rising importance of IT-BPO in the domestic market makes it critical to analyse the current state

of the industry, its key characteristics and the current trends. There is also a need to understand the

current pain points existing in the customer and service provider ecosystem. Understanding these critical

aspects will help in better addressing the existing challenges and in making calculated decisions to grow

the market in the coming decade.

The Indian Domestic IT-BPO Market Landscape report has been developed through an extensive eff ort,

involving discussions with NASSCOM members and industry leaders from across the spectrum. Over

150 in-depth interviews and extensive secondary research have been conducted to extract valuable

insights of the market landscape.

This report is divided into six sections:

1. Overview of the Indian Domestic IT-BPO Market

2. Demystifying the Indian Customer

3. Supplier Landscape: Shifting the Focus

4. Indian Domestic IT-BPO Market Review: Vertical-wise Deep Dive

5. e-Governance: Citizen Enablement

6. The Way Ahead: India’s IT led Transformation

1. Overview of the Indian Domestic IT-BPO Market

Growth is never by mere chance; it is the result of forces working together – James Cash Penney

Emerging economies, the world over, have grown in importance and are creating signifi cant demand for

products and services in all spheres. India, being one of the key emerging economies, is no exception and

represents one of the fastest growing markets in the world. With business fl ourishing at an unprecedented

rate and the ICT infrastructure in the country rapidly improving, the market for IT-BPO consumption in

the country is also growing steadily. The domestic IT-BPO market in India has grown at an impressive

20.7 per cent (in USD terms) in FY2011 as against 12 per cent in China, 13 per cent in Brazil, 18.1 per cent

in Russia and 5.7 per cent worldwide.

Executive SummaryA dark horse, which had never been thought of, rushed past the grandstand in sweeping triumph – Benjamin Disraeli


In the recent years, the growth of domestic IT-BPO market has even surpassed that of the export market

for IT-BPO services in the country.

1.1. Current Domestic IT-BPO Market Landscape

With a rapidly growing ICT infrastructure, increasing customer awareness, rising spending capabilities

of consumers and acceptance of technology as a business enabler, the domestic IT-BPO market in India

is undergoing a transformational phase. Domestic IT-BPO industry comprising Hardware, Software

Products, IT Services and BPO, aggregated revenues of ` 1,321 billion in FY2011. Indian domestic IT-BPO

market is dominated by Hardware and IT Services, which jointly contribute nearly 78 per cent of the total

revenue. The Indian Hardware market grew at 15.8 per cent and accounted for ` 534 billion in FY2011.

Rising income and falling prices of IT Hardware has led to an increase in spending by Indian consumers.

Moreover, large scale digitisation of data, especially in Manufacturing, Telecom and BFSI verticals, is a

key driver for Hardware sales in India. The government, with its continued investments in State Data

Centres (SDCs) and projects such as UIDAI, is aiding the growth of the Hardware market.

India’s IT Services market grew at 16.8 per cent to reach ` 501 billion in FY2011. The overall level of IT

outsourcing by Indian customers in on the rise – percentage IT outsourced by mature verticals such as

Telecom and BFSI in India has reached 60-70 per cent in FY2011. Non-traditional business models such as

Managed Services, Remote Infrastructure and Application Management are rapidly gaining acceptance

across verticals in India.

The domestic Software Product market grew by 14 per cent to ` 159 billion in FY2011. Technological

advances in the mode of delivery of products are being viewed as the key drivers for the growth of the


Software product market in India. Rising preference for OPEX-based models is driving customers towards

cloud-based products.

The demand for BPO services stood at ` 127 billion in FY2011, growing at 16.9 per cent over FY2010.

Domestic BPO industry currently off ers a range of services from customer interaction services to

knowledge services such as research and analytics. However, it is dominated by voice-based support

services, accounting for a majority of the revenue.

1.2. Key Drivers for IT-BPO Adoption

The domestic IT-BPO market is witnessing an impressive growth phase due to a variety of factors

which includes a large base of customers, maturing supply side organisations, improving ICT

infrastructure, evolving regulatory conditions and emergence of new technologies as well as delivery

and business models.

L a r g e s c a l e I n d i a n

organisations are starting

to compete in the global

markets. The number of

Indian organisations in the

Forbes 2000 list increased

from 30 in 2005 to 57 in 2011

a) Aspiring Indian enterprises: Indian enterprises are rising up to

global standards and are adopting IT to support their growth plans.

As these organisations grow and their processes mature, they adopt

IT to improve business effi ciencies and enhance competitiveness

in the market. India also presents a huge base of about 46 million

Small and Medium Businesses (SMBs) that are rapidly opening up to

IT adoption.

b) Government initiatives: Indian Government is the key consumer of

IT-BPO services in the country. The government, at all levels, is employing IT for its programmes such

as National e-Governance Plan, Unique Identifi cation, Restructured Accelerated Power Development

and Reforms Programmes (R-APDRP), etc.

c) Aggressive focus by service providers: Domestic IT-BPO industry has come a long way since late

1980s and early 1990s when only a handful of IT organisations were focusing on developing their

India business and providing services to domestic customers. The ecosystem today has evolved into a

vibrant landscape of over 12,000 supply side players, who are actively devising new business ideas to

tap the huge potential existing in the market. Service providers are developing customised products

for the domestic market, introducing new business models and are realigning their business units

to cater to the rising demands.

Cloud computing is ranked

as the top technology

priority of Indian CIOs

d) Emergence of disruptive technologies/delivery models/business models: Indian enterprises across the spectrum are gearing up

for the adoption of alternate business models/technologies

such as cloud computing, enterprise mobility, social networking,

service-oriented architecture, etc. Recent surveys indicate that

adoption and awareness levels of new/disruptive technologies among Indian enterprises are also

on the rise.

e) Huge ‘Native to IT’ population base: The huge ‘Native to IT’ Indian population, exposed to IT at

home, schools and colleges is the key enabler of IT in the country. Besides, ICT infrastructure in the


country is rapidly evolving. There are over 750 million mobile subscribers and over 74 million internet

users in the country today. The PC penetration in the country has increased to 69 million units. Over

33 million people have joined the social networking bandwagon.

f) Regulatory factors: Regulatory factors have also been pivotal in furthering the adoption of IT in

the country. Strict compliance needs, especially in the BFSI and Telecom verticals, are driving Indian

enterprises to constantly update and upgrade their IT infrastructure.

2. Demystifying the Indian Customer

Being a novelty had its advantages. – Jessica Savitch

2.1. Understanding the Customer Landscape

It is of utmost importance to understand the customer landscape and their behaviour to better serve the

domestic IT-BPO requirements. Indian customers are very unique when compared to their counterparts

in other geographies, across all segments i.e., government, large enterprises, Micro, Small & Medium

Enterprises (MSMEs) and household consumers.

The Government of India functions in a three-tier structure with the central government at the core acting

as the apex regulating authority. At the state/UT government level, there are 28 states and seven union

territories. The Rural Local Self-Governing Institutions (LSGIs)/Urban Local Bodies (ULBs) are seated at

the periphery and are the fi rst contact points for the citizens.

The central government comprises 49 central ministries with 51 central departments. There are six


additional departments which do not come directly under any central ministry but are a part of the

central government. The state/UT governments are responsible for the development of the respective

states with support from the central government. The municipal corporations in 423 individual

class I cities and others serve as the ULBs in the respective cities and are responsible for local governance.

The Rural LSGIs which consist of 540 district panchayats, 6,096 intermediate panchayats and 232,000

village panchayats bear the responsibility of local governance at the village level.

SMBs in India account

for over 46 million units

with more than 40 per

cent contribution to the

total industrial production

and but only 25 percent

c o n t r i b u t i o n t o t h e

domestic IT-BPO spend

Businesses in India can be divided into micro, small, medium and large

enterprises based on the number of direct employees. Large enterprises

are organisations with more than 1,000 employees and there are around

5,000 such enterprises in India. SMBs in India account for over 46 million

units with more than 40 per cent contribution to the total industrial

production and 45 per cent to the total manufacturing output of the

country. Medium enterprises consisting of 101 to 1,000 employees

are estimated to be around 100,000 in number. There are as many as

1.3 million small enterprises with 11 to 100 employees. Around 97 per cent

of all SMBs belong to micro enterprises (enterprises with less than 10 employees). Retail is the largest

contributor to the Small and Medium Business (SMB) segment with close to 47 per cent of the total

landscape. It comprises both organised and unorganised Retail with the latter constituting close to 90

per cent of the number of units. This is followed by Manufacturing with around 11 million organisations

spread over 2,000 manufacturing clusters across India.

There are around 220 million households in India that are rapidly evolving towards adoption of lifestyle

and hi-tech products. Success of technology products such as mobile phones, netbooks, PCs, social

media, etc. bear testimony to the increasing tech-savvy buying pattern.

2.2. Desirables of Each Customer Segment

The primary objective of the GoI is to deliver optimum services to its citizens in an effi cient and eff ective

manner. The objective of the government is to introduce reforms and policies to create suitable conditions

for sustainable growth of the country. In addition, the government focuses on job creation, price stability

and maintenance of balance of payments.

The GoI is aggressively focusing on enhancing the transparency of its internal functions. One such move

is the Right to Information Act, passed in 2005 which necessitates the use of technology in its processes.

With the government losing more than ̀ 150 billion every year due to pilferage in the Public Distribution

System (PDS), the focus is towards reducing these losses and achieving effi cient distribution of basic

necessities to the less privileged population.

The focus of businesses is primarily towards providing means for rapid expansion, competiveness

enhancement, cost optimisation of operations and increasing customer reach. Large enterprises are

exploring various avenues such as mergers & acquisitions, diversifi cation, portfolio extension, etc. to

expand their markets rapidly. They are entering newer markets and are expanding existing product

portfolios via partnerships, acquisitions or new product development. With globalisation being the

key focus area for most large enterprises, organisations are now working towards enhancing their


competitiveness to meet the competition suitably. A lot of emphasis is now being laid on enriching

customer experience and providing customer-centric products/services.

SMBs on the other hand are focused on meeting competition and sustaining business as usual. Large

numbers of SMBs in India are facing immense competition from China and other emerging Asian

economies in domestic as well as global markets. Most SMBs concentrate on short-term goals of acquiring

a few customers and delivering eff ectively.

2.3. IT Expectations of Indian Customers

Customers’ expectations across segments have matured over the past decade. This maturity has been

a result of their exposure to disruptive, innovative and more importantly, aff ordable technologies.

The most demanding expectations are from large enterprises that have experienced a paradigm shift

in their IT requirements. Indian enterprises have started realising that the use of IT can be a strong

business diff erentiator in terms of higher business value and not just increasing bottomline effi ciency.

Government expectations have risen considerably from discrete IT solutions and basic record management

to integrated solutions with a citizen-centric approach.

The GoI is looking towards the adoption of information and allied technologies to empower itself to

provide better service to all its citizens. IT is viewed as a means of imparting strength to transparency,

accountability and execution of new policies and reforms. IT is expected to address the three key themes

of enhancing internal effi ciencies and increased reach, which in turn will provide better services to the


citizens. IT is being adopted with a view to bringing faster and eff ective implementation of policies and

reforms by the government from time-to-time as well as to help monitor and assess the eff ectiveness

and success of a particular initiative.

Businesses are becoming more and more reliant on IT for achieving their business goals. While the

existing enterprises are maturing fast with their IT investments, most of the new projects/enterprises

consider IT as a part of the infrastructure budgets right from the very beginning.

IT expectations of large enterprises are centered on meeting their desired business goals. CIOs/IT heads

are now looking towards IT to solve their business problems which traditional methods cannot address.

IT is expected to play a key role in process standardisation, meeting regulatory requirements, quality

management, sales & marketing, fi nancial performance, as well as customer analytics.

SMBs expect IT to help them survive and sustain their business eff ectively in a highly competitive

market. SMBs also expect IT solutions to help them introduce local as well as international industry best

practices in their business. However, in most cases, their business processes are not mature enough to

adopt standard solutions. As most SMBs do not have much exposure to IT, solutions are expected to

be intuitive and easy to use. Managing IT is considered an overhead by most SMBs, hence they prefer

to use solutions which don’t require much eff ort in maintenance and upgradation. Expectations from

IT are very high at very low-cost points with all relevant features. IT is expected to generate immediate

and visible impact to both the topline as well as the bottomline.


IT expectations of consumers are diff erent from other customer segments. The key expectation comprises

intuitive and easy-to-use devices with networking, collaboration, infotainment capabilities. Consumers’

aspirations include superior lifestyle IT products which bring in a pride associated with owning a

particular product.

The industry has witnessed increase in maturity at the technology front augmented by innovative business

models to deliver services to customers. Traditionally, IT adoption and usage among enterprises was

heavily dependent on their in-house capabilities. This is fast changing with the introduction of newer

business models off ered by the supply side to best suit the requirements of the customers. Enterprises

are moving away from tactical in-house development to strategic IT partner alliance. The model of

complete outsourcing is evolving from the current hybrid state wherein a part of the development work

is still conducted in-house supported by an IT service provider.

2.4. Challenges in IT Adoption

There are various challenges that inhibit the growth of IT-BPO market in India. Demand side organisations

are concerned with the supply side’s lack of domain expertise provided for the local market, inability to

build a clear business case for the solutions and complex licensing agreements. Indian buyers prefer to

adopt best-in-breed solutions and have also been experimenting with niche smaller organisations and

start-ups. However, they are skeptical about stability and ability of these small organisations/start-ups

to provide support on a long-term basis. Also, reaching out to niche players in foreign locations is very

diffi cult and CIOs/IT heads have to make additional eff orts to convince such suppliers to come and

work in India. Some of the other challenges faced by the demand side, especially SMBs, include lack of


IT budget, internal expertise and understanding of emerging technologies such as cloud computing,

business intelligence, virtualisation, etc.

The IT budgets of Indian

enterprises are signifi cantly

lesser than their counterparts

in developed economies

reflecting the relatively

low maturity and paying

propensity for IT

Government, being a late adopter of technology compared to

other private organisations, is faced with a technology gap. Other

challenges inhibiting IT adoption in government vertical include

high resistance to change, low integration and standardisation

across departments, very long procurement cycle and huge

investments required from the IT suppliers starting from the proof of

concept stage.

Large enterprises are considered relatively mature compared to

the rest of the customer segments; however, they are also faced with a variety of challenges. Most

large organisations are supported on legacy systems which are very core to their business. These legacy

systems are usually designed keeping in view the organisational processes which may or may not be

standard/best practices. Replacing these legacy systems with new age solutions is considered highly

cumbersome. Other bottlenecks include non-existence of long-term IT roadmap, lack of understanding

of emerging technologies, long implementation cycles, etc.

There are a multitude of challenges that inhibit SMB investments in IT solutions. Indian SMBs lack

maturity in business processes and are reluctant to change them. This inhibits adoption of available

standard IT solutions in the market. On the other hand, customised solutions are very costly for SMBs

and take a very long time for implementation and demand additional investment in associated trainings.

Indian SMBs are highly infl uenced by their peers and competitors. They expect to see successful IT

implementation case studies for businesses similar to them in size and domain, which is very rare as of

today. SMBs are also constrained with high attrition within their IT departments. This attrition results

in a huge setback to the SMBs and disrupts internal processes. A large number of the SMBs belong to

Tier-II and Tier-III cities where fi nding suitable talent takes a lot of time. IT is still considered as a cost

and hence, SMBs expect quick returns from their investments. The RoI is expected in terms of increasing

top line instead of greater business value.

Awareness and availability of new and emerging technologies is one of the primary barriers in IT adoption

among consumers in India. The Indian market is viewed as a secondary market by most technology giants.

New product launches happen later in India as compared to other developed markets. However, this is

fast changing with a few technology organisations focusing on India and releasing emerging market

focused products in India.

3. Supplier Landscape: Shifting the Focus

Seize the opportunity by the beard, for it is bald behind. – Bulgarian Proverb

3.1. Why India? A Supplier Perspective

India has emerged as a preferred destination for business for many global IT-BPO organisations. The

past few years have seen entry of players such as Apple, Infosys and WNS in the domestic market.

With a recessionary scenario in most developed markets, the less aff ected and rapidly growing Indian


economy off ered lucrative opportunities. Moreover, the large base of maturing customers also favour

rapid adoption of new technologies. The Indian domestic market is being treated as a learning ground by

some service providers. Complex nature of domestic projects is helping these players to develop domain

expertise and replicate the success in other emerging markets.

As a result of the improving business conditions, an ecosystem of over 12,000 players has developed in the

domestic IT-BPO market. Over 50 per cent of the total market is dominated by the top 20 organisations in

the space. The long tail of the ecosystem, which contributes ~5-8 per cent of the total revenue, consists

of over 11,000 players. These players comprise web development organisations, freelancers, value-added

resellers, individual app-developers, etc. While multinational corporations have been highly successful

in the domestic market commanding a major share of the total revenue, Indian organisations are fast

catching up.

3.2. Challenges

Deep relationships between

the account manager and

the CIO is a must have in

India. Frequent organisation

restructur ing among IT

suppliers often hampers the

existing relationships

While India appears to be an attractive market, certain challenges

inhibit the growth of IT-BPO organisations. For a majority of the

organisations, Europe, Japan and the US remain the primary target

and most of their products are not specifi c to domestic needs.

Organisations usually roll out their global products in the Indian

market with minor customisation. There is a lack of industry


collaboration and a majority of these players do not have access to their potential customers in remote

geographical areas out of Tier-I cities. Lastly, talent attrition is a major bane for the suppliers.

3.3. Key Initiatives by the Supply Side

“Each market is diff erent and so is India. Hence, it needs to be treated as a primary market and cannot be put under another division head (like APAC). India-based pricing and India focused talent is needed”, said the Business Head of a Major IT-BPO Service Provider.

Indian consumers are unique in their requirements and expect specifi c solutions from the supply side.

Government IT projects are unique in nature and require suppliers to develop expertise in implementing

solutions of an unprecedented scale. Large enterprises usually demand the development of best-in-class

high-value business solutions, which equip them to better serve their customers and enhance internal

effi ciencies. On the other hand, meeting Indian SMBs’ demands, requires greater eff orts from the supply

side in awareness/market creation, developing new cost models and innovative ways to reach out to

them, in remote locations. However, serving Indian consumers will require development of products

which provide greater value for money and durability.

This growing complexity and uniqueness of the market has led service providers to launch a host of

initiatives to grow their businesses in India. While some of these initiatives are targeted at specifi c

customer segments, the others are focused on growing the business in general:

• Developing India-specific solutions: Few organisations have started developing customised

solutions targeted at specifi c Indian customers. While some product organisations such as SAP

are introducing readymade templates for micro-verticals such as Automobile, Sugar and Rice mills,

Hardware organisations such as HP and IBM are particularly targeting the SMB sector with their

customised solutions. Suppliers are also customising their fl agship products to better suit Indian

requirements. Tablet PCs with customised Indian content and software applications in regional

languages are also being launched in the Indian market. For instance, Huawei is planning to introduce

new media tablets that will be sold in India with content customised for the Indian consumers. SAP,

on the other hand, is introducing its key products in Indian regional languages to address the needs

of a multilingual culture

It is increasingly being

realised that India is not

a cost arbitrage-driven

market and value-added

off erings such as managed

s e r v i c e s w i l l d r i v e

IT adoption

• New business strategies: IT-BPO organisations are realigning their

businesses to better cater to the domestic market. While some

organisations such as Infosys and Tech Mahindra are creating

dedicated divisions for product development and IP creation, other

players like EMC and Dell are focused on expanding their sales and

partner network presence in India. Organisations are also looking

to reduce costs by shifting their secondary workload to Tier-II and

Tier-III cities, to optimise their operational costs. Conventional

product organisations are also trying to transform themselves from

being a product player to a solutions organisation. Hence, they are looking to develop their own services

capability (e.g. system integration) in India and bring in other value-added services to the market.


• Partnerships: IT-BPO organisations are coming together to jointly develop solutions for the market.

For instance, Microsoft and Tech Mahindra have formed an alliance for targeting the Telecom market.

Similarly, organisations are partnering with demand side organisations to leverage their expertise and

jointly develop holistic solutions. Partnership is also a preferred route for many foreign organisations

to rapidly establish a pan-India network

• Acquisitions: Software organisations, both Indian as well as foreign, are acquiring organisations to

expand their capabilities in newer technologies and geographical reach. Similarly acquisitions are

being witnessed across servicelines

• New cost models: Organisations are introducing (and experimenting with) new cost models in the

domestic market. Indian banks are now being targeted with ‘pay-per-branch’ and ‘pay-per-transaction‘

kind of models. Suppliers are promoting the benefi ts of pay-per-use based cost models among the

price sensitive Indian SMBs. Other business models such as managed services are fi nding traction

among Telecom and BFSI verticals in the country

• Awareness creation/Brand building: Bright spots of investments in awareness creation and brand

building have started to emerge in India. Some organisations, like HP, Yahoo! and VMware have

been successful in introducing brand building campaigns and in improving their business in India.

More and more organisations are organising roadshows for SMBs in India to understand customer

challenges and create awareness around solutions and service off erings. Many suppliers have also

started promoting successful customer case studies from the region. They are also organising

CIO/decision-maker roundtables and seminars, in various cities across the country

• Developing better customer targeting strategies: Suppliers are particularly focused on fi nding new

ways to attract customers. They are introducing new bundled off erings for Indian customers and

are readily providing discounts, to build relationships with them. The key focus is put on targeting

potential customers and new and innovative channels (e.g. through private equity organisations,

targeting SMB clusters, etc.). Suppliers are also realising that the real decision makers in many large

Indian enterprises are the CEOs and the CFOs (besides the CIOs), and hence, are focusing on developing

relationships across the board

• Strengthening partner network: Suppliers are taking steps to expand and strengthen their partner

network in India. Organisations such as Microsoft and Tally have developed a large network of partners

across the country and continue to provide them with suitable incentives, as a part of their partner

promotion schemes. Some organisations are also leveraging their existing customers to acquire newer

customers. In order to solve the challenge of last mile connectivity to the SMBs in remote locations,

IT organisations are leveraging the wide reach of Telecom organisations, for critical processes such

as billing, payments, etc.

• Leveraging India as a test-bed: IT organisations are replicating the learning from highly demanding

Indian projects to other emerging markets. Organisations are also testing business models in India

with an objective to replicate them in other emerging markets.

As a result of these initiatives, the domestic IT-BPO market is rapidly evolving and is witnessing rapid

maturity of the Indian customer base. Besides, the domestic IT-BPO industry is also providing direct

employment opportunities to over 970,000 IT professionals in the country. The


With improving landscape, large

outsourc ing deals are being

signed in the domestic market

today – the average value of an IT

outsourcing deal has risen from USD

9 million in 2005 to USD 46 million

in 2010

domestic IT-BPO industry is creating immense job

opportunities in Tier-II and Tier-III cities, as well.

Emergence of rural BPOs to cater to regional needs is

providing employment to a young population, even with

a non-English expertise. With more and more IT-BPO

organisations planning to enter the domestic market,

employment opportunities will continue to rise in

the future.

4. Indian IT-BPO Market Review: Vertical-wise Deep Dive

IT-BPO spending in India varies greatly on the grounds of maturity and the business ecosystem of

individual verticals. The market is dominated by Manufacturing and Energy verticals, which jointly

contribute nearly 45 per cent to the total IT-BPO spending. IT maturity levels are much higher in verticals

such as Telecom and BFSI, which are transforming to the next level of IT adoption with new generation

services such as cloud and managed services model. India is also witnessing the emergence of verticals

like Education, Healthcare and Retail, which are rapidly adopting IT. Owing to the low penetration of IT

and rising business maturity, IT adoption in these verticals is growing at a rate faster than the industry

average. Consumers on the other hand, represent an attractive segment, with the fastest growth in

FY2011. With the growing personal disposable incomes and aspirations of Indian citizens, IT consumer

product organisations, particularly hardware suppliers, are experiencing an ever increasing demand of

their products.


As a part of this study, a deep-dive analysis of seven verticals has been performed, based on their

contribution and growth in the domestic IT-BPO market. The verticals include:

Large Verticals

1. Manufacturing

2. Telecom

3. BFSI

4. Energy and Utilities

Emerging Verticals

1. Education

2. Healthcare

3. Retail

Besides these verticals, the report also covers the government as a consumer of IT-BPO products and

services in a separate section.

4.1. Manufacturing

Business trends: The Manufacturing vertical in India is gaining much importance in the fi ve-year-plans

and newer initiatives that are being planned for by the GoI to drive the next phase of growth for the sector.


Manufacturing contributes close to 15 per cent of GDP currently and various policies are designed to bring

it up to 25 per cent by 2025. The key factors for such growth can be attributed to rising globalisation in

the vertical and the focus on improving infrastructure and the human resource employment scenario,

within the country.

Current IT trends: Manufacturing is one of the highest spenders on IT-BPO. It contributes more than

1/4th of the total IT-BPO spend, pegged at ` 380 billion in FY2011. Since the vertical is highly dominated

by SMBs in the number of units, a huge opportunity is being envisioned for OPEX and transaction-

based models such as those in cloud off erings. Some early examples of cluster-based cloud delivery

have already started to emerge. Large Manufacturing organisations are heading the adoption of latest

technologies such as private cloud, enterprise mobility, virtualisation and Business Intelligence (BI) to

enhance competitiveness and better service to the end customers.

Challenges: India faces huge competition from its neighbouring countries such as China, and Bangladesh,

both in domestic as well as global markets. This puts Indian manufacturers under huge cost pressures

and hence, results in sub-optimal levels of IT-BPO spending. Also most SMBs lack internal process

maturity which inhibits the adoption of standard solutions. The biggest challenge that is faced by IT

suppliers is the last mile connectivity, as these Manufacturing units are spread across 2,000 registered

and unregistered clusters.

Future: Going forward, the IT-BPO spending of the Manufacturing vertical is expected to grow to

` 1,003 billion by FY2020. As more and more large Manufacturing units adopt higher degree of automation,

the sector will witness the widespread adoption of Manufacturing Execution Systems (MES). SMBs will

be moving to the next phase of IT adoption and shall start adopting enterprise-wide collaboration and

management solutions.

4.2. Telecom

Business trends: Indian Telecom industry is highly dynamic (over 20 million mobile subscribers are being

added every month). New technologies such as 3G and BWA are being introduced in the market and

there is an increasing focus on new avenues of revenue generation (such as VAS, cloud, app stores, etc.)

by Telecom operators.

Current IT trends: Total IT spending in the vertical has grown by 20.6 per cent to ` 96 billion in FY2011.

A large number of Telecom operators have outsourced their IT operations to service providers such as

IBM, Wipro and Tech Mahindra. Telecom organisations are investing in integrating their business/data

platforms to get a unifi ed view of their operations. Much emphasis is being laid on adopting business

intelligence and data mining solutions. New avenues such as VAS, cloud services and app stores are

creating further opportunities for IT organisations in India.

Challenges: Telecom organisations are reeling under the pressure of falling Average Revenue Per

User (ARPU) which is shrinking the budgets for IT investments. The market being highly dynamic and

unpredictable, Telecom operators are unable to predict future IT requirements. They struggle to allocate

the right annual budgets for their IT spending.

Future: Looking ahead, the IT-BPO spending in the Telecom vertical is expected to grow to ̀ 341 billion by

FY2020. Telecom organisations will continue to add infrastructure capacity to keep pace with the rising


demand. Launch of 3G services, increasing focus on VAS off erings, introduction of National Telecom

Policy 2011 and plans to launch 4G by 2012 will be the key drivers for IT adoption in the future.

4.3. Banking, Financial Services and Insurance (BFSI)

Business trends: The Indian BFSI sector is set to witness multi-fold growth with the entry of new players

and an increased focus on sub-urban and rural markets. The emergence of newer channels of delivery

are now enabling real-time transactions and has enhanced the reach of Banking and Financial Services

in the country. Policy-related initiatives aimed at fi nancial inclusion have further fuelled the growth in

rural/remote regions.

Current IT trends: The total IT spending in the BFSI vertical grew by 14.4 per cent to reach ̀ 147 billion in

FY2011. Banks are focusing on integrating their systems on a single core banking platform. Integration

of various delivery channels and easy collaboration between various units like Banking, Insurance and

Financial Services are key investment areas. Intense competition has resulted in enhanced customer

focus, which is leading to the adoption of CRM, BI and advanced analytic solutions. Security has taken

preference with rising threats and the evolving regulatory compliance.

Challenges: BFSI in India still remains price-sensitive. Public sector enterprises and smaller players

struggle with lack of standardisation, change management issues and constrained budgets. Emerging

technologies like cloud computing face sluggish adoption due to the legacy investments, lack of success

stories and security concerns.

Future: Going forward, the IT-BPO spending in the BFSI vertical is expected to grow to ` 429.1 billion

by FY2020. BFSI is set to reach every citizen of India as per RBI’s vision. With private cloud, biometric

smartcards, mobile transactions and other IT-enabled systems, a complete portfolio of services would be

accessible to all citizens in the country. Simplifi ed Banking service accessibility and CRM would remain

the focus in the future. A managed services model would further develop for ATM management, opening

new opportunity windows for the outsourcing providers.

4.4. Energy and Utilities

Business trends: With the enhanced focus of government to provide aff ordable and quality energy to

all and accommodate the exponential growth in demand, the industry is undergoing a reform phase.

Along with privatisation and deregulation, the government is focused on controlling huge losses in

transmission and distribution of power. Developing alternative sources of energy, remains a key priority

for the nation.

Current IT trends: The total IT spending of the vertical has grown by 12.4 per cent to reach ̀ 207.7 billion

in FY2011. Increased IT investments are being made on retail automation as well as on internal processes

of the organisation. Digitisation of distribution of power and smart grid technologies are also being

adopted. Digital oilfi elds, retail automation, monitoring systems, supply chain management, integration

of vendors through web/intranet portals, ERP, etc. are some of the key investment areas.

Challenges: Legacy infrastructure and lack of standardisation prevents Energy organisations from

adopting newer technologies. Lack of awareness and IT skills, further slows down the process. Smart

technology/energy effi cient solutions are being constrained due to their high initial cost of deployment.


Limited policies and research investments to monitor end-use of energy, carbon emissions, etc. has

resulted in slow adoption of IT systems.

Future: Looking ahead, the IT-BPO spending in the Energy and Utilities vertical is expected to grow to

` 538 billion by FY2020. Renewable energy, smart grid, green and energy effi cient technologies like smart

meters and other monitoring solutions would see fast adoption. Mobility, automation and digitisation for

improved customer connect and effi ciency would remain the key investment areas. In the future, cloud

computing and virtualisation is expected to mature in providing enhanced value to the sector.

4.5. Healthcare

Business trends: Various stakeholders in the vertical are coming together to improve Healthcare

services in India. The vertical is witnessing rising government budgets for emergence of more and more

world-class facilities in cities and technology-enabled Healthcare services. Increasing penetration of

health insurance is also helping the industry grow. The rising success rates for treatments in India is

also promoting medical tourism in the country today.

Current IT trends: Healthcare is one of the fastest growing verticals recording a growth of 17.5 per cent

in FY2011 to clock or spending of ` 13.6 billion. Large hospitals are in the process of adopting Hospital

Information Systems (HIS). Electronic Medical Record (EMR) is also being invested upon aggressively by

various hospitals. Use of social networking and cloud computing to better connect and manage customer

information is gaining traction. Many IT suppliers and Healthcare service providers are working together

to bring more relevant and targeted products and services to the market.

Challenges: Constrained budgets due to high cost of the core medical operations and devices still remains

a key challenge for enhancing IT-BPO investments, especially among small hospitals. Lack of IT maturity

and the inability to retain IT talent is another challenge faced by small players. Inexistence of standard

Healthcare practices inhibits the adoption of packaged products.

Future: Looking ahead, the IT-BPO spending in the sHealthcare vertical is expected to grow to ̀ 47 billion

by FY2020. Focus on better and secure customer clinical data handling will drive adoption. Telemedicine,

HIS and CRM would attract signifi cant investments. Mobility solutions are expected to gain attraction

to connect the farthest corners of the nation. Infrastructure optimisation would attract investments

in the form of virtualisation and cloud adoption which will be the way forward with the fast increase in

volume of customers.

4.6. Education

Business trends: GoI is spearheading the movement by increasing its spending on public education and

introducing favourable policies such as the Right to Education. Moreover, there are a lot more investments

coming into the vertical from the private sector. Foreign varsities are gearing up to enter the country

and funding opportunities are also improving.

Current IT trends: Total IT-BPO spending in the Education vertical grew by 17.5 per cent to reach

` 20.2 billion in FY2011.

Both the public as well as the private sector educational institutions are investing in IT solutions.

Government contracts are usually under the Build-Own-Operate-Transfer (BOOT) model. Key investments


are being made by the state governments, to provide basic computer Hardware and Software facilities to

rural public schools. Online education is also being promoted and there is a strong push in the direction

of developing, supporting and promoting open source software.

Non-government educational institutions are investing in solutions which take care of the end-to-end

concerns of institutions. Indian schools and colleges are adopting online platforms, to off er specialised

e-Programmes and conduct their entrance exams. Cloud-based solutions, smartcard technologies and

security solutions are other key areas of investment by these institutions.

Challenges: Even though the relevance of IT and its benefi ts are well-understood, schools and colleges

do not have suffi cient funds to invest in expensive IT solutions. Lack of employee training, absence of

a dedicated IT team and last mile connectivity are some of the other challenges faced by the Indian

educational institutions.

Future: Looking ahead, the market is expected to grow to ` 77 billion by FY2020. Indian educational

institutions are expected to invest in technologies such as biometrics, virtual classrooms, real-time

video sharing, etc.

4.7. Retail

Business trends: While the maturity level of the unorganised Retail sector is increasing, the number of

malls and supermarkets is also rising. New format stores (e.g. wedding malls) are proliferating in India.

More and more foreign organisations are entering the market and organisations are also focusing on

targeting customers through the internet (e-Tailing).

Current IT trends: The total IT-BPO spending in the Retail vertical has grown at 17.5 per cent to reach

` 5 billion in FY2011. However, there is a distinct gap in the IT maturity between the unorganised and the

organised Retail sector. In the local mom-and-pop stores, IT maturity is primarily limited to the adoption

of PCs, cash registers and printers. Use of advanced devices such as Point-of-Sale (POS) solutions, credit

card machines and RFID is likely to rise in the future.

The organised Retail sector in India has a mix of legacy applications and new age technologies. The

key areas of focus include supply chain management, BI, integrating multiple outlets, etc. In-house

legacy systems are being replaced with packaged solutions in many large Retail enterprises. Some

Retail organisations are using social media to connect with their target customers for branding

and marketing. Smaller Retail stores are adopting cloud/SaaS-based solutions to optimise on

their investments.

Challenges: The retailers of the unorganised sector are faced with the challenge of low awareness, last

mile connectivity and lack of internal IT expertise. Organised retailers have relatively better understanding

of IT but lack in the area of business process maturity.

Future: Looking ahead, IT-BPO spending in the Retail sector is expected to reach ̀ 20 billion by FY2020.

As Indian retailers mature, technologies such as RFID, self-scanning machines, self-browsing kiosks, etc.

will fi nd traction, especially among the mature and high value stores. There will be adoption of customer/

supplier facing applications, video surveillance, etc.


5. e-Governance: Citizen Enablement

5.1. Introduction

In the recent years, citizen enablement through e-Governance has gained considerable momentum

in India, with the implementation of several high-profi le projects in the Government-to-Citizen (G2C)

and Government-to-Business (G2B) domains. The total IT spending by the government has risen from

` 173.3 billion in FY2010 to ̀ 203.7 billion in FY2011, a growth of 17.5 per cent. The National e-Governance

Plan (NeGP), comprising the Mission Mode Projects as well as several strategic e-Governance initiatives

in states, are being executed in partnership with the IT industry. This is helping redefi ne the government

service delivery to rural/urban citizens and businesses.

The government has not only started focusing on delivering services to the citizens’ doorsteps but is also

endeavouring to introduce transparency in its processes. It is focusing on reducing the administrative

and commercial losses, which costs the country billions of rupees every year. Some of the key projects

being implemented include Automation of PDS, R-APDRP, e-Tendering, e-Procurement, etc.

5.2. Shifting the Focus

From the earlier focus on Hardware-centric procurement, projects are now starting to move towards

defi ning services and outcomes. Detailed Project Reports (DPRs), Request for Proposals (RFPs) and

services agreements/contracts are demonstrating a fundamental shift in the way the government is

procuring IT and IT Services. Hardware and even application development are now being considered

more as building blocks towards an end outcome rather than as key requirements. The relationship

between the government and the service provider is increasingly moving towards a more strategic

outsourcing relationship.

The Government has been one of the biggest spenders on IT in the recent years:

National e-Governance Plan (NeGP): The Government of India embarked on an ambitious initiative, the

NeGP, which aims to provide a host of services to the citizens, businesses and employees in a convenient,

effi cient and transparent manner. Of the nearly 1,100 services targeted under NeGP, over 600 services can

be accessed across the length and breadth of the country today. Nearly 75 per cent of the MMPs are in the

implementation/post-implementation phase while 15 per cent are still in the design and development

phase. The e-Governance infrastructure necessary to implement the MMPs is reaching completion with


the State Datacentres (SDCs) to be operational in 31 states/UTs by December, 2011. The State Wide

Area Network (SWAN) is already operational in 23 states/UTs and will be operational in all states by the

year end. Over 100,000 Common Service Centres (CSCs) have been established as the access points for

government, private and social sector services for over 600,000 villages in the country. This is being

planned to be extended to another 150,000 panchayats in the future.

Project Investment Outlay

NeGP 341

NKN 60

Automation of PDS 54

R-APDRP 52

NME-ICT 46

Project Arrow 45

NPR 35

IAF e-Maintenance Programme 25

CICP (Indian Army) 7

Beyond NeGP: A host of other government initiatives in domains like Education, Civil Supplies, Power,

Logistics, etc. have been undertaken to leverage the power of IT for citizen enablement. Projects such

as the National Knowledge Network (NKN) and National Mission on Education through Information

and Communication Technology (NME-ICT) will ensure teaching and learning for all citizens across the

country by interconnecting institutions, with speeds of the order of multiples of gigabits per second. PDSs

are being automated to track the procurement of various foodgrains, building-up and maintenance of

foodstocks, storage, movement and delivery to the distributing agencies and fi nally distribution to the

intended benefi ciary. The R-APDRP programme has been introduced to improve the fi nancial viability

of state power utilities, reduction of AT&C losses, improve customer satisfaction and enhance reliability

and quality of power supply.

Contribution of Private Players in e-Governance

• Citizen interface services

• Development of portals and websites

• Complex networking/backbone/core infrastructure services

• Data digitisation/migration of legacy systems and back end computerisation

• Development of IT strategy, blueprint and architecture

• Development of collaborative groupware applications

• IT infrastructure management

• Assisting in vertical and horizontal integration of government bodies

• Organisational restructuring and capacity building

• Execution of roadmaps with information systems and technology planning

5.3. Key Trends

• Increasing need of custom application development: OEM applications do not suffi ce the requirement

of most of the government projects due their uniqueness and exclusivity. Hence, there is an increasing


need of custom application development to develop the core application servers for many of the

projects such as UID, R-APDRP, Project Arrow, etc.

• Use of emerging and futuristic technologies like cloud computing, open source, GPS, GIS, RFID

and mobility solutions: The use of latest and futuristic technologies has been one of the key trends

in IT adoption by the government over the years. For instance, the Jammu and Kashmir Government

is using cloud computing services from the state datacentre of the M P Government. Similarly, the

Central Government is contemplating to deploy a national computing platform on cloud, to integrate

all government services and projects. Other examples of technology use include GIS and cadastral

mapping being done in digitising land records across the country, use of RFID in the proposed e-Toll

system project and GPS enablement of public transport and police vehicles in states like Punjab and

M P, biometric authentication systems being installed in government schools and offi ces in states

like Haryana, Punjab, etc.

• Maturing SLAs with the increased adoption of managed services: The government has realised the

need for adopting managed services to focus their eff orts on core governance. So, the SLAs now

being prepared cover a wide scope and the technology partner is expected to share the business, as

well as the technology risks associated with the project. To effi ciently serve the citizens with various

government services, the government is focusing on creating single window systems, for integrated

services delivery in the form of CSCs, kiosks and online portals, often in a managed services model

• Consortium approach to bag government projects: Owing to the large scale and size of the

government projects, IT providers are forming consortiums. The large providers spearhead these

alliances, while the smaller ones contribute with their niche off erings.

• Engagement models: In most cases, the government is currently engaging with the domestic IT

service providers in a PPP model which can be on a BOOT or BOT basis. Since these government

projects are generally large in scale and have a wide scope, typically the proof of concept and pilot for

any implementation is also massive. The payment models being followed are generally on a quarterly

basis with payments made according to the service level reached enlisted in the SLA.

5.4. Looking Ahead

IT spending by the government is expected to grow at 14.4 per cent over the next nine years, primarily

due to the implementation of NeGP and other key projects across the country. Latest technologies such

as GPS and RFID will fi nd use in the security tracking of vehicles and will soon be employed in police

vehicles and public transportation for effi cient management. The toll booths across the country will soon

employ RFID tags for detection and payment of tolls. Future generation technologies such as biometrics

will fi nd extensive use for identifi cation and record keeping, primarily driven by the UID project and will

extensively be employed for attendance and time keeping purposes. The government has already started

deploying smartcard technologies and is expected to grow in the future with the introduction of the India

Transport Card and penetrate into other domains such as Healthcare, Insurance, etc. Mobile reporting

technologies are being extensively employed primarily due to, the implementation of the RTI Act and

will further grow due to the government’s push to provide doorstep services to citizens.


6. Future Outlook

Because things are the way they are, things will not stay the way they are – Bertolt Brecht

6.1. The Way Ahead

IT-BPO will be instrumental in the rise of India in the coming decade. As a result, the domestic IT-BPO

market is expected to grow in parallel with the growth of the economy. Three scenarios can be expected

for the growth of the domestic IT-BPO market:

The low growth scenario: Indian domestic IT-BPO industry reaches a market size of ` 3,791 billion by

FY2020, growing at a CAGR of 12.4 per cent. This implies that the growth in the market has substantially

reduced due to external factors such as a slowdown in the anticipated growth of the economy

(~8.5 per cent).

The medium growth scenario: India continues to grow as anticipated and along with that, the domestic

IT-BPO market also blooms. The market, in this case, will grow nearly three times its size in FY2020 to

reach ` 4,621 billion.

The high-growth scenario: In such a scenario, the domestic IT-BPO market will grow at nearly

18 per cent over the next nine years to reach ` 5,827 billion in FY2020. This phase will be earmarked

by an innovation-led growth where both the demand and supply side ecosystem in the country has

suffi ciently matured.

The medium growth scenario seems to be the most likely scenario for the growth of domestic IT-BPO

industry. In such a scenario, Manufacturing, Energy and Government verticals will drive the adoption of

IT in the country. However, IT adoption by Indian consumers is expected to grow at over 25 per cent till

FY2020 and as a result their contribution to the total domestic IT-BPO market can rise to ~26 per cent

by FY2020.

It is also estimated that the booming domestic IT-BPO industry will create direct employment

opportunities in excess of 1.5 million. In addition, over 4.5 million indirect jobs will also be created by

the industry.

Relevance of domestic IT-BPO market on the global level is likely to increase in the next decade. The

domestic IT-BPO market presently consumes 1.7 per cent of the total global consumption of IT-BPO

products and services. In the future, this is expected to double to 3.6 per cent by FY2020.

Vertical-wise Spending Estimates

` billion FY2011 FY2020 CAGR

Manufacturing 382 1,003 22%

Energy 208 538 11%

Government 204 683 14%

BFSI 147 429 13%

Telecom 96 341 15%

Education 20 77 16%

Healthcare 14 48 15%

Retail 5 20 16%


6.2. India’s IT-Led Transformation

Looking ahead, information technology can signifi cantly infl uence the growth of India. Bright spots are

emerging, showcasing the use case of IT for the benefi t of the three pillars of the Indian society:

1. People

2. Business

3. Governance

6.2.1. People

IT can be leveraged to improve the lives of people. It has the potential to extend the reach of basic

Education and Healthcare services, to the millions of deprived Indian citizens. While information

Technology has started being used to realise the aim of Distance Education and Telemedicine, its wide

scale adoption is expected to take-off in the coming years. Similarly, the government and the banks

in India are promoting the use of technology to enhance fi nancial inclusion in the country. Financial

inclusion has started paying dividends as millions of people are benefi ting from it. However, it is just the

start and a large part of India’s population continues to remain deprived of the basic Banking services.

Besides, IT is also leveraged to provide relevant information to Indian farmers, empower women and

create employment opportunities. IT is transforming the lifestyle of many Indian citizens. Internet has

become the preferred medium of interaction for many Indian youth and facilities such as e-Commerce,

online admissions, etc. are rapidly fi nding acceptance in the country.

6.2.2. Business

Many organisations in India have started leveraging IT for their business needs and going forward, the

trend is expected to fi nd wide-scale acceptance. Indian enterprises are using IT to improve their supply

chain processes, employee and customer management and for a plethora of diff erent business processes.

Information technology can especially be useful to the SMB sector in the country. SMBs are adopting

technology to increase the visibility of their products, enhance operational effi ciencies and mobility. A study

to understand usage patterns of the online medium among the SMBs by Google India shows, that over

57 per cent of the SMBs surveyed use their website as a sales channel and get direct business leads

from their website. Smaller businesses like cake shops and fl orists are connecting with their customers

on Facebook/Twitter and are thriving. There is also a new breed of start-ups emerging in the country,

rapidly growing on the back of a sound IT infrastructure. A number of success stories (such as Flipkart.

com, EKO, etc.) have surfaced in the past few years.

6.2.3. Governance

The government is expected to continue to leverage IT to provide effi cient and transparent services to

its citizens. Many of its key projects, which are still in the inception stage, are expected to take off in the

next few years. Through the use of IT, the government will try to overcome its long standing ineffi ciencies

and delays in critical processes, which rob India of billions of rupees every year. Providing national and

food security to the nation are the top priorities of the government today.


Information technology can benefi t all facets of infrastructure in India. While IT has tremendous use

in extending collaboration and communication facilities to every corner of the country, it can also help

improve the effi ciencies of Indian airports, seaports, traffi c systems and power distribution systems.

India has already started utilising IT for these benefi ts and is looking ahead. With the total investment

outlay on infrastructure for the 12th Five-Year Plan estimated at ` 40,000 billion, the expenditure on IT

is expected to grow.

6.3. Call for Action

The Indian domestic IT-BPO market is viewed as a huge opportunity by various suppliers of IT. However,

it is of great importance that appropriate steps are taken, based on the need of the hour, to help the

industry grow. This can only be achieved if all the stakeholders from the demand side, supply side,

industry bodies and the government come together and play their part in taking the industry to its next

phase of growth.

6.3.1. Demand Side

Based on various inputs from the demand as well as supply side, it has been observed in most cases

and especially in SMBs, that businesses are not ready for the adoption of IT. This is primarily due to the

lack of adoption of industry standard practices. These non-standard processes inhibit the adoption of

packaged solutions presented by the IT suppliers in their ‘as is’ state and require heavy customisations.

For businesses to adopt to IT rapidly, there is a need for business processes re-engineering by the SMBs

to get them ready before adopting IT into their core processes.

Awareness/understanding of IT is very low among the SMB owners. It is highly important that they are

educated on the use case and business benefi ts of IT adoption. The owners/IT heads of these SMBs should

make concentrated attempts to participate in conferences/events organised by the supply side.

Solving the challenges faced by large enterprises calls for diff erent sets of actions to be taken. IT has

been traditionally viewed as a cost centre by large enterprises and return on IT investments are mostly

viewed by the impact it creates on the bottom line and top line. There is a need to shift this mindset

and consider IT investments as strategic with the RoI measurement in terms of business value derived

from the same. Most large enterprises invest in IT with a very short-term vision of 2-3 years and are

not prepared for a dynamic business environment. Hence, it is becoming more important than ever to

prepare an IT roadmap for the organisation and invest in solutions which are agile and fl exible to the

changing needs of the business.

The government has emerged as one of the key IT adopters in India lately. However, there are certain

issues faced by the government which require immediate attention. The fi nancial commitment required

in executing government projects is very high, which results in small indigenous IT organisations to shy

away from applying for the same. Also, the approval process within the system is very long and in many

cases with the fast evolving scenarios, the technology procured gets obsolete by the time the fi nal

implementation is done. Hence, there is a need for the Government to revisit the tendering processes

and the internal administrative processes especially in case of technology procurement.


6.3.2. IT Suppliers

One of the key learnings from the interactions with the demand side organisations is the mismatch of

expectations between the suppliers and the customers. The customers in India especially, the businesses,

share a common notion that the suppliers do not deploy their best resources for serving the domestic

market. It is very important for suppliers to consider the domestic market as a primary market and make

their employees undergo extensive training, both in technology and business before deploying them on

any domestic projects.

Another challenge identifi ed outlines the lack of budgets for IT investments. IT suppliers should

understand the depth of pockets of SMBs and help them prepare a long-term IT roadmap and avoid

presenting too many items on their plates at the same time. This would also help SMBs to plan well in

time for their budgets, for investing in IT.

Indian domestic IT market has been identifi ed as a unique market by the IT suppliers while traditional

models for product development, business development and sales have not fared so well. In some cases,

IT suppliers have started collaborating with the demand side, to develop solutions best suited for the

industry and have tasted initial success. There is a need for more such initiatives to work in collaboration

with other industry stakeholders to tap the large, underpenetrated market.

6.3.3. Ecosystem Development

The government and industry associations have a very critical role, in enhancing the IT adoption levels in

the country. They should introduce favourable policies and plan initiatives to boost the adoption levels

within all customer segments.

Awareness levels on business value of IT are low and this information gap has an adverse impact on

IT penetration levels. The GoI and industry associations should work towards spreading awareness

among Indian customers, especially SMBs, to help them understand the benefi ts of adopting IT in

their business.

Increasing the adoption capacity of user organisations for IT solutions is critical in further adoption.

The development of human capital skills on the demand and supply side, is an essential requirement to

accelerate the adoption of IT. Large scale eff orts are required to redesign curriculum and overhaul the

education system to enable this process.

There is a need to provide access to fi nance for IT adoption, as these investments are considered very

high by Indian SMBs accompanied by uncertainty around Return on Investment (RoI). There is also a need

for the government to push Indian businesses to increase their transactions with the government with

the help of online portals/gateways. This would not only enable easier compliance to the government,

but will also bring the businesses on a digital platform.


International Youth CentreTeen Murti Marg, ChanakyapuriNew Delhi 110 021, India

T 91 11 2301 0199 F 91 11 2301 5452

[email protected]

www.nasscom.in

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India’s Domestic IT-BPO Marketold.nasscom.in/sites/default/files/researchreports/Executive Summary_2.pdf · increasing demand for IT-BPO products and services. The next decade will