The evolution of the IT industry in India and opportunities for Africa

Sriram Bharatam

CEO & Founder, iridiumInteractive Limited

September 2012

Indian IT-BPO industry revenue crossesUSD 100 billion

INDIAN IT-BPO INDUSTRY

Note: 1) Exports (IT services, software products, OSPD, ER&D, BPO, hardware); Domestic (Hardware, IT services (incl. ER&D), S/W products, BPO) E: EstimateSource: World Bank, NASSCOM

• Total revenue: ~USD 101 billion

• Relative to India’s GDP: ~7.5 per cent

• Relative to merchandise exports: ~25%

• Value add: 60-70 per cent

• Exports CAGR: 17 per cent for last 5 years

• Domestic CAGR in USD: ~10 per cent – reflects impact of variable rupee

4147 50

59

69

22 22 2429 32

6.4%6.7% 6.5%

7.1%7.5%

FY2008 FY2009 FY2010 FY2011 FY2012E

Exports Domestic Percentage of GDP

USD billionIT-BPO revenue aggregate1

The industry to provide employment to about 12mn people in FY2012

INDIAN IT-BPO INDUSTRY

*Excluding HardwareSource: NASSCOM

1,000 1,153 1,295

774826

876

525562

601

FY2010 FY2011 FY2012E

IT Services exports BPO exportsIT-BPO Domestic

2,300

2,770

2,540

Direct Employment (’000)

• IT-BPO industry expected to employ around 2.8 million

professionals (growth rate of 9 per cent) in FY 2012

• IT service exports remains the largest employer, with around

47 per cent share of total direct employment

FY2012 Estimates (Mn Nos)

Indirect

Direct Total Emp

~10.2mn

~2.8

~11.7

~8.9

Indian IT-BPO exports continues on the growth path in FY2012

IT-BPO Export revenues*(USD billion)

FY2011 FY2012E

33.539.8

14.2

15.9

11.3

13.0

IT Services BPO S/W prod and Engg

59

68.7

16.3%

Source: NASSCOM * Excluding Hardware

• India’s share in global sourcing - 58 per cent in 2011, up from 55 per cent in 2010

• IT services exhibiting fastest growth at 19 per cent, BPO growing by 12.2 per cent, and Software Products & ER&D by 15 per cent

•Transformation, new business models, driving organisation wide efficiencies

•Services around disruptive technologies- cloud, mobility, analytics, social media

•Flexible product portfolios, verticalised solutions

INDIAN IT-BPO INDUSTRY

Increasing focus on diversifying into newgeographies and verticals

INDIAN IT-BPO INDUSTRY

Source: NASSCOM

Industry Vertical break-up, FY2012

5

19.5%

17%

21%

Industry Geographic break-up, FY2012

Vertical break-up, Q2FY2012 (top 10 companies)

Geographic break-up, Q2FY2012 (top 10 companies)

Industry Growth in emerging

geographies and verticals ~1.4X

more than mature

segments

Revenue breakup of top

10 Indian companies

demonstrates this

Impact of the industry on the Indian economy

Learnings for Africa

Lasting, Sustainable and Phenomenal contribution over the last decade

Contributing to India’s economy

Empowering the diverse human assets

Putting India on the Global map

Socially responsible and inclusive

Driving Balanced Regional Development

Creating Innovation Platform

Multi-fold impact on the

Indian Economy

Catalysing India’s transformation to a services-based economy

0%

10%

20%

30%

40%

50%

FY02 FY05 FY09

Trade, Hotels,Transport & CommIT-BPOCommunity,Social & Personal ServicesFinancing, Insurance, Real Estate & Business Services

Decline

Decline

Decline

Rise 10.0%

• Contributes to 10% of India’s service sector revenues

• Unique “service led” export oriented model

• Contributing 9% of India’s incremental GDP

• Per capita GDP contribution of IT-BPO employees ~ 80 times that of agriculture

Indian IT-BPO Industry’s contribution to GDPIndian IT-BPO Industry’s contribution to GDP

• By 2020, expected to account for

–~10% of India's GDP

–14% of total services sector revenues

FY98 FY09

1.2%

6.0%

8X increase in direct employment;3X increase in the share of organized private sector

284

2,200

FY00 FY09

Dire

ct em

ploye

es ('

000)

Direct employment of 2.7 million; Indirect employment ~8 million

45% of total incremental urban employment in the last decade

~8x

By 2020 - Direct employment of 10 million; Indirect employment of 20 million

Employment opportunities for diverse sections of the society

Livelihood forEconomically backward

Empowering the youth

Bridging the gender divide

Employment beyondUrban areas

Employing the Differently abled

~5% of the IT-BPO workforce from economically backward sections

~5% of the IT-BPO workforce from economically backward sections

~74% of employees are less than 30 years old;

~35% are less than 25 years of age

~74% of employees are less than 30 years old;

~35% are less than 25 years of age

~31% women employees in FY09; account for 45% of new intake

~26% of the female employees are chief wage earners

~20% of the female employees are at managerial level or above

~31% women employees in FY09; account for 45% of new intake

~26% of the female employees are chief wage earners

~20% of the female employees are at managerial level or above

~58% of the IT-BPO workforce is from tier 2/3 cities

~ 56% employees are chief bread earners

~58% of the IT-BPO workforce is from tier 2/3 cities

~ 56% employees are chief bread earners

~60% of companies provide employment to differently abled people

~60% of companies provide employment to differently abled people

•Changing aspirations of India’s youth

•Created high paying jobs

•Setting new standards of work environment

•Emerging as a “Skill Factory”

By 2020 5 mn women employees

4 mn direct employees from tier 2/3 locations

*NASSCOM Evalueserve survey findings, 7500 participants pan India

By 2020, this industry can become a strategic growth engine for India

IT/BPO industry size

US$ billion

64

360-375

2020 potential1

2008

6x

*Innovation driven growth scenario

Areas Contribution by 2020Economy ~10% of annual GDP

18-20% of annual exports

Employment 30 million employment opportunities (direct and indirect)

Job creation in rural and non-metro areas - 20-fold increase in the number of employees operating from tier 2/3 locations

Increased diversity (women are 50% of the total workforce)

Significant global career opportunities due to location-independent models

Balanced Regional Growth

8-10 satellite townships around Tier-I cities 10-15 Tier-II cities with upgraded basic and

business infrastructure

Reduced fiscal burden

ICT can provide solutions at a fraction of the cost of traditional solutions

Globally reputed innovative solutions

Innovation driving additional GDP contribution of ~2%

How can we work for a win-win?

India and Africa

India and Africa

13

India and Africa• Historically shared friendly ties

Mutual respect• Healthy trade, but largely dominated by

commodities and natural resources

14

Partnership with African

countries

India as a CATALYST of development

Closer economic and

commercial relations with India can help

African countries to realise their

developmental aspirations in Information Technology

Africa – The Next Billion

• 50+ Countries with a population of 1 billion+

• Fastest growing ICT market worldwide – Growth 50% YOY largely dominated by growth in mobile phones

• In last 5 years cellular market grew 5000% (400mn+ Telecom Subscribers); internet grew 630%

• According IDC, Africa's IT market is expected to be $22.53 billion in 2010

• According to World Bank estimates, Africa needs over $90 billion per year to build the infrastructure it needs to support growth and meet stated development goals.

• High tech business on the agenda of many African governments which is seen as a catalyst for development

Source: Avasant

Current TrendsIn

creasi

ng

• Corruption• Violence• Political instability

• Democracy• Economic

Liberalization• Positive

Leadership

Improved Optimism

Robust Economic Growth

• Favorable investment climate

• Rising Stock Markets• Stronger Currencies• Falling Interest Rates

Dec

reas

ing

Positive Govt. Actions

• Increased spending targeted towards poverty alleviation and social growth

• WB, EU, AfDB providing $70 bn + of aid

• Targeted action focusing governance and education

• ICT seen as a key driver to achieve Millennium Development Goals (2015)

Huge needs in areas of e-Govt, Education, Security,

Healthcare and across private sectors are driving demand for ICT in Africa

Source: Avasant

Advantage for Indian industry

Right Time

• Africa has huge unmet ICT demand. Governments and business that were apprehensive till some time back have realized the potential of ICT and are willing to invest

Lesser Competition

• Lack of service provider maturity has prevented many from outsourcing. Availability of competent providers can unlock the potential,

• Current deficit of credible Tier II and Tier III players

Brand India• Brand India is no.1 in ICT• High respect for Indian companies and professionals.

Source: Avasant

For African region

The Win-Win Opportunity

18

IndiaFor African region

• Access to large pool of specialist manpower

• Use Innovative solutions to solve problems

• India has many challenges that are different from Western markets, and Indian companies have devised solutions that address these challenges

• SMEs have an opportunity to establish themselves in a competitive market

For India

• New opportunity across IT-Services, BPO and Engineering Services.

• Access to a relatively untapped t IT-Services market.

• Opportunity to leverage the strong cultural, trade and historical affinity with India

• De-risk from over dependence on the English speaking markets

In conclusion

19

Apr 11, 2023

New models of partnership will have to be created

Verticals in focus for developing the African region

E-Governance Education Telecom

Banking, financial services,

insurance

Healthcare industry

Demand for IT/BPO services is strong driven by evolving business models; reducing product /

service life cycles

Thank you