IT industry & Institutional theory

ANALYSIS OF THE STRATEGY – STRUCTURE – PERFORMANCE OF THE INDIAN IT INDUSTRY USING THE INSTITUTIONAL THEORY

PRESENTED BY GROUP 2

ANKITA BAHETI RAVI RANJAN KISHORE

SALANA LAVANYA SUDHEER TATIKONDA

IT industry in IndiaBefore 1980s

Software exports started in 1974Software Export SchemeHigh import dutyPresence of few players

1980-90New Computer PolicyLower import dutiesGrowth in exports

1990-2000Offshore provisioning of servicesMany playersSetting up of Software Technology Parks of India

Post 2000High demand for IT professionalsStrong global delivery modelLarge sized contractsIssues of Y2K, dot.com

The contribution of the IT sector to Indian GDP rose to approximately 8 percent in FY13 compared to 1.2 percent in FY98

Out of the total market 70 percent of the revenue in FY14 was obtained from exports

US has been the biggest importer of Indian IT exports, accounting for 60 percent of Indian IT exports

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201413.4 18.2 24.1 31.3 40.9 47.5 50 59 69 76 868.3 10.2 13.2 16.5 23.1 21.9 10

29 32 32 32

Market Size of IT Industry In India

(in USD Bn)Exports Domestic

Top players in IndiaCompany Name

Market Share ( In %)

Employees Global Spread

TCS 10.7 2.5 Lakhs 47 countriesWipro 7.2 1.3 lakhs 54 CountriesCognizant 6.8 1.8 Lakhs 29 countriesInfosys 6.3 1.4 Lakhs 68 countriesHCL Tech 4.2 0.85 lakhs 18 Countries

The top five firms contribute around 35 percent of the total revenue, indicating the market is fairly competitive

The number of global delivery centers of IT firms in India reached 580, spreading across75 countries as of 2012.

Evolution of Top players

TCS• It was founded in 1968• Its early contracts were

punching card service to its sister company TISCO.

• Its first project was with Central Bank of India,

• In 1979, it delivered an electronic depository and trading system to a Swiss Company

• 1981,it established of Tata Research Development and Design Center

• 2004, it went into public• Its headquarters are in

Mumbai, India

Infosys• It was founded in 1981• Its first Client was Data

Basics New York• 1987, It established its

first International Office in Boston

• In 2004, its-revenues reached $1 Bn

• 1993, it went into public• Its headquarters are in

Banglore, India

Wipro Technologies• The company was

incorporated in 1945 as Western India Products Limited

• It was started as small consumer products business

• In 1980, Wipro employed IT Services

• Wipro BPO was founded in 2002

• 68% of its revenue are from IT sector

• It is Headquartered in Banglore, India

HCL• It was Founded in 1976• It was one of India’s

original IT garage startups

• HCL Enterprise comprises of two companies- HCL Technologies and HCL Infosystems

• HCL is the fourth largest IT company in India and is ranked 48 in the global list of IT service providers

• It is headquartered in Noida, India

The Institutional Theory

HABITS

ROUTINES

INSTITUTIONS Examines the structure of organizations through the

lens of “rationalized myths”, accepted ceremoniously in order for the organization to gain or maintain legitimacy in the institutional environment.

Makes the assumption of Bounded Rationality. Rational decisions of the actors are bounded by the “reality” of the normative and/or regulative environment.

Organizations will take on structures that are isomorphic with the institutional environment in which the organization exists and that doing so confers legitimacy, resources and a survival advantage to these organizations.

.Adoption of structural characteristics which may not be efficient

.External measures dictate value of these structures

.Conformation reduces Uncertainty and ensures Survival

Coercive

Normative

Mimetic

Isomorphism

Legitimacy

Survival

SOCIAL PRESSURES

Frequency based

Trait based

Outcome based

ECONOMIC VIEWPOINT

UNCERTAINTY

BENCHMARKING

Key Gaps and Criticisms There is little evidence supporting the constraints of legitimacy - it is the

middle-status players who feel the need to act legitimately. High-status players have the reputational capital to deviate from the norm, and low-status players have to do whatever it takes to survive, whether legitimate or not.

Overlooking the problem of appropriately measuring institutions - institutional research should only value instances of significant, profound, field-level change, and not merely incremental changes.

Institutional theory has tended to focus on the effects of institutionalization rather than on the process through which organizations become institutionalized. This has resulted in a view of organizations merely as “black boxes” with nothing of value inside.

Top 10 Trends in IT during 2007-2013

Distributed co-creation moves into the mainstream

Making the network the organization

Collaboration at scale

The growing ‘Internet of Things

Experimentation and big data

Wiring for a sustainable world

Imagining anything as a service

The age of the multisided business model

Innovating from the bottom of the pyramid

Producing public good on the grid

Company response to trendTCS Infosys Wipro HCL

Distributed co-creation moves into the mainstream

Co-creation Model with ClientsTCS Co-Innovation Network (COINTM)

Eco-system partnerships

Making the network the organization

GNDMOffshore-onsite Global Delivery Model

Global Delivery Model

Global Delivery Model

Collaboration at scale

iON – a fully integrated IT-as-a-Service (ITaaS) modelTCS’ tool brand MasterCraft‘eTransform’: an analytics-led toolset

cloud based service delivery platform

Driving Certainty & Efficiency through hyper automation

Cross-Functional Services like ITIL (Information Technology Infrastructure Library) and MTaaS™ (Management Tools-as-a-Service)

Company response to trend

TCS Infosys Wipro HCL


production automation and high performance computing

Connected vehicle solutions.

HCLT ERS offers end-to-end engineering services and solutions in hardware, embedded, mechanical and software product engineering


mobile applications and consumer analytics on top of core applications

Edge suite of products and platforms. ‘Walletedge’

Mobility Solutions analytics and big data

Enterprise Mobility Services. iEM (mobile energy mgmt. app)


environmentally profitable solutions (intelligent buildings & green product lifecycle management programs

Company response to trend

TCS Infosys Wipro HCL

Imagining anything as a service

significantly invested in digital technologies

outsourcing shifted to cloud

Integrated Cloud Services

Cloud Computing Services

The age of the multisided business model

technology solutions in digital technologies like mobile and social media.

Innovating from the bottom of the pyramid

GNDM Entering into emerging markets

Expansion to emerging markets

Producing public good on the grid

‘Clin e2e’ and ‘Med Mantra’

DCAS contract for state of art health and human service solution

2013-14 and the Future Outlook

Emergence of Tier II and Tier III Cities as Centres of IT Excellence – 43 new cities with an expected 28% reduction in cost

BFSI Telecom Manufacturing0

200

400

600

Growth Trend of Traditional Industries – expected to

average 15%

FY10 FY13E FY15F

Education Healthcare Retail01020304050

Growth Trend of Emerging Verticals

FY10 FY13E Series 3

0 100 200 300 400 500 600 700 8000%10%20%30%40%50%

SMAC future growth

Social Media

Big Data

Cloud

Enterprise Mobility

Country IT Spend India’s Penetration

Key Segments

Canada USD63 billion ~1.5 per cent Cyber Security, Healthcare ITEurope USD230

billion<1.5 per cent It Sourcing, BPM, CAD

Japan USD235 billion

<1 percent CRM, ERP, SI

Spain USD26 billion <1.5 per cent IT Sourcing, SIBrazil USD47 billion ~2 per cent Artificial Intelligence, R&DChina USD105

billion<1 per cent Software Outsourcing , R&D

New Geographical Markets – BRIC provides USD 380-420bn opportunity by 2020

Company Response to TrendTCS Infosys Wipr

o HCL


production automation and high performance computing

Connected vehicle solutions.

HCLT ERS offers end-to-end engineering services and solutions in hardware, embedded, mechanical and software product engineering


mobile applications and consumer analytics on top of core applications

Edge suite of products and platforms. ‘Walletedge’

Mobility Solutions analytics and big data

Enterprise Mobility Services. iEM (mobile energy mgmt. app)


environmentally profitable solutions (intelligent buildings & green product lifecycle management programs

Conclusion IT industry is very volatile due to rapid technology changes. Also it is not shielded by

geographic boundaries as around 80% revenue comes from abroad. Revenues of IT industry is mostly dominated by top 5-6 firms commanding around

45% of revenue. Hence we have chosen top 4 firms for our analysis The analysis is carried out based on the response of the companies to external

stimulus of changing trend in the IT industry The analysis suggests that though the responses are not exactly replicating, the

deviations are minute proving the institutional theory. For e.g. the potential of co-creation is realised by TCS and Wipro whereas Infosys was the

lead taker in “The internet of things”

Thank You