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Wednesday, September 10, 2003

NASSCOM on IT Services

One interesting site as far as IT services goes is the National Association of Software and Service Companies (NASSCOM). In particular NASSCOM produces a number of very interesting publications, inter alia their annual review of the Indian ICT sector:

The Indian IT sector has proved to be the country’s fastest growing segment, even in troubled times—in the globally challenging economic environment of 2001-2003. The software and services industry, a major component of India’s IT sector, showed significant momentum, higher than that of other industries in the country. India continued to be a compelling investment destination, as leading companies either set up shop here or beefed up their existing infrastructure. Outsourcing of IT requirements by leading global companies to Indian majors also picked up pace during 2002-03, in line with worldwide trends.

Software and services exports continued to remain on top of the IT industry’s revenue table. The export-driven software sector saw major long term projects come to Indian ICT leaders and Indian companies bagging a larger and larger share of the global outsourced business. The software export sector logged in a revenue of Rs. 47,500 crore during 2002-03, a jump of around 30 percent, as compared to the previous year.

In terms of software services delivery, offshore project revenues grew by a blazing 49 percent as compared to on-site revenues, growth of which was pegged as 12 percent during 2002-03. In terms of geographies, Indian ICT companies began tapping regions outside the US market, even though the country remained the largest user of software solutions from India. The revenue contributions by the US market continued to rise on account of the large number of ITES/BPO projects getting outsourced to India.

Some of the key service lines for Indian players continued to be:

Custom Application development and maintenance
Applications outsourcing
IT enabled services
R&D services
Indian companies also made modest headway in segments such as packaged software support and installation, product development and design services and embedded software solutions.

NASSCOM estimates indicate that during 2002-03, the IT-enabled services segment grew by a phenomenal 65 percent. Revenues from this sector rose from around Rs. 71 billion in 2001-02 to approximately Rs. 117 billion in 2002-03. Compared to other competing ITES nations such as Ireland, the Philippines and China, India drew the bulk of the global ITES/BPO business on account of its unmatched price/performance/quality proposition.

The ITES/BPO industry took root in most of India’s leading cities. Some of the leading hubs of these services were NCR, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Kochi, Ahmedabad and Pune. Some of the key players in this market (including captive and third party ITES/BPO vendors) were AMX, Convergys India Services, GE Capital Standard Chartered, Dell, Healthscribe India, EXL Services, Daksh eServices, Wipro Spectramind, 24/7 Customer, among others.

The Indian ITES/BPO engine continued to surge forward on account of the following reasons:

India’s vast pool of English speaking and skilled manpower, which rates high on qualification, capabilities, quality of work and work ethics
India’s telecom and physical infrastructure, which is approaching parity with other developed countries
The strong quality orientation of Indian ITES players
The strong cost/value proposition associated with outsourcing non-core processes to India. Customers are stated to realize cost savings of the order of 40-60 percent by moving some processes to Indian shores
India’s unique geographical location enables 24x7 service offering and reduction in turn around time due to time zone difference.
The presence of a regulatory environment that’s conducive to the growth of the ITES market
Some of the key ITES services lines include:

Customer care
Web sales/marketing
Billing services
Database marketing
Transaction document management
Benefits administration
Tax processing
HR hiring/administration
Biotech research

The domestic IT market touched revenues of Rs. 317 billion during 2002-03, of which software and services accounted for around Rs. 137 billion. The ICT market during 2001-02 has been worth Rs 291 billion. The Indian software and services sector continued to lag behind the export segment on account of issues such as higher piracy levels, pressure on software prices and lower level of IT spending for domestic companies. The growth in the domestic software market fell to around 13 percent during 2002-03 as compared to 2001-02 when it was pegged at around 18 percent. A reduction in IT spend by key spending segments such as banking and manufacturing is stated to be responsible for this trend.

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