Kapil Dev Singh Country Manager IDC India Limited kdsinghidcindia.com

1
Kapil Dev SinghCountry ManagerIDC (India)
Limitedkdsingh_at_idcindia.com
India Domestic IT Services BPO/ ITES
MarketFebruary 16, 2006
2
Indian IT Industry- Formation to Consolidation
Formation

• 50s 60s First computer comes to India, first
  computer designed in India, installed base of
  70
  
• 70s DoE comes into existence, IBM Exits, CMC
  formed installed base of 450
  
• 80s Apple Mac was launched
• Computer policy announced in 1984
• Software policy announced, Nasscom Formed
• 70,000 PCs installed
• Early 90s STPI formed, IBM re-enters, HCL-HP
  formed Other Indian- Foreign JVs formed
  
• Mid 90s VSNL launched its gateway, Distributors
  set shops
  
• Late 90s HP, Acer, IBM broke ties with Indian
  partners
  
• Satyam became the first ISP, Karnataka was the
  first government to make IT policy, major tax
  incentives for the exports segment, private ISPs
  got a gateway, Ministry of IT formed, 108
  recommendations by IT Task Force
• Early 00 India earn 2.5 B on Y2K, Dotcom boom
  and bust, BPO boom, telecom reforms, US
  Slowdown
  
• Mid 00 Domestic Opportunities

Making
Growth
Consolidation
3
Study Objectives

• NASSCOM
• To help develop and grow the Indian domestic IT
  Services BPO/ IT Enabled Services market

IDC To study the Indian domestic market for IT Se
rvices BPO/ IT Enabled Services from both the
supply side as well as the demand side
perspective so as to be able to provide
actionable insights for its growth and development
4
Methodology

• IDCs HY IT Services Tracker was used as a
  baseline.
  
• The study adopted a two-pronged approach, i.e.
  supply-side and demand-side analysis, to identify
  the relevant issues and action points.
  
• Vendors (supply-side) study provided the
  understanding of current market forces and
  initiatives from different vendors.
  
• Users (Demand-side study) provided insights on
  the important customer needs, the gaps, and
  drivers to hire third party service providers and
  what would further boost this demand.

5
India Domestic IT IndustryIndia IT Services
BPO/ ITES MarketOutsourcing Engagement
6
India Domestic IT market Environmental Influence
Source IDC (India)
7
Domestic IT Market 2004 Beyond

• Growth led by IT Services (26)
• Hardware growth primarily from MFDs (48),
  Datacom (32) PCs (25)
  
• Software performance bettered with 19 growth
• Rs. 38 K crores in 2004 to 85 K crores in 2009

Rs. Crore
CAGR
18
19
18
6
17
Source IDC (India)
CAGR for the period 2004-09
8
AP Remains a Region of Immense Potential- India
Remains the Fastest
Size of bubble 2004 IT Spending
India
20.0
China
2005 forecast growth
15.0
Vietnam
Indonesia
Philippines
Malaysia
10.0
Thailand
Korea
Taiwan
New Zealand
5.0
Australia
Hong Kong
Singapore
Japan
0.0
0.0
1.0
2.0
3.0
4.0
5.0
IT as proportion of GDP
Source IDC, WW Black Book V4, 2004
9
The Growth Scale (04-09)

Security SW (33)
Digicams (51)
BI Software (34)
Other Peripherals (37)
30
System Mgmt SW (25)
Ent. Outsourcing (29)
Content Apps (26)
SHDs (27)
NW Mgmt SW (21)
Software Support (24)
Info and data mgmt SW (25)
Notebooks (25)
NW Consulting and Integration (22)
Appln Lifecycle mgmt SW (25)
Storage SW (22)
Application dev. Software (20)
LAN Equipment (24)
SISP Svcs (24)
Other Datacom Equip (21)
Applications Mgmt (21)
Networking SW (20)
20
Desktops (19)
Systems Software (17)
Systems Integration (19)
Avg 17
Appln. Deployment SW ((15)
IT Consulting (17)
Inkjet MFDs (17)
CRM Apps (14)
Custom Apps Dev (15)
Laser MFDs (15)
ERM Apps (14)
ASP (14), IT Edn Trg. (14)
Non X-86 Servers (12)
HW Support (14)
SCM Apps (12)
10
Collaborative Apps (9)
LAN Cabling (9)
Disk Storage (9)
Engg. Apps (7)
WAN Equipment (5)
Consumer SW (10)
X 86 Servers (4)
Tape Storage (2),
Laser Printers (4)
0
Workstations (-9),
Inkjet Pr. (-5),
DMPs (-15)
Source IDC (India)
10
The Structural Shifts

• Old
• Linear and separate
• Majorly distribution
• PCs, Servers, Inkjet, ERP
• Client-Server, Internet
• Horizontal, technology sales

• New
• Complex merging
• Integrated/ New channels
• Infra OS services, Notebooks
• Wireless
• Vertical business sales

• Old
• Ecosystem
• Channel
• Growth Areas
• Technology
• Biz Orientation

Source IDC (India)
11
India Domestic IT IndustryIndia IT Services
BPO/ ITES MarketOutsourcing Engagement
12
IT Services Foundation Markets Mapping of Major
Engagements and Foundations
13
Market Size by Engagement Types (Rs. M)
14
Total Market Size Vs.Potential (Rs. M)
15
Why Using in-house IT teams ()?
16
India IT services revenue by vertical industry
segments 2004 ()
Total Market INR 103.6 Bn
17
Customers Want IT that Keeps Up with Dynamic
Enterprises
Source IDC
18
Solutions Approach Role of IT Services
Source IDC, 2005

• The market is moving towards solutions, with the
  services vendor front-ending the IT deals in many
  cases, and providing the customer a total IT
  solution combining hardware, software and
  services

19
2002 vs. 2004 Change in Importance
In choosing a Services provider, what are the
most important attributes?
Source IDC, 2005, Positioned to Win Multiclient
Study
n301
20
The Market Matrix
 
High
 
 
Integration Solutions
IS Outsourcing
End to End Service Providers
Average Deal Size
 
Regional Integrators
Local Support Providers
Integration Plain
Support
Low
0
100
One Time Services Share
21
Growth Paths Domestic IT Services

• Source IDC 2005

22
Supplier- User Engagement
23
Key Insights

• Verticalized solutions are becoming increasingly
  important, and vendors need to develop skills and
  offerings for verticals. A solutions approach and
  a vertical focus will be the basis of long-term
  success in the market.
• Larger service providers need to evolve strong
  end-to-end service capabilities, as the IT
  services market moves to high-value annuity
  engagements, such as outsourcing.
• The IT Services vendors need to develop
  communicate their value proposition in a better
  manner to the user community, and demonstrate the
  financial and technological benefits, as well as
  their capabilities in engaging with IT services
  vendors.

24
India Domestic BPO/ITES Market Forecast
120894
66084
38019
23213

• The major growth will continue to come from
  customer care in the next 3 years. The large
  deals that are happening today and those that are
  on the anvil are predominantly on the customer
  care space. Another major growth area is HR
  processing

25
BPO Services Value Chain Drivers Developed
Markets
26
BPO Services Value Chain Drivers INDIA
India domestic market will be driven by the need
to access skills offer quality service-
especially in areas such as customer support
Drivers - Core Focus Special SkillsScalabilit
y
Direct revenue growth
Drivers Core Focus Special SkillsScalabilit
y
Drivers Core Focus Special Skills
27
Key Insights

• Domestic BPO Sector is poised for a phenomenal
  growth, albeit form a small base.
  
•  
• The domestic BPO sector will be driven by the
  quest of the users for specialized skills rather
  than cost.
  
• Customer Support Voice based services will
  drive the domestic BPO market in the next 2-3
  years. Back-office operations will slowly emerge
  but will lag behind.
•  
• While Telecom Banking has been the pioneering
  verticals there is huge potential in sector
  such as Insurance, Government, Organised retail
  etc.
•  

28
India Domestic IT IndustryIndia IT Services
BPO/ ITES MarketOutsourcing Engagement
29
Outsourcing Engagement
Currently, larger part of revenue comes from
Network and Desktop Outsourcing
Outsourcing Market in India
20 CAGR
Outsourcing Services categories
Source IDC India Market Tracker
30
Outsourcing Engagement
Reasons for Outsourcing
Possible Barriers
Employee concern about takebacks
Sensitivity to diminishing quality given loss of
control
Sensitivity to sharing information and exposing
vulnerabilities
Concern about new potential vendors
Resentment of take over byoutsiders
Source IDC India End User Survey, 2004
Sample Size - 89
Decision Points related to Outsourcing
Scope Program Design Organisation Design Techno
logy Design
Implementation Approach
Knowledge Transfer Service Performance Manageme
nt Change Management Resourcing Transition Mana
gement
31
Thank You