Information Technology In India

1. Information Technology In India January 2006

2. Indian IT Industry - sector wise break-up Source: NASSCOM Strategic Review 2006

3. The IT Industry in India • 2005 was a year of steady growth with gradually increasing optimism for the global IT-ITES sector. • The IT–ITES Industry’s contribution to the Indian GDP is estimated to be 4.8 per cent in FY 06. • This includes hardware, peripherals, networking, training, domestic and export market for software & services and ITeS. • Growth is expected to exceed US$ 36 billion in annual revenue in FY 2006, an increase of nearly 28 per cent. • Increased outsourcing and mature global service delivery were the key drivers of growth. Service exports growth are estimated at 32 per cent. • Source : Nasscom 2006

4. The IT Industry in India The year 2005 also witnessed the coming of age of the Indian IT multinationals with the traditionally India-centric, indigenous players beginning to build noticeable global presence – through cross border acquisitions and organic growth in other low cost locations. Complementing the continued growth in IT-ITES exports is a growing domestic market. Strong demand over the past few years has placed India among the fastest growing IT markets in the Asia-Pacific region. While hardware still accounts for a majority share, spending on services and the outsourced model is gaining noticeable traction.

5. Manpower Projections for the Indian IT Industry FY 2007-08 Source: NASSCOM Strategic Review 2005

6. Composition of the IT Market in India Source: NASSCOM : Strategic Review 2006

7. Offshore presence of leading Global IT Services Vendors Source: NASSCOM Strategic Review 2005

8. HARDWARE • Demand for Hardware systems remained strong in FY 2004-05 with servers as well as single-user systems averaging a 30 per cent volume growth. • Inspite of the steady growth in volumes, the performance of the hardware segment of the Indian IT-ITES industry continues to remain in the shadows of the stellar growth in services. • Inspite of continued pricing pressure in key categories, domestic hardware revenues grew by 22-23 per cent in FY 2004-05 and are expected to maintain similar growth rates in the current fiscal (FY 2005-06). • Key vertical markets include Telecom, BPO, BFSI, manufacturing and education. • The Indian PC market in FY 2004-05 was marked by continued price competition between Indian and MNC vendors. • While the desktop segment reported a volume growth of over 25 per cent, value growth was restricted to 6 per cent. • Branded players gained share from the assemblers – with aggregate share of the former rising from 48 per cent in 2003-04 to 58 per cent in FY 2004-05. • Source: NASSCOM Strategic Review 2006

9. HARDWARE…contd • HCL and HP maintained their dominance in the segment followed by IBM/Lenovo, Zenith and PCS. • The notebook segment continues to witness the highest level of growth in the hardware pack, with unit shipments growing by 140 per cent over the previous year. • India is fast emerging as one of the most attractive notebook markets in the Asia-Pacific region. • Widening product portfolio and aggressive pricing helped drive this growth with models aimed at value and price-conscious buyers accounting for over 50 per cent of the notebook sales. • The segment continues to be dominated by MNCs with HP, IBM,Dell, Acer and Toshiba occupying the top five slots in FY 2005-06.

10. Domestic IT Market Software & Services • Nasscom estimates that the domestic market will grow by nearly 22 % in FY 2006, to reach US$ 7.4 billion. • In ITES, as global delivery matures, newer locations are emerging; however India remains the undisputed leader and maintains its lead amongst offshore destinations. • Strong demand over the past few years has placed India amongst the fastest growing IT markets in the Asia Pacific region. Source: NASSCOM Strategic Review 2006

11. Software and Services exports • India's IT –ITES sector continues to chart double digit growth and is expected to exceed US$ 36 billion in annual revenue in FY 2006, an increase of nearly 28% in this current fiscal. • Out of this software and services exports are estimated to grow by 32 per cent to reach USD 23.4 billion in FY 2006. • Indian software majors are gradually moving up the value chain in terms of capabilities and breadth of solutions offered. • Source: NASSCOM : Strategic Review 2006

12. India: Internet Users and Subscribers: 1998-2005

13. Major Incentives Available to the Software Industry in India • Income tax exemption allowed under Section 80 HHE of Income Tax Act. • Even sub-contractors or supporting developers gets benefit under Section 80 HHE of Income Tax Act. • Zero customs duty on import of IT software • Export Promotion Capital Goods (EPCG) schemes at Ministry of Commerce allow zero duty on imports of Capital goods with threshold limit of only Rs. 10 lakh. • Special Import Licence (SIL) issued against exports; SIL can be sold in the open market at a premium. • Quality certified companies get additional SIL benefits. • Software companies are allowed ADR/ GDR linked dollar stock options.

14. PRESS SPENDS – COMPUTER HARDWARE SOURCE: TAM ADEX AUGUST 2004 - JULY 2005

15. The India Advantage • India ranks as the world’s leading destination for offshore outsourcing of IT and ITES-BPO. The total value of IT and ITES-BPO services in India in 2006 is estimated to exceed USD 36 billion – over a third higher than Canada the next preferred destination. •   India’s sustained leadership position through 2008 is driven by strong fundamentals comprising a large pool of qualified, English speaking manpower – that is increasing each year; a keen emphasis on delivering quality – at a significant cost advantage. • Quality is the hallmark of Indian software industry. ISO 9000 certification and SEI Level 5 and 4 maturity level are becoming common standards. • Complementing the fundamental factors is the exhibited emphasis on information security, the improving quality of telecommunication infrastructure and developing policies and an effective regulatory regime that favours the growth of Indian IT- ITES. • The total number of IT and ITES-BPO professionals employed in India has grown from 284,000 in 1999-2000 to over 1 million in 2004-05, growing by over 150,000 in the last year alone. Source: NASSCOM Strategic Review 2005

16. The India Advantage • The Indian Government of India continues to support the interests of the industry by being an active proponent of global free trade. Government has been recognised a key driver of domestic IT demand in India and even around the world. • Recent increase in uptake in adoption of IT systems that would allow organisations to leapfrog to the state-of-the-art practices and technologies unlike other countries where organisations are going through restructuring phases. • Brand equity enjoyed by Indian software industry in the global market. • Internet being recognised as an effective and efficient medium to connect various communities and parts of India

17. E-Commerce in India • E-commerce has matured into a Rs 1,180 crore industry during 2004-05 - The industry is expected to grow 300 % over the next two years and will touch 2,300 crore by 2006-07 • Total Internet population estimated at 25 million. • 13.75 are regular net shoppers. • 13% of them use their credit cards. • 62% have shopped for more than an year. • Within the last 3 months 37% have tested the waters. • 79% prefer cash on delivery option. • Books are the most sought after product. • Mumbai, Delhi and Kolkata lead net shopping Source: The Internet and Online Association of India. The Times of India June 29, 2005

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