Have been thinking about the Indian IT Services industry in general, So i thought i will put down a post listing some facts of the industry and and trends that are impacting the industry.

First is a set of facts of Indian IT Services industry specific and a view of the Global IT Services industry.

Some interesting nuggets to kick off the thinking, head to google and search for IT Services, the top 3 resuls are first TCS, second Infosys and third IBM. Interesting eh! Also just to highlight the potential of the industry "The total addressable market for global offshoring is approximately $300 billion, of which $110 billion will be offshored by 2010, according to the NASSCOM-McKinsey report." The industry employed about 1 million staff and provided indirect employment to 2.5 million people in the fiscal year to March 31 2005, according to data released by NASSCOM. Gartner also estimates that India currently holds 80 to 90% of the offshoring market.Dean Davison, VP of strategic outsourcing for Nautilus Advisors excepts India's market share to shirnk by 20% by 2010.

Currently in the Indian IT Services Industry the tier 1 players have the lions share of the business, the tier 2 companies and the offshore centers come in second and finally the ever increasing list to the already existing set of emerging industries who have about 15% of the market share, What needs to be seen is how are things going to pan out? Consolidation seems imminent in the industry. Consolidation/Acquisitions are likely to be done for two purpose's, first people /talent/raw material and two moving up the value chain or completing the offering. Ofcourse we are probably going to see a few acquistions particualrly outside the country by the emerging and mid sized players for purposes of customer access/acquisition.

Notes:
Tier 1 Player - 45 % - 4 (Revenues greater than USD 1 billion)
Tier 2 Player - 25% - 10 (Revenues USD 100 million-USD 1 billion)
Offshore Ops - 15% - 30 (Revenues USD 10 million-USD 500 million)
Emerging - 15% - >3000 (Revenues less than USD 100 million (IT) Revenues less than)
Other Facts:

• The total direct employment in the Indian IT-ITES sector is estimated to have grown by over a million, from 284,000 in FY 1999-2000 to a projected 1,287,000 in the current fiscal (2005-06), helped create an additional 3 million job opportunities through indirect and induced employment.
• The leading publicly- listed players have reported a top line year-on-year growth of nearly 34 per cent, over the first half of the current fiscal.
• Indian IT services exports (excluding revenues earned from the export of ITES-BPO, engineering and R&D services, software product development and hardware) are estimated to have grown from USD 7.3 billion in FY 2003-04 to USD 10 billion in FY 2004-05, and are projected to reach USD 13.2 billion by the end of the current fiscal (FY 2005-06).
• Revenues earned from project-based services accounted for 56 per cent of Indian IT services exports in FY 2004-05. While Indian firms are gradually increasing their share of revenues earned from annuity-based multi-year outsourcing contracts, with steady growth in demand for CADM and application support and customer preferences for the use of offshore service providers still being higher for discrete services than for end-to-end engagements - revenues from project-oriented engagements continue to contribute a larger share.
• Functional IT outsourcing services (including application management, IS outsourcing/infrastructure, network and desktop management services) sourced from India grew by nearly 28 per cent in FY 2004-05. While application management services remain the mainstay of this segment, increasing traction in remote infrastructure management services is helping Indian companies increase their share of revenue earned from IS outsourcing engagements.
• IT support and training services exports from India grew from USD 640 million in FY 2003-04 to USD 1.1 billion by FY 2004-05 an annual growth of 71 per cent.

Will follow up with post on trends that are impacting the industry.

Source: 1, 2, 3, 4
Prashanth Rai

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