In the last few years, India has emerged as one of the fast-growing economies and this trend is estimated to continue in the future.
India’s GDP grew by 6.8% (World Bank GDP forecast) during the financial year 2018-19 as a result of the various initiatives taken by the government.
The Indian IT sector has remained one of the main sectors contributing to the robust growth story of the Indian Economy.
In 2018, almost half of India’s GDP was generated by the services sector which majorly includes telecommunications, IT, and software. The IT industry includes the following sub-domains:
1. Software Development 2. Software Management 3. IT Consulting, and other online services 4. Business process management (BPM)
The IT industry is a vital part of India’s economy and it is rapidly growing which is evident from its increasing revenue (Figure 2) and employment figure (Figure 7).
India’s IT industry’s Revenue Figures
From Figure 2 we can see that in the financial year 2019, the annual revenue from the Indian IT industry was to the tune of $177 billion. It increased significantly as compared to the previous years due to massive outsourcing from foreign companies.
Moreover, the majority of this revenue was generated from the exports of IT services (refer Figure 3), which was over $130 billion in the financial year 2019, while the domestic revenue was less than $50 billion for the financial year 2019.
So there has been significant growth in the export revenue of the Indian information technology industry.
India’s IT Industry’s spending from 2013 to 2019
In 2019, out of the total spending of $90 billion by the Indian information technology sector, about 15% of the spending was from IT services itself.
The expenses from the Telecommunication services and the Devices sectors dominated the segments.
One of the leading sourcing destinations was the south Asian countries across the globe in 2018. Over a thousand global delivery centers were set up in around 80 countries by the IT and ITeS firms.
Figure 6 shows the market size of the domestic information technology industry in India from the financial years 2014 to 2018.
The market size of the domestic IT industry across India has increased significantly over the past few years to approximately $26 billion during the financial year 2018.
Employment in the Indian IT sector
India is one of the favorite offshoring destinations among global IT companies. Major IT companies in India like TCS, Infosys, Wipro, and Tech Mahindra have diverse options available in various domains such as cloud computing, robotics, artificial intelligence, blockchain, and much more.
In the private sector, the Indian IT industry has generated maximum employment with over 15 million, directly and indirectly, employed personnel during the financial year 2017, as per the latest publically available data.
India is the largest business process management destination worldwide.
Being the largest organized sector for job creation, this industry is generating huge employment and revenue opportunities in India which are estimated to contribute a 10% share in the GDP by 2025.
Recent trends in the Indian IT sector
Emerging technologies in the IT sector have provided India with an opportunity to surf for big growth, both in onshore as well as offshore services revenues.
There have been recent advancements in blockchain technology and public cloud computing.
In a public cloud, resources are made available to the user through cloud computing. Such public cloud services have picked up a lot of attention in recent years in the country.
The market for cloud services valued at over 4 billion dollars by the end of the year 2020 as per the recent study from Gartner. This market is expected to grow even further in the coming years.
Indian IT Industry players
Over the last few decades, India has become the home of the top IT companies. These Indian IT companies have become the global leaders in the information technology (IT) sector.
This has contributed to the growth of technology not only in India but globally. Some of the best Indian IT companies are part of the world’s best software companies.
India’s top 3 IT company base don revenue in FY 2019-20
TATA Consultancy Services (TCS)
Tata Consultancy service (TCS) is the Largest IT company in India in terms of Revenue. TCS is the first Indian IT company to have a market capitalization of $100 billion and has over 420,000 employees.
TCS is an IT services, consulting, and business solutions provider that has been partnering with the world’s largest businesses in their transformation journeys for the last fifty years.
TCS, being one of the global leaders in the sector, generates roughly 70% of the revenue for Tata Sons.
- Revenue: Rs 152,497 Cr
- Market Cap: Rs 845,337 Cr
- Employees: 420,000
- ROE: 35.98 %
- Sales Growth (3Yrs): 10.47 %
- Promoter holding: 72.05 %
- Market Capitalization of Rs 8,10,000 Crores
Infosys is an NYSE listed global consulting and IT services company with more than 228,000 employees. It is India’s second-largest IT company in terms of revenue for the financial year 2019-20.
It is one of the best IT companies in India and first to be listed on NASDAQ.
Over 37 years, The company has catalyzed some of the major changes that have led to India’s emergence as the global destination for software services talent.
- Revenue: Rs 87,371 Cr
- Market Cap: Rs 282,028 Cr.
- Employees: 228,000
- ROE: 23.50 %
- Sales Growth (3Yrs): 9.81 %
- Promoter holding: 13.15 %
HCL Technologies, in terms of revenue, is one of the third largest IT companies in India, which generated a revenue of more than ₹21,000 crores over the last four quarters and has a strong workforce of 117,000+ employees.
The Company is a leading global IT services company that helps global enterprises re-imagine and transform their businesses through Digital technology transformation.
- Revenue: Rs 65,643 Cr
- Market Cap: Rs 153,370 Cr.
- ROE: 25.76 %
- Sales Growth (3Yrs): 24.74 %
- Promoter holding: 60.00 %
HCL Technologies has a global network of integrated co-innovation labs and global delivery capabilities to provide holistic services in key industry verticals including Financial Services, Telecommunications, Manufacturing, & Healthcare, Publishing, Media, Retail & CPG, Entertainment, Oil & Gas, Energy & Utilities, Travel, Transportation & Logistics.
The Company focuses on 1–2–3 growth strategy by providing an integrated portfolio of services.
Mode 1 encompasses the core services in the areas of Applications, Infrastructure, BPO and Engineering, and R&D services to transform clients’ business and IT landscape, making them ‘lean’ and ‘agile’.
Mode 2 focuses on experience-centric and outcome-oriented integrated offerings of Digital & Analytics to drive business outcomes and enable enterprise digitalization.
Mode 3 strategy is ecosystem–driven, creating innovative partnerships to build products and platforms business.
|Corporate Action (Interim Dividend)||Rs 5 per share||Rs 9.50 per share||Rs 2 per share|
Government Policy Initiatives
Foreign Direct Investment (FDI) Policy
As per the FDI policy, 100% FDI has been allowed in the software / IT industry under the automatic route (i.e., there is no need to obtain prior government approval).
India BPO Promotion Scheme (IBPS)
The India BPO Promotion Scheme (IBPS) has been approved under Digital India Programme, to incentivize BPO/ITES operations across the country.
The main objective of IBPS is the creation of employment opportunities for the youth, by promoting the IT/ITES Industry particularly by setting up the BPO/ITES operations and promoting investment in the IT/ITES Sector in order to expand the base of IT Industry and secure balanced regional growth.
Software Technology Parks of India (STPI)
Software Technology Parks of India, is an Autonomous Society set up by the Ministry of Electronics and Information Technology (MeitY), Government of India in 1991, with the objective of encouraging, promoting and boosting the Software Exports from India.
National Policy on Information Technology 2012
In order to promote further growth of the ICT industry, the government has approved National Policy on Information Technology 2012 which aims to make at least one individual in every household e-literate.
National Cyber Security Policy 2013
In 2013, the Ministry of Communication and Information Technology of the Government of India had released the National Cyber Security Policy to protect the information, such as personal information, financial/banking information, sovereign data, etc.
The policy has proposed to set up different bodies to deal with various levels of threat, along with a national nodal agency, to coordinate all matters related to cybersecurity.
The government has also proposed to set up a National Critical Information Protection Centre (NCIIPC), which will act as a 24*7 center to ward off cybersecurity threats in strategic areas such as air control, nuclear, and space.
(Source: Report published by Seconded European Standardization Expert in India (sesei.eu))
Growth Drivers for the Indian IT industry
Availability of highly qualified talent pool
The availability of a highly qualified talent pool at lower rates helps in cutting the cost of about 60-70% to source countries. This large pool of qualified skilled workforce has enabled Indian IT companies to help clients save USD 200b in the last five years.
Increasing adaption of emerging technologies
Disruptive technologies like AI (Artificial Intelligence), Social Media, Mobility, Analytics, and Cloud (SMAC), embedded systems, etc. are the emerging trends of the industry to create new paradigms. India has been creating a future-ready digital workforce, with more than 0.15 million employees SMAC skills. The SMAC market is expected to grow to USD 225 billion by 2020.
Government policy support
Government of India (GOI) envisions a digitally equipped India and emphasized on activities to promote programming for skill development and uplifting infrastructure capabilities. R&D programs are being supported by GOI at every possible level to maintain India’s strategic advantage in IT and IT-enabled services in the global market.
Porter’s Five Framework Mode for India’s IT Industry Analysis
The Indian IT industry is likely to witness consistent growth in the future.
Tapping into new advancements in robotics and artificial intelligence, the industry seeks to continue helping clients build successful businesses, propelled by a large export market.
Prepared by Abhishek Verma | Edited by Unmesh
Cover Image: Taken from Slide Share