Overview of Global and Indian Information Technology (IT) Industry Scenario

Overview of Global and Indian Information Technology (IT) Industry Scenario

Chapter Two Overview of Global and Indian Information Technology (IT) Industry Scenario Information Technology (IT) is a phenomenon that has dramatically changed the daily lives of individuals, the modes of business operations as well as the market competitiveness. IT comprise of design, development, implementation and management of computer-based information systems, particularly software applications and computer hardware. Today, it has grown to cover most aspects of computing and technology. The Information Technology-enabled Services (ITeS) industry provides services that are delivered over telecom or data network to a range of external business areas. Examples of such Business Process Outsourcing (BPO) include customer service, web-content development, back office management and network consultancy etc. Therefore, IT acts as a facilitator, an enabler and also assumes the role of custodian. It facilitates large volumes of information to be stored, processed and/or transferred at lightning speed. Only few selected specialized companies in the world are engaged in IT business but most corporations and institutions use information technology to enable functions (like better communication between staff, suppliers, customers, asset management etc.) that drive their business. The constant upgrade in IT, along with increasing global competition, is adding complexity of several orders of scale to the related business and trade.the new organisational network structures are actually holding survival and growth in such an environment of complexity. Effective implementation of IT decreases liabilities by OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 14

reducing the cost of expected failures and increases flexibility by reducing cost of adjustment. The capabilities and flexibilities of computer based communication systems become operative to business to respond to any specific information communication requirement (e.g. Face book, LinkedIn, MySpace, Twitter etc. and social networking websites become pervasive in business to communicate both collaboratively and cooperatively between enterprises and their constituencies). The impacts of IT on all trade industries and business have never being denied and it affects workers at all levels in the organisations, from the executives to middle managements and lower level workers. So, there is no way to deny that in the present complex socio-economic environment, computer-based information systems become one of the basic necessities of life, livelihood, business and trade. 2.1 Global IT/ ITeS Industry Profile The world information technology sector constitutes Information Technology enabled Service (ITeS), accompanying the hardware and software segments. In spite of present worldwide depression and volatility in currency, the global spending on technology and related service sector have exceeded US$ 1.7 trillion in 2011, a growth rate of 5.4 percent over 2010. Software product, IT and BPO services account for over US$ 1 trillion (63 per cent of total spending). The estimated IT-hardware spending was US$ 645 billion (38 per cent of the technology spending in 2011) and renewed demands for overall global sourcing (which grew by 12 per cent over 2010) had also been observed. During the same period, the global outsourcing market recorded a healthy growth driven by contracting activity in small size deals. On the other, there are growing OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 15

demands from the customers around the world for immediate value from IT. This actually changed the overall structure in global sourcing and organisations are adopting forwardlooking strategies that support growth and innovation. The worldwide IT-service providers are now adopting methods focusing on operational excellence through on-going innovation, diversifications, renewal partnerships and new business strategies (NASSCOM, Strategic Review, 2012). Information and Communication Technologies (ICTs) have already been evolved as the key enabling infrastructure across industries and become a powerful driver of enhanced living conditions and opportunities around the world. Over more than a decade, the Networked Readiness Index (NRI) has provided the useful conceptual framework to evaluate the impact of ICTs at a global level and a benchmark to the use of ICT readiness and use in an economy (NRI is a composite index, comprises of four sub indexes: Environment index-encompasses political and regulatory environment; Readiness indexencompasses infrastructural and digital content, affordability and skills; Usage indextakes into account of individual usages, business usage and Government usage; and Impact index-covers economic impacts and social impacts). The network readiness landscape of the world as assessed in the NRI 2013 by the Global Information Technology Report (GITR) 2013, published by World Economic Forum and INSEAD (InstitutEuropėend`Administration des Affairs, that is European Institute of Business Administration) provided the overall or NRI ranks of 144 countries of the world (see Table 2.1).Two groups of economies dominate the top 10 ranks of NRI: North European OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 16

economies and the so called Asian Tigers. Among the North European countries, four out of five Nordic economies [Finland (1 st ), Sweden (3 rd ), Norway (5 th ) and Denmark (8 th )] represents in the NRI top ten ranks. Iceland, the last of the Nordics, is at 17 th place. The Asian Tigers: Singapore (2 nd ), Taiwan, China (10 th ), the Republic of Korea (11 th ) and Hong Kong SAR (14 th ) have made a remarkable performance. However, overtaking Singapore and neighbouring Sweden, Finland reaches the top of the NRI ranking for the first time. The United Kingdom (7 th ) posts the biggest rank improvement among the top ten countries. The United States slips one down to 9 th place despite a performance essentially unchanged from previous year. Table 2.1: World s Top 25 Countries in terms of Networked Readiness Index (NRI) 2013 2013 Rank (out of 144 countries) Country/ Economy 2012 Rank (out of 142 Countries) Change of Ranks in 2013 1 Finland 3 2 Singapore 2 = 3 Sweden 1 4 Netherlands 6 5 Norway 7 6 Switzerland 5 7 United Kingdom 10 8 Denmark 4 9 United States 8 10 Taiwan, China 11 11 Korea, Rep. 12 12 Canada 9 13 Germany 16 14 Hong Kong SAR 13 15 Israel 20 16 Luxembourg 21 17 Iceland 15 18 Australia 17 19 Austria 19 = 20 New Zealand 14 21 Japan 18 22 Estonia 24 23 Qatar 28 24 Belgium 22 25 United Arab Emirates 30 Source: The Global Information Technology Report, 2013; World Economic Forum and INSEAD. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 17

Among the 144 countries, the performance of Nordic countries in terms of readiness is particularly outstanding and four out of five of them dominated the top 10 ranks. Finland (1 st ) reaches the top of the NRI rankings for the first time. Sweden achieves impressive level of excellence and consistency and Singapore achieved the extreme efficiency and business friendliness of its institutional framework. Singapore has a strong intellectual property protection, intense competition, and high university enrollment rate lead to these outstanding outcomes. The Netherlands climbs two ranks to 4 th place. The country s level of ICT readiness is also very high with a strong skill base and a world class infrastructure. Norway s performance, on the other, is outstanding with respect to the individual usage and in the infrastructure and digital content. Switzerland, the 6 th rank holder, has full liberalization in its ICT services and its average mobile cellular tariffs are among the highest in the world. Despite this, the country suffers from one area of relative weakness is the lack of government efforts to promote ICTs. The United Kingdom (7 th ), offers one of the most conducive environments for ICT development. Most noticeably, the country ranks 1 st for the role of ICTs in giving rise to new organisational models and 2 nd for the impact of ICTs in creating new services and products, which highlights the importance of ICTs for innovation in service-based economies. Denmark (ranks 8 th overall) tops the individual usage pillar with very high rates of internet usages, households with personal computers, broadband internet subscriptions and mobile broadband subscriptions. The United States was ranked 1 st in GITR (2001) NRI ranking but slips to 9 th place in 2013. However, the country still possesses much strength, which has contributed to making it the world s innovation powerhouse for decades. Taiwan, China (ranked 10 th ) has a major manufacturing base for OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 18

electronics and high-tech products and has become an innovation hub. Taiwan s performance is, however, undermined by the relatively mediocre quality of its political and regulatory environment. Despite worldwide adverse economic environment, the top 100 IT services companies, in 2009, grew their revenues by a healthy 13% on average (includes both organic and acquisitive growth). World s top 100 companies in the IT services industry ranked by annual IT services revenues and the list includes software implementation companies, offshore development companies, communication services suppliers, network integrators, outsourcing partners, desktop management companies, datacenter specialists and IT consultancy firms (Balder Verberne and Michel van Kooten, 2009, 2010). The world's leading companies in IT services are IBM, HP and Fujitsu (see Table 2.2). With services revenues of US$ 37.3 billion, IBM remains the largest IT services company in the world. HP (2 nd ) however, almost closed the revenue gap with IBM, after taking over EDS in 2008. Fujitsu and CSC held on to positions 3 rd and 4 th on the list, respectively, followed by consultants Accenture (5 th ) and Capgemini (6 th ). Ericsson (8 th ) boosted services revenues in 2009, entering the top 10 as a result, while Hitachi (7 th ) had a more difficult year. All of the top 10 companies brought in more than 10 billion US$, and 93 of 100 companies in the Services Top 100 posted revenues above 1 billion in 2009. Total employee headcount is around 4.5 million, of which 10% is on the account of companies that are headquartered in India. The fastest growing IT services firm in the world is KPN, a Dutch telecom company that boosted its position in the worldwide IT services market by the acquisition of Getronics. KPN (277% growth) is followed by Blackberry-maker OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 19

Research in Motion (52% growth) and Mahindra Satyam, the product of the Satyam acquisition by Tech Mahindra (46% growth). Protected by long-running outsourcing contracts, most firms did not suffer any material declines during the economic crisis. Probably, the industry will return to double-digit growth rates when the worldwide economic depression will be over. Table-2.3 below provides a brief picture of country wise distribution of IT Services companies. IT companies, especially multinational companies, around the world are enjoying steady growth, irrespective of which country they belong to. Among them the software companies have been showing unprecedented progress in the present global scenario. Most of the IT companies have developed worldwide networks and that in turn have boosted their growth in revenue, technology and innovation. The list of world s top 20 technology companies, from the ranks of Global Software Top 100 list, ranked (by Michel van Kooten, 2009, 2010) as per their annual software revenue is presented in Table-2.4 and a brief profile of each of the top 20 companies are given below: Microsoft, the multi-national company founded in 1975 by Bill Gates and Paul Allen, has topped the list in 2012. Microsoft rose to dominate the home computer (personal computer) operating system market with firstly MS-DOS in the mid 1980s, followed by the Windows line of operating systems. The company s software revenue has exceeded $50,000 million (80.5 percent in the total revenue) in 2012. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 20

Table 2.2: World Top 25 Companies in the IT Services Industry Rank 2009 2010 IT Service Company Services Revenue IT Service Company Services Revenue (million US$) (million US$) 1 IBM 39,264 IBM ( = ) 37,347 2 HP 27,745 HP ( = ) 34,678 3 Fujitsu 27,102 Fujitsu ( = ) 26,935 4 CSC 16,680 CSC ( = ) 16,281 5 Accenture 15,985 Accenture ( = ) 15,555 6 Northrop Grumman 12,454 Capgemini ( ) 11,255 7 Hitachi 12,318 Hitachi ( = ) 11,050 8 Capgemini 11,154 Ericsson ( ) 11,031 9 NTT Data 10,498 NTT Data Corporation Corporation ( = ) 10,425 10 NEC 9,103 NEC ( = ) 9,555 11 Ericsson 8,951 BT Global Services ( ) 9,237 12 BT Global Services 8,375 T-Systems ( ) 8,744 13 Atos Origin 7,827 Lockheed Martin ( ) 8,087 14 T-Systems 7,660 SAIC ( ) 7,547 15 Siemens 7,590 Atos Origin ( ) 7,386 16 Lockheed Martin 7,338 Huawei ( ) 7,277 17 Nokia Siemens 7,103 Siemens ( ) 6,949 Networks 18 SAIC 6,983 ACS ( ) 6,700 19 Microsoft 6,463 Microsoft ( = ) 6,265 20 ACS 6,342 Digital China ( ) 6,218 21 Huawei 6,110 Tata Consultancy Services ( ) 6,126 22 Dell 5,682 Nokia Siemens Networks ( ) 6,038 23 Logica 5,245 Logica ( = ) 6,004 24 General Dynamics 5,019 Dell ( ) 5,599 25 Alcatel-Lucent 4,805 General Dynamics ( ) 5,401 Source: The Top Companies in the IT Services Industry by Balder Verberne and Michel van Kooten (2009, 2010). Note: Symbols in the parenthesis indicate ranks higher ( ) than ; equal ( = ) to; and lower ( ) than 2009. Table 2.3: Number of IT Services Companies by Country Segmentation (2009) IT Services Companies by Country Name of Country Number of Companies United States 56 India 7 Japan 6 United Kingdom 6 China 5 Rest 20 Source: Balder Verberne and Michel van Kooten, 2009. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 21

IBM ranks second in the top 20, is another multi-national company founded by Herman Hollerith in 1896. The company produces both software and hardware products and offers services in areas ranging from mainframe computers to nanotechnology. The major products of the company are Web Sphere, DB2, Lotus, Tivoli and Cognos and the company, has software revenue of $22,485 million (22.5 percent of the total revenue) as of 2011. Oracle, a multi-national computer technology corporation, has appeared as the third largest software company in the United States and in the world with a software revenue exceeding $20,000 million (69.4 percent of the total revenue) as on 2011. Oracle, an American multinational computer technology corporation headquartered in Redwood City, California, United States is dedicated to unleashing innovation by simplifying IT. Its internal growth and continued innovation with respect to software, hardware and services businesses are the foundation of long-term strategic plans. In each of fiscal 2012 and 2011, Oracle invested $4.5 billion and in fiscal 2010, invested $3.3 billion in research and development to enhance existing portfolio of products and services and to develop new products and services. Oracle s software, hardware systems and services businesses represented 70%, 17% and 13% of total revenues, respectively, in fiscal 2012; 68%, 19% and 13%, respectively, in fiscal 2011; and 77%, 9% and 14%, respectively, in fiscal 2010. The fourth rank is grabbed by SAP AG, a multi-national software development and consulting corporation, founded in 1972 in Mannheim by the OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 22

former IBM engineers, Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Claus E Tschira and Claus Wellenreuther. The corporation provides enterprise software applications to businesses of all sizes. The software revenue of this corporation becomes $12,558 million (75.4 percent of its total revenue of $16,654 million). In spite of the fact that Ericsson has experienced a decrease in the software revenue of 4.2 percent from the previous year, it occupied the fifth position in the list with respect to its annual software revenue. The company now claims software revenue of $7,274 million (24 percent of the total revenue). Ericsson is a Swedish provider of telecommunication and data communication systems, including mobile networks was founded in 1876 by Lars and Magnus Ericsson as a telegraph equipment repair shop. The company has the status of the worldwide market leader of Telco networks and it is the fifth largest software company in the world and the Sweden office of the company employs more than 75,000 employees, making it one of the largest companies in the country. Hewlett Packard, popularly known and marketed as hp is a consumer electronics corporation that has come in the sixth position on the list. The company has $6,669 million software revenue (5.3 percent of company s total revenue). The major product lines of the company include personal computer devices, enterprise servers, related storage devices, as well as a diverse range of printers and other similar imaging products. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 23

Table 2.4: Profile of World s Top 20 IT/ITeS Companies in 2012 Rank Name of the Company Total Revenue (in million US$) Software Revenue (in million US$) Percentage Growth of Software Revenue 1 Microsoft 67,383 54,270 10.6 (80.5) 2 IBM 99,870 22,485 5.1 (22.5) 3 Oracle 30180 20,958 12.8 (69.4) 4 SAP 16,654 12,558 10.5 (75.4) 5 Ericsson 30307 7,274 (-) 4.2 (24.0) 6 Hewlett Packard 126,562 6,669 7.9 (5.3) 7 Symantec 6,013 5,636 1.3 (93.7) 8 Nintendo 13,766 5,456 (-) 19.8 (39.6) 9 Activision 4,447 4,447 3.9 Blizzard (100.0) 10 EMC 17,015 4,356 10.0 (25.6) 11 Nokia Siemens 16,918 4,229 (-) 6.6 Networks (25.0) 12 Computer 4,454 4,136 3.1 Associates(CA) (92.9) 13 Electronic Arts 3,413 3,413 (-) 8.4 (100.0) 14 Adobe 3,826 3,177 13.6 (83.0) 15 Alcatel-Lucent 21,374 2,561 (-) 4.6 (12.0) 16 Cisco 41,045 2,383 11.5 (5.8) 17 Sony 83,039 2,083 8.8 (2.5) 18 Hitachi 1,13,500 1,939 22.0 (1.7) 19 Dassault Systems 2,090 1,885 19.0 (90.0) 20 Sales force.com 1,628 1,523 (90.0) 27.9 Source: Silicon India News, September 13, 2012 Note: Figures in the parenthesis denote percentage of software revenue to the total revenue of the company. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 24

Hewlett Packard is considered as the largest technology company in the world. Hewlett Packard is the largest worldwide seller of personal computers, dominating the rival DELL as reported in January 2010 by the market research firms Gartner and IDC. Symantec, a computer technology corporation, shows a meager percent of software revenue growth this time with $5,636 million placing itself in the seventh position on the list of world s top 20. 93.7 percent of the total revenue of the company ($6,013 million) is the revenue generated by software products and services. Symantec is a multi-national company that develops security software, best known for its flagship product and is the largest security software company in the world and also the fifth largest software company in the United States. Nintendo comes at the eighth position on the list of top 20 software companies in the world. Nintendo has shown a reduction of 19.8 percent in their software revenue and reaches at $5,456 million software revenue (39.6 percent of its total revenue of $13,766 million). The primary business sector of the company is gaming software production, non-pc Games and Game Engines. The company employs more than 3,768 people in their offices. Activision Blizzard develops and publishes video games. The software revenue is its only revenue generating sector of the company and the estimated is $4,447 million. This firm is the American Holding company for Activision and OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 25

Blizzard Entertainment, majority of which is owned by the French corporation Vivendi SA. The well known games developed and published by the company are Guitar hero, Call of Duty and World of Warcraft. The merger happened in 2008 made Activision Blizzard, one of the largest growing software companies of the Software Top 20. This firm was the second largest video game company in the world as of 2009. EMC is at the 10 th position on the list of the top 20 software companies in the world having software revenue $4,356 million (25.6 percent of the total revenue of $17,015 million). Infrastructure software and Storage Management Software are the major sectors from which the company derives its revenue. The company employs around 37,700 people in its offices. Nokia Siemens Networks, although shows a reduction of 6.6 percent in its software revenue, is at the 11 th position with the software revenue of $4,229 million (which is 25 percent of its total revenue) as of the year 2011. The company produces industry specific software and Telco software from which it derives majority of its revenue. The company employs around 60,000 people altogether. Computer Associates (CA) is a multi-national computer software corporation founded by Charles Wang and Russ Artzt in 1976. This corporation ranks 12 th has software revenue of $4,136 million (which is 92.9 percent of its OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 26

total revenue of $4,454 million) having software revenue growth of 3.1 percent. The company is one of the ten largest software companies in the United States and develops and markets Information Technology (IT) management software. Electronic Arts, popularly known as EA, founded in 1982 by Trip Hawkins. It is a video game developing and publishing company and software revenue is the only revenue generating sector as far as the company is concerned. Despite a reduction in its current software revenue of 8.4 percent, the company ranks 13 th having with $3,413 million software revenue, which is the only revenue generating sector as far as the company is concerned. The well known and successful products of the company include Battlefield series, Command & Conquer series and many other sports games under the EA Sports label and in the field of electronic arts this company became the third largest video game producing company in the world in 2009. Adobe Software Company is popularly known among the users as Adobe Systems. The company was founded in 1982 by John Warnock and Charles Geschke and in 2009 it has over 8,500 employees. The company with its software revenue of $3,177 (which is 83 percent of the company s total generated revenue) has come at the 14 th position on the list of world s top 20 companies. Adobe Systems is the worldwide market leader in multi-media and creativity software products. Well accepted products of the company include Adobe Photoshop, OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 27

Adobe Acrobat and In-Design. Adobe Systems acquired Macromedia in the year 2005, adding Dreamweaver and Flash to its flagship product portfolio. Alcatel-Lucent is a software firm and the firm with its software revenue of $2,561 (which is 12 percent in the total revenue of $21,374 million) has come at the 15 th rank of top 20 companies. The primary business of the company is industry specific software developing and developing of Telco software. The company employs 77,700 people. The 16 th rank position on the list is occupied by Cisco Software Company. The company earns 5.8 percent of its total revenue ($41,045 million) from its software sector ($2,383 million) and it has a growth of 11.5 percent. Infrastructure software, Network Management software and Call Management software are the major business sector of the company. The company employs 61,535 people. Sony Software Company is a well-known company ranked 17 th on the list of world s top 20 companies. The company has $2,083 million software revenue (makes only 2.5 percent of its total revenue of $83,039 million) showing an 8.8 per cent growth. The Primary business sector of the company is developing gaming software and non-pc games. It has more than 1,200 employees. The software company Hitachi (ranks 18 th ) has only $1,939 million software revenue that shows a 22 percent growth. The software revenue of the OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 28

company makes only 1.7 percent of its total revenue that is $113,500 million. Information Technology (IT) is the primary business sector of the company. The company has employed more than 390,725 people. Dassault Systems, ranks 19 th, is a French software company that offers technical design software. Dassault Systems has $1,885 million software revenue (around 90 percent of its total revenue of $2,090 million) showing a 19 percent growth. The company is a worldwide leading company in Product Lifestyle Management (PLM) and it also offers 3D software. Dassault is the largest software company in France and the second largest software company in Europe. Salesforce.com is the software company that ranks 20 th on the list of world s top 20 software companies. The company has $1,523 million software revenue (which is 90 percent of its total revenue of $1,628 million) showing a 27.9 percent growth. Developing Enterprise Software and Customer Relationship Management Software are the primary business sector of the company. The above profiles of the world s top 20 software companies have provided us brief information about their products and business performances. Now, it would be worthy to have a glimpse into the global employee turnover scenario. The Global Management Consultancy, Hay Group, predicted in 2012 that the average global employee turnover in 2013 would be at 21.2 per cent as compared to 20.3 per cent in 2010. Hay Group, in association with the Centre for OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 29

Economics and Business Research (CEBR), estimated that 192 million more employees are likely to leave their jobs worldwide over the next five years (2013-2018) compared to 2012, owing to improvement in economic and labour market conditions and the global average employee turnover rates over the same period would rise to 23.4 per cent. The number of employees expected to take flight will reach 161.7 million in the year 2014 - a 12.9 per cent increase in people leaving compare to 2012. The expected country specific employee turnover, estimated by the Hay Group, is presented in Table-2.5 below. It is clearly evident (see Table- 2.5) from the prediction of Hay Group that the Asia-Pacific will experience its largest spike in employee turnover levels in the year 2013 and India is set to witness highest attrition rate globally (26.9 per cent) with possibility of one in four employees switching jobs in the country. Table 2.5: Country Specific Expected Employee Turnover in 2013 Sl. No. Country Employee Turnover Rate (in percent) 1 India 26.9 2 Russia 26.8 3 Indonesia 25.8 4 Brazil 24.4 5 US 21.8 6 China 21.3 7 UK 14.6 Source: Global Management Consultancy, Hay Group, 2012. The Information Technology (IT) sector is witnessing the highest attrition rates among talented employees, making retention of critical manpower resources a key challenge. Again, according to the analysis of the Hay Group s employee opinion database (covering 5.5 million employees worldwide) the most consistent OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 30

predictors of employee engagement and commitment are confidence in leadership, an opportunity for career development, autonomy, supportive work environment and appropriate compensation. 2.2 Indian IT/ITeS Industry Profile The spectacular growth of the India s service sectors in general and IT/ ITeS sector in particular, create greater job opportunities (The estimated aggregate IT software and service sector provides direct employment to about 2.8 million and indirect employment nearly 8.9 million people - NASSCOM, 2012) than that of the other sectors of the economy. Retaining employees has become a great challenge in the Business Process Outsourcing (BPO) and Information Technology enabled Services (ITeS) industries as the IT sectors are witnessing high rate of employee turnover. The Associated Chambers of Commerce and Industry of India (ASSOCHAM), an industry body, stated that during December 2010-April 2011, the attrition rate in the Business Process Outsourcing (BPO) has increased to 55 per cent from about 40 per cent during the same period in the previous year (Bussiness Standard, April 14, 2011). ASSOCHAM, in their report on the IT, ITeS and BPO sector, has stated that attrition rate has fallen sharply to the level of about 15-20 per cent from January to June 2012 (The New Indian Express, August 6, 2012). It has been observed that more than two-thirds of IT professionals, who quits, have generally ventured for better career openings within the same industry (Bhat and Kumar, 2011). As a result, it may be observed OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 31

that the problem of employees voluntary turnover is a significant issue in the IT/ ITeS sector. The Indian information technology sector had launched its journey by early 1990 s when the US based companies began to outsource work to low cost and skilled talent pull of India. In the mid of 1990 s major policy reforms were made to recognize software as an industry to invest and the announcement of CSDT (Computer Software Data Tapes) policy which liberalizes exposure to the latest technologies to compete globally and to capture a global software exports, a notable turning point in the Indian software and IT industries. During the period of 1995 to 2000, IT industry in India was in its course of maturity with increased investment in R&D and infrastructure. India was then increasingly becoming a product destination programme by 2000-2005, the number of Indian firms grew in size and had started offering complex services like product management, go-to market strategies etc. In the same period, western firms set up number of captives in India. By 2005 onwards the Indian firms became multinational companies with delivery centres across the world (560 centres in 70 countries, as of 2011). Indian IT sector is expected to employ around 2.8 million directly and around 8.9 million indirectly, as of FY2012 (IBEF, March 2013). OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 32

The Indian IT/ITeS sector comprises of IT services, Business Process Outsourcing (BPO), software product and engineering services and hardware. It is evident from the researches by NASSCOM, Edelweiss and Aranca (2013) that the market size of Indian IT services become US$ 52.0 billion during FY 2012 and over 76 per cent of the revenue comes from export market. During the same financial year (FY 2012) the market size of BPO, software products and hardware are US$ 19.0 billion, 17.0 billion and 13.0 billion respectively. Around 84 per cent of the revenue of BPO and over 76 per cent of revenue of software and engineering services segment comes from exports. The domestic market contribute significant share of hardware segment. Global In-House Centres (GIC), known as captive centres, is one of the major group drivers of IT/BPO sector in the country. Availability of skilled talent has been a major reason behind India s emergence as global outsourcing hub. Indian technology and BPO sector (including hardware) is estimated to have generated US$ 101 billion in revenue during FY 2012 compared to US$ 88.1 billion in FY 2011, at a growth rate of 14.4 per cent. As proportion of India s GDP, the contribution of IT sector rises to 7.5 per cent in FY 2012 from 1.2 per cent in FY 1998 (NASSCOM-Aranca Research, 2013). Despite global economic recession, the Indian IT sector has experienced a high growth at a CAGR (Compounded Annual Growth Rate) of 13.6 per cent during FY2008-2012 (estimated). The total export from the IT-BPO sector (including hardware) are estimated to reach US$ 69 billion during FY2012 were the contribution of IT OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 33

services accounted for around 58 per cent and BPO commands a share of around 23.2 per cent of total IT exports (FY2011) from India. The estimated projection (NASSCOM-Aranca Research, 2013) of Indian IT/BPO exports is to reach US$ 175 billion by 2020. Indian IT market size is growing rapidly. It appears from the Bloomberg- Aranca Researches (2013) that TCS is the market leader (from the point of view of market share of IT players based on revenues during FY 2012) commanding about 10.1 per cent of total Indian IT/ITeS sectors revenue. Wipro (7.7 per cent) comes next to TCS followed by Infosys (7.0 per cent), Cognizant (6.1 per cent, 2011 calendar year), HCLTech (4.3 per cent) and Tech Mahindra (1.1 per cent). It appears that these top six firms share around 36 per cent of total industry revenue showing the market is fairly competitive. United States has traditionally been the largest importers of India s exports. During FY12 over 60 per cent of India s IT-BPO exports were absorbed by US. US and U.K. together constitute 79 per cent of India s IT exports and the remaining percentage is accounted for the countries other than these two. However, the demand from emerging countries is expected to show strong growth growing forward. Most of the Indian IT companies have developed worldwide networks and that in turn have boosted their growth in revenue, technology and innovation. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 34

Indian IT/ITeS companies are concentrated in certain places in India like Bangalore, Bhubaneswar, Cochin, Coimbatore, Chandigarh, Chennai, Delhi, Gurgaon, Hyderabad, Calcutta, Mysore, Madurai, Maneshwar, Mumbai, Noida, Pune and Trivandrum. Out of these Bangalore is considered to be the Silicon Valley of India as it houses many domestic as well as multinational IT companies and some the multinational companies have its headquarters here (Zachariah and Roopa, 2012). Indian Chamber of Commerce (ICC) has ranked the Indian states with respect to the Destination IT Index (DII), constructed with the parameters like IT Infrastructure, Government Policy, Availability of skilled Manpower, Cost of operationsand Potential of software exports etc. (see Table- 2.6). It is apparent that the South-Indian states are far ahead of the East and the North-eastern states as potential destination of IT. Again, a city becomes an attractive destination to stay for professionals, spending long hours at work to meet almost impossible deadlines in service sector like IT/ITeS, only if it offers improved infrastructure, quality lifestyle-related facilities and after-office entertainment avenues to them. Considering this aspect, the ICC also constructed the Lifestyle-related Infrastructure Index (LII) with incorporating the parameters like number of places to hang around or visit, quality of entertainment provided, affordability and accessibility of places of interest etc. (see Table-2.7). It appears from the ranks of the Indian important cities with respect to LII that Bangalore is at the top of the ranks followed by Mumbai, Pune and Delhi (NCR) among the top 12 Indian Cities. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 35

It is interesting to note here that the rank of the Indian IT/ ITeS companies with respect to their revenue varies when we classify them into IT, IT-BPO and BPO groups of companies. The top 15 IT, IT-BPO and BPO companies in India in 2012-13 is presented in Table-2.9 (NASSCOM, 2012-2013). It is evident that Tata Consultancy Services Ltd. (TCS) occupies the top rank both as an IT as well as an IT-BPO company in India but as a BPO it ranked 2 nd. Following TCS, Infosys Ltd. and Wipro Ltd., both as an IT as well as an IT- BPO company, occupied the 2 nd and 3 rd ranks respectively but as a BPO their respective ranks become 6 th and 5 th respectively. On the other, Genpact India Pvt. Ltd. ranks 1 st among the top 15 BPO companies in India but its rank as an IT and an IT-BPO becomes 11 th and 7 th respectively. It is to be noted that some companies whose corporate headquarters are located outside India but have significant India-centric delivery capabilities and if they have not shared their India-centric revenue figures it would be erroneous while estimating the ranks of the IT companies in Indian. It is therefore desirable to rank the IT in India on the basis of their India revenues. Table- 2.9 presents the ranks (based on their India revenues) of the top 20 IT companies in India by their corporate headquarters in FY2011. It appears that among the top 20 IT companies whose headquarters are located in India, Tata Consultancy Services Ltd. occupies the top rank followed by Infosys Technologies Ltd, Wipro Ltd., HCL Technologies Ltd., Mahindra Satyam Ltd. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 36

and Tech Mahindra Limited. Companies like Accenture, Cognizant, HP, Oracle and IBM have appeared in this ranking when we consider IT companies in India irrespective of their headquarter locations. It is interesting to observe that Tata Consultancy Services Ltd., Infosys Technologies Ltd. and Wipro Limited remain at the top three ranks respectively among the top 20 IT companies in India irrespective of locations of companies headquarters. Though IBM is the global No.1 company but its Indian divisional company (IBM India Ltd.) comes at the 6 th rank after Hewlett-Packard India Ltd. (4 th ) and Cognizant Technology Solutions Ltd. (5 th ). Ranks of the IT companies in Indian will also vary to a great extent with respect to their revenue and market capital. For illustration, Table- 2.10 presents the ranks of the Indian IT companies with respect to their revenue as well as their corresponding ranks with respect to market capital in FY 2009. It is observed that when the companies are ranked on the basis of revenue then Tata Consultancy Services Ltd. (TCS) remains at the top among the IT companies in India irrespective of their headquarter locations. Infosys Tech. Ltd. (rank-1) supersedes TCS (rank-2) when the companies are ranked on the basis of their market capital. More than 50 per cent of the top 20 (on the basis of revenue) IT companies have ranked significantly lower when the ranks are estimated on the basis of market capital (see Table-2.10). OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 37

Table 2.6: Ranks of the Indian State by the Destination IT Index (DII) Sl. No. Name of the States Rank 1 Karnataka 1 2 Andhra Pradesh 2 3 Tamil Nadu 3 4 Maharashtra 4 5 West Bengal 5 6 Delhi (NCR) 6 7 Orissa 7 8 Punjab 8 9 Haryana 9 10 Meghalaya 10 11 Sikkim 11 12 Chhatisgarh 12 13 Jharkhand 13 14 Rajasthan 14 15 Assam 15 16 Tripura 16 17 Bihar 17 Source: Indian Chamber of Commerce (ICC), 2010. Table 2.7: Ranks of the Indian Cities by the Lifestyle-related Infrastructure Index (LII) Sl. No. Name of the Cities Rank 1 Bangalore 1 2 Mumbai 2 3 Pune 3 4 Delhi (NCR) 4 5 Kolkata 5 6 Hyderabad 6 7 Chennai 7 8 Shillong 8 9 Guwahati 9 10 Jamshedpur 10 11 Ahmedabad 11 12 Indore 12 Source: Indian Chamber of Commerce (ICC), 2010. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 38

Table2.8: Top 15 Indian IT/ ITeS Companies classified as IT, IT-BPO and BPO in terms of Revenue (2012-2013) Rank (Revenue wise) Classification of Indian IT/ ITeS Companies in accordance with IT Companies IT-BPO Companies BPO Companies 1 Tata Consultancy Services Ltd. Tata Consultancy Services Ltd. Genpact India Pvt. Ltd. 2 Infosys Ltd. Infosys Ltd. Tata Consultancy Services Ltd. 3 Wipro Limited Cognizant Tech. Solutions Pvt. Ltd. Serco Global Services 4 HCL Tech.Ltd. Wipro Ltd. Aegis Ltd. 5 Tech Mahindra Ltd. HCL Tech.Ltd. Wipro BPO 6 igate Global Solutions Ltd. Tech Mahindra Ltd. Infosys BPO 7 MphasiS Ltd. Genpact First source Solutions Ltd. 8 Larsen and Toubro Infotech Ltd. Serco Global Services WNS Global Services (P) Ltd. 9 Syntel Ltd. Capgemini India Pvt. Ltd. Aditya Birla Minacs Worldwide Ltd. 10 CSS, India MphasiS Ltd. EXL 11 Genpact India Pvt. Ltd. Aegis Ltd. Hinduja Global Solutions Ltd. 12 MindTree Ltd. igate Global Solutions Ltd. HCL Tech.Ltd.- Business Services 13 Robert BOSCH Eng. And CSC India Tech Mahindra Ltd. Business Sol. Ltd. 14 KPIT Tech. Ltd. First source Solutions Ltd. Hero Management Service Ltd. 15 Polaries Financial Tech. Ltd. WNS Global Services (P) Ltd. MphasiS Ltd. Source: www.nasscom.in (2012-2013) It would be commendable to talk about India s top 10 IT companies whose corporate headquarters are in India and for that brief portfolio of each of the top 10 India s IT companies are given below: Tata Consultancy Services Limited (TCS) is one of the Tata Group of Companies, ranked first on the list of top 15 Indian IT and IT-BPO companies in OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 39

2012-2013. The company is founded in 1968 by late Sh. JRD Tata and it's headquarter is in Mumbai (Maharashtra, India). TCS is Asia's largest IT service provider as well as exporter, deals mainly in services relating to business solutions, BPO and IT outsourcing. It has 142 branches in as many as 47 countries globally. TCS is also ranked at 21 in the list of global IT services ranking of service providers and with its market capital reaching $52 billion makes and becomes one of the biggest IT companies in the world. During FY2011 company s total revenue is Rs 33,112 crores, a 25 per cent growth of revenue. The company employed 2,00,300 people (as of April, 2011) and is planning to hire 50,000 associates in 2012-2013 to extend its services and operations globally. Infosys Technologies Limited ranked 2 nd among the top 20 Indian IT as well as IT-BPO companies. The company was founded in year 1981 by group of 7 colleagues (including N R Narayana Murthy, retired from Infosys in FY2011 and NandanNilekani, former NASSCOM head). Infosys mainly offers software products services to the banking industry and deals in business process management services relating to end-to-end business solutions. Infosys also got a mention by Forbes magazine as one among the Global High Performers as well as ranked 28 th globally as an IT Service provider. The company has a multimedia studio in Infosys Bangalore. During FY2011 company s total revenue is Rs. 25,997 crores with a revenue growth of 22 per cent. The company in India has 1,30,820 employees (including all its subsidiaries) as of March, 2011. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 40

Table 2.9: Ranks of the Top 20 IT/ ITeS Companies in India based on their India Revenues by their Corporate Headquarters in FY11 IT Companies irrespective of their Corporate Headquarter Locations* Name of the Total Revenue Rank Company (in Rs. Cr) 1 Tata Consultancy Services Ltd. 2 Infosys Tech. Ltd. 33112 (25.0) 25997 (22.0) 3 Wipro Limited 24899 (13.0) 4 Hewlett-Packard 23227 India Ltd. (30.0) 5 Cognizant 21393 Technology (37.0) Solutions Ltd. IT Companies having their Corporate Headquarters in India** Name of the Total Rank Company Revenue 1 Tata Consultancy Services Ltd. (in Rs. Cr) 33112 (25.0) 2 Infosys Technologies Ltd. 25997 (22.0) 3 Wipro Limited 24899 (13.0) 4 HCL Technologies 14111 Ltd. (28.0) 5 Mahindra Satyam 5049 Ltd. (-1.0) 6 IBM India Ltd. 14132 (14.0) 6 Tech Mahindra Ltd. 4819 (11.0) 7 HCL Tech. Ltd. 14111 (28.0) 7 MphasiS Ltd. 4498 (15.0) 8 HCL Infosystems Ltd. 12137 (2.0) 8 Patni Computer Systems 215 (13.8) 9 Ingram Micro India Ltd. 9766 (35.0) 9 Larsen and Toubro Infotech Ltd. 171 (22.2) 10 Redington India Ltd. 9274 (32.0) 10 CSC, India 16042 # (0.8) 11 Cisco Systems India Ltd. 8157 (35.0) 11 Syntel Ltd. 642 # (21.0) 12 Oracle India Ltd. 7934 (26.0) 12 Polaries Software Lab Ltd. 1586 (17.1) 13 Dell India Ltd. 7666 (34.0) 13 MindTree Ltd. 15,090 (16.4) 14 Intel India Ltd. 6108 (18.0) 14 3i Infotech Ltd. 2,587 (40.1) 15 Accenture India Ltd. 5672 (18.0) 15 NIIT Technologies Ltd. 670 (3.9) 16 SAP India Ltd. 5146 (31.0) 16 Infotech Enterprises Ltd. 119 (24.7) 17 Mahindra Satyam Ltd. 5049 (-1.0) 17 Honeywell Tech. Sol. Lab Pvt. Ltd. 1629 (19.5) 18 Tech Mahindra Ltd. 4819 (11.0) 18 Hexaware Technologies Ltd. 1,450 ( 37.6 ) 19 Microsoft India Ltd. 4711 (20.0) 19 Zensar Technologies Ltd. 1138 (19.5) 20 MphasiS Ltd. 4498 (15.0) 20 igate Corporation 780 # (177.9) Source:* CyberMedia's Dataquest - techcircle.vccircle.com (2010 11); ** www.nasscom.in Note: (i) Figures in the parenthesis indicate growth in percentage. (ii) # implies Million US$. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 41

WIPRO has become the third largest IT company among the top Indian IT companies. Initially it started in the name of WIPRO-Western India Vegetable Products Limited, founded in 1945 by late Mr. M.H. HashamPremji, as a vegetable oil manufacturing company in Amalner, Maharashtra. Now, WIPRO has emerged as a global brand and becomes a pioneer Indian company. The company is mainly dealing in Business Process Outsourcing, IT and Software services. WIPRO - has also other divisional companies, e.g. Wipro Consumer Care & Lighting, Wipro Eco-Energy, Wipro Infrastructure Engineering, Wipro GE Medical Systems Ltd. During FY2011 company s total revenue is Rs 24,899 crores with a revenue growth of 13 per cent. As on March 2011, Wipro employs more than 122,385 people globally (including its all subsidiaries). Hindustan Computer Limited (HCL), a global Electronics, Computing and IT company, was founded in 1976 by Mr. Shiv Nadar. It has it s headquarter in India at Noida (UP, India) and becomes the 4 th largest IT company in India. HCL has its two subsidiaries as HCL Technologies and HCL Info-systems. The company initially focused on computer manufacturing and IT hardware markets but after 1996 it shifted its focus towards IT and BPO services.presently HCL is one of the renowned Indian IT and Hardware companies and occupies 4 th position among the Indian top IT companies. In FY11 the company increased its revenue to Rs 14,111 crores, a 28 per cent growth of revenue with employee strength of 80,000. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 42

Mahindra Satyam is one of the leading IT and software companies in India which provides consulting and IT software services. Mahindra Satyam is owned by renowned Mahindra group itself. Mahindra Satyam mainly offers BPO services to its local as well as foreign clients in the domain of IT and consulting; Cloud computing, Enterprise Architecture and Digital Convergence; Enterprise Mobility, Green and Sustainability Solutions, Infrastructure Management Services, Microsoft Solutions, Integrated Engineering Solutions, Operations Management as well as Platform Solutions, SAP Solutions and Management- Solutions. In FY11 the company increased its revenue to Rs. 5,049 crores but experienced a minus one per cent revenue growth during the same period. Tech Mahindra Ltd. (TechM) was founded in 1986 and it's headquartered in Pune (India). TechM is a Joint Venture company between the Mahindra Group and BT Group plc, UK. According to NASSCOM, Tech Mahindra is the 6 th largest IT and Software exporter of the country and became the No.1 Telecom Software Provider in India for the year 2009-10. Tech Mahindra mainly deals in Telecom Software & Solutions and its subsidiaries are Tech Mahindra (Americas) Inc., Tech Mahindra GmbH, Tech Mahindra (Singapore) Pvt. Ltd., Tech Mahindra (R & D Services) Ltd., Tech Mahindra (Thailand) Ltd., PT Tech Mahindra Indonesia. During FY11 company s revenue growth rate was 11 percent and the total revenue was Rs 4,819 crores and in the worldwide Tech Mahindra s there are 33,524 employees. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 43

Table 2.10: Ranks of the Indian IT Companies with respect to Revenue and Market Capital in FY 2009 Revenue wise Rank Name of Company 1 Tata Consultancy Services Ltd. Market Capital wise Ranks Total Revenue ( in Rs. Cr) 2 27,813 (23.0) 2 Infosys Tech. Ltd. 1 20,264 (20.4) 3 Wipro Limited 3 25,456 (28.9) 4 HCL Tech.Ltd. 4 10,591 (40.0) 5 Tech Mahindra Ltd. 8 4,465 (18.6) 6 Patni Computer 12 665.9 * Systems (31.4) 7 MphasiS an EDS 6 4,264 company (30.5) 8 Oracle Financial Services Software Ltd. 9 Aricent Tech. (Holdings) Ltd. 5 29,276 (23.0) N.A. 1284 (209.0) 10 CSC India Pvt. Ltd. N.A. 16741 * (1.5) 11 Larsen and Toubro N.A. 33,926 Infotech Ltd. (36.4) 12 Prithvi Information 72 26,900 * Solutions Ltd. (16.5) 13 Polaries Software Lab Ltd. 24 1,376 (25.3) 14 MindTree Ltd. 18 852.63 * (4.7) 15 Mascon Global Ltd. 58 1,848 (26.0) 16 3i Infotech Ltd. 27 2,286 (89.6) 17 HSBC Software Dev. N.A. 4.32 ** (I) Pvt. Ltd. (-6.0) 18 Hexaware Tech. Ltd. 32 1,039 (-9.8%) Total Market Capital ( in Rs. Cr) 55579.59 83024.21 45845.61 8580.78 4049.96 1967.62 4741.76 7566.75 N.A. N.A. N.A. 90.67 651.65 935.18 133.52 547.15 N.A. 467.42 19 Mastek Ltd. 35 965 410.49 (5.3) 20 Sonata Software Ltd. 50 371 (-4.6) 223.02 Source: The Economic Times, ET Intelligence Group - Research Channel; April 26, 2009. Note: (i) Figures in the parenthesis indicate growth in percentage; (ii) N.A. indicates Not Available. (iii) * implies Million US$ and ** indicates Revenue for 2013. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 44

MphasiS Limited, the one among top IT companies in India, is a subsidiary of Hewlett-Packard (HP) and it was incorporated in June, 2000. MphasiS is a prestigious IT company ranked 6 th position among top 20 IT companies in India by NASSCOM with more than 38,000 employees in 29 offices in 14 countries with delivery centers in India, Sri Lanka, China, North America and Europe. It's headquartered in Bangalore, Indian MphasiS s net income increased by US$185.79 million during financial year 2009-10. MphasiS subsidiaries are MphasiS Corporation, Eldorado Computing Inc, BFL Software Asia Pacific Pvt. Ltd., MphasiS Consulting Ltd., MphasiSFinsourcE Ltd. MphasiS Software & Services (India) Private Limited, MsourcE (India) Private Ltd., MphasiS Infrastructure Services Inc. Patni Computer Systems Limited (as formerly known) or igatepatni was founded in 1978 is one of the reputed and popular IT Software companies in India, and it's headquartered is in Bangalore, India. Initially it was started in the name of Data Conversion Inc in 1972 by its founder Narendra Patni. Patni Computer System Ltd was acquired by its major shareholder igate in 10 th January 2011 and now the company is known as igatepatni. igate Patni's astounding growth story can be understood by the fact that it had only an 80-crore revenue in 1996 that reached to 656 million US$ till 2009. igate Patni employes 17,642 people and has 23 global offices across the Americas, Europe, and Asia- Pacific. Patni built its ambitious project Patni Knowledge Park in Navi Mumbai and it has been marked as the second largest Platinum rated building in the world. OVERVIEW OF GLOBAL AND INDIAN IT INDUSTRY SCENARIO 45