CHAPTER-1

INTRODUCTION
Industry Profile
INFORMATION TECHNOLOGY
Information technology (IT) is the application of computers to store, retrieve, transmit and
manipulate data, often in the context of a business or other enterprise. IT is considered a subset
of information and communications technology (ICT).

EVOLUTION OF IT INDUSTRY
Information technology has been around for a long, long time. Basically as long as people have
been around, information technology has been around because there were always ways of
communicating through technology available at that point in time. There are 4 main ages that
divide up the history of information technology. Only the latest age (electronic) and some of the
electromechanical age really affects us today, but it is important to learn about how we got to the
point we are at with technology today.
Ages
Pre mechanical
The pre mechanical age is the earliest age of information technology. It can be defined as the time
between 3000B.C. and 1450A.D. We are talking about a long time ago. When humans first started

communicating they would try to use language or simple picture drawings known as petroglyphs
which were usually carved in rock. Early alphabets were developed such as the Phoenician
alphabet.

Petroglyph
As alphabets became more popular and more people were writing information down, pens and
paper began to be developed. It started off as just marks in wet clay, but later paper was created out
of papyrus plant. The most popular kind of paper made was probably by the Chinese who made
paper from rags.
Now that people were writing a lot of information down they needed ways to keep it all in
permanent storage. This is where the first books and libraries are developed. Youve probably
heard of Egyptian scrolls which were popular ways of writing down information to save. Some
groups of people were actually binding paper together into a book-like form.
Also during this period were the first numbering systems. Around 100A.D. was when the first 1-9
system was created by people from India. However, it wasnt until 875A.D. (775 years later) that
the number 0 was invented. And yes now that numbers were created, people wanted stuff to do
with them so they created calculators. A calculator was the very first sign of an information
processor. The popular model of that time was the abacus.
Mechanical
The mechanical age is when we first start to see connections between our current technology and
its ancestors. The mechanical age can be defined as the time between 1450 and 1840. A lot of new
technologies are developed in this era as there is a large explosion in interest with this area.

Technologies like the slide rule (an analog computer used for multiplying and dividing) were
invented. Blaise Pascal invented the Pascaline which was a very popular mechanical computer.
Charles Babbage developed the difference engine which tabulated polynomial equations using the
method of finite differences.

Difference Engine
There were lots of different machines created during this era and while we have not yet gottent to a
machine that can do more than one type of calculation in one, like our modern-day calculators, we
are still learning about how all of our all-in-one machines started. Also, if you look at the size of
the machines invented in this time compared to the power behind them it seems (to us) absolutely
ridiculous to understand why anybody would want to use them, but to the people living in that time
ALL of these inventions were HUGE.
Electromechanical
Now we are finally getting close to some technologies that resemble our modern-day technology.
The electromechanical age can be defined as the time between 1840 and 1940. These are the
beginnings of telecommunication. The telegraph was created in the early 1800s. Morse code was
created by Samuel Morse in 1835. The telephone (one of the most popular forms of
communication ever) was created by Alexander Graham Bell in 1876. The first radio developed by
Guglielmo Marconi in 1894. All of these were extremely crucial emerging technologies that led to
big advances in the information technology field.
The first large-scale automatic digital computer in the United States was the Mark 1 created by
Harvard University around 1940. This computer was 8ft high, 50ft long, 2ft wide, and weighed 5
tons - HUGE. It was programmed using punch cards. How does your PC match up to this hunk of

metal? It was from huge machines like this that people began to look at downsizing all the parts to
first make them usable by businesses and eventually in your own home.

Harvard Mark 1
Electronic
The electronic age is what we currently live in. It can be defined as the time between 1940 and
right now. The ENIAC was the first high-speed, digital computer capable of being reprogrammed
to solve a full range of computing problems. This computer was designed to be used by the U.S.
Army for artillery firing tables. This machine was even bigger than the Mark 1 taking up 680
square feet and weighing 30 tons - HUGE. It mainly used vacuum tubes to do its calculations.
There are 4 main sections of digital computing. The first was the era of vacuum tubes and punch
cards like the ENIAC and Mark 1. Rotating magnetic drums were used for internal storage. The
second generation replaced vacuum tubes with transistors, punch cards were replaced with
magnetic tape, and rotating magnetic drums were replaced by magnetic cores for internal storage.
Also during this time high-level programming languages were created such as FORTRAN and
COBOL. The third generation replaced transistors with integrated circuits, magnetic tape was used
throughout all computers, and magnetic core turned into metal oxide semiconductors. An actual
operating system showed up around this time along with the advanced programming language
BASIC. The fourth and latest generation brought in CPUs (central processing units) which
contained memory, logic, and control circuits all on a single chip. The personal computer was
developed (Apple II). The graphical user interface (GUI) was developed.
MICRO SCENARIO OF IT INDUSTRY

India is the world's largest sourcing destination for the information technology (IT) industry,
accounting for approximately 67 per cent of the US$ 124-130 billion market. The industry
employs about 10 million workforces. More importantly, the industry has led the economic
transformation of the country and altered the perception of India in the global economy. India's
cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the
US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing
market. However, India is also gaining prominence in terms of intellectual capital with several
global IT firms setting up their innovation centres in India.
The IT industry has also created significant demand in the Indian education sector, especially for
engineering and computer science. The Indian IT and ITeS industry is divided into four major
segments IT services, Business Process Management (BPM), software products and
engineering services, and hardware.
The IT-BPM sector which is currently valued at US$ 143 billion is expected to grow at a
Compound Annual Growth Rate (CAGR) of 8.3 per cent year-on-year to US$ 143 billion for
2015-16. The sector is expected to contribute 9.5 per cent of Indias Gross Domestic Product
(GDP) and more than 45 per cent in total services export in 2015-16.

he Indian IT sector is expected to grow at a rate of 12-14 per cent for FY2016 in constant
currency terms. The sector is also expected triple its current annual revenue to reach US$ 350
billion by FY 2025, as per National Association of Software and Services Companies
(NASSCOM).

India, the fourth largest base for new businesses in the world and home to over 3,100 tech startups, is set to increase its base to 11,500 tech start-ups by 2020, as per a report by NASSCOM
and Zinnov Management Consulting Pvt Ltd.
Indias internet economy is expected to touch Rs 10 trillion (US$ 146.72 billion) by 2018,
accounting for 5 per cent of the countrys GDP, according to a report by the Boston Consulting
Group (BCG) and Internet and Mobile Association of India (IAMAI). Indias internet user base
reached over 350 million by June 2015, the third largest in the world, while the number of social
media users grew to 143 million by April 2015 and smartphones grew to 160 million.
Investments
Indian IT's core competencies and strengths have attracted significant investments from major
countries. The computer software and hardware sector in India attracted cumulative Foreign
Direct Investment (FDI) inflows worth US$ 20.42 billion between April 2000 and December
2015, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Indian start-ups are expected to receive funding worth US$ 5 billion by the end of 2015, a 125
per cent increase in a year, according to a report by IT Industry association NASSCOM.
The Private Equity (PE) deals increased the number of Mergers and Acquisitions (M&A)
especially in the e-commerce space in 2014. The IT space, including e-commerce, witnessed 240
deals worth US$ 3.8 billion in 2014, as per data from Dialogic.
Government Initiatives
Some of the major initiatives taken by the government to promote IT and ITeS sector in India are
as follows:

Mr Ravi Shakar Prasad, Minister of Communication and Information Technology,

announced plan to increase the number of common service centres or e-Seva centres to
250,000 from 150,000 currently to enable village level entrepreneurs to interact with
national experts for guidance, besides serving as a e-services distribution point.

The Railway Ministry plans to give a digital push to the India Railways by introducing
bar-coded tickets, Global Positioning System (GPS) based information systems inside
coaches, integration of all facilities dealing with ticketing issues, Wi-Fi facilities at the

stations, super-fast long-route train service for unreserved passengers among other
developments, which will help to increase the passenger traffic.

The e-Tourist Visa (e-TV) scheme has been extended to 37 more countries thereby taking
the total count of countries under the scheme to 150 countries.

Department of Electronics & Information Technology and M/s Canbank Venture Capital
Fund Ltd plan to launch an Electronics Development Fund (EDF), which will be a 'Fund
of Funds' to invest in 'Daughter Funds' which would provide risk capital to companies
developing new technologies in the area of electronics, nano-electronics and Information
Technology (IT).

The Human Resource Development (HRD) Ministry has entered into a partnership with
private companies, including Tata Motors Ltd, Tata Consultancy Services Ltd and realestate firm Hub town Ltd, to open three Indian Institutes of Information Technology
(IIITs), through public-private partnership (PPP), at Nagpur, Ranchi and Pune.

MACRO SCENARIO OF IT INDUSTRY

The information technology (IT) industry has become of the most robust industries in the
world. IT, more than any other industry or economic facet, has an increased productivity,
particularly in the developed world, and therefore is a key driver of global economic
growth. Economies of scale and insatiable demand from both consumers and enterprises
characterize this rapidly growing sector.
The Information Technology Association of America (ITAA) explains 'information
technology' as encompassing all possible aspects of information systems based on
computers.
Both software development and the hardware involved in the IT industry include
everything from computer systems, to the design, implementation, study and
development of IT and management systems.
Owing to its easy accessibility and the wide range of IT products available, the demand
for IT services has increased substantially over the years. The IT sector has emerged as a
major global source of both growth and employment.

Features of the IT Industry at a Glance

Economies of scale for the information technology industry are high. The marginal
cost of each unit of additional software or hardware is insignificant compared to the
value addition that results from it.

Unlike other common industries, the IT industry is knowledge-based.

Efficient utilization of skilled labor forces in the IT sector can help an economy
achieve a rapid pace of economic growth.

The IT industry helps many other sectors in the growth process of the economy
including the services and manufacturing sectors.
This statistic illustrates the amount of revenue generated by the IT industry worldwide from 2005
to 2012, and also includes a forecast for 2013 and 2016. The source estimates that in 2016, more
than 1,357 billion euro revenue will be made through software, hardware and IT services.
FUTURE PROSPECTUS OF IT INDUSTRY
India is the topmost offshoring destination for IT companies across the world. Having proven its
capabilities in delivering both on-shore and off-shore services to global clients, emerging
technologies now offer an entire new gamut of opportunities for top IT firms in India. Social,
Mobility, Analytics and Cloud (SMAC) are collectively expected to offer a US$ 1 trillion
opportunity. Cloud represents the largest opportunity under SMAC, increasing at a CAGR of
approximately 30 per cent to around US$ 650-700 billion by 2020. The social media is the
second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by
2020. The Indian e-commerce segment is US$ 12 billion in size and is witnessing strong growth
and thereby offers another attractive avenue for IT companies to develop products and services
to cater to the high growth consumer segment.

Theoretical background of the topic