IT-BPO Industry- Analysis

Introduction

Wave I: Indian IT industry started growing in the 1980s with first services being made towards automation of manual processes.

Wave II: This was in the late 1990s when Indian IT offered low cost solution to American clients.

Wave III: Consolidation of BPO,KPO, IT Services

Wave IV: There is emergence of advanced services like Big Data, Analytics, Cloud to provide wholesome business solutions to clients

Indian IT-BPO Industry

The 1990s heralded the golden era of Information Technology in the country. It transformed the economic landscape of a nation that was under the clutches of the government till 1994. Liberalisation, privatisation and globalisation became the norm, even as the Indian economy made giant strides in IT and ITes (IT enabled services). Today, with a total revenue of US$70 billion, the Indian IT industry is touted as one of the most robust industries world-wide. A study by National Association of Software and Service Companies (Nasscom)-Deloitte shows that the contribution of the IT/ITes industry to the country's GDP has gone up to a share of 5% in 2007 from a meagre 1.2% in 1998. Software exports from India have increased and account for about 60% of India's total software revenue.

STRENGTH Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business. Proven Global delivery model Commitment to superior quality and process execution

WEAKNESSES Excessive dependence on US for revenues, 67 % of revenues from USA. Weak player in domestic market. Only 1 % of revenues from India low as compared to peers. Low R & D spending as compared to global IT companies only 1.3 % of total revenues.

Strong Brand and Long-Standing Client Relationships

Ability to scale Innovation and leadership

Low expertise in high end services like Consultancy and KPO

OPPORTUNITIES Domestic market set to grow by 20%. Expanding into new geographies Europe, Middle East etc.

SWOT

THREATS

Global economic slowdown may continue for several years hence low IT spending globally. US Govt. against outsourcing. Shrinking margins due to rising wage inflation, Rupee-dollar movement affects revenue and hence margins. Increased competition from foreign firms like Accenture, IBM etc .Increased competition from low-wage countries like China, Indonesia etc.

Acquiring companies to increase expertise in Consultancy, KPO and package implementation Opening offices and development centers in cost advantage countries such as those in Latin America and Eastern Europe

Competitive Analysis: Porters 5 Forces

Entry Barriers
Medium rivalry No destructive competition due to low exit barriers
Intense Rivalry

Level of Rivalry
Supplier Power Buyer Power

None; Input is manpower Buyer conc. v/s firm concentration- Varies for companies. Tier II companies have higher Buyer conc However switching costs are high Substitution with other vendors is feasible

Substitute

IT-BPO Industry Growth Over the Last 4 Years

Key Highlights during FY2012

Milestone year for Indian IT-BPO industryaggregate revenues cross the USD 100 billion mark, exports at USD 69 billion Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011 The industry continues to be a net employment generator - expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people

Software and services exports- 2012

% of total Software and services exports

19% IT Services 23% 58% BPO

ER&D, Software Products

Challenges faced by the IT-BPO Industry not require much skill. Any Working in a BPO, many feel is a job that does
body possessing a basic education, good communication skills is employable after some training. Companies do not mind taking in people who are middle aged, and homemakers. There is no sense of accomplishment among the employees.

Financial desperation is mostly the reason behind a person joining BPO

The tasks that BPOs perform are diverse like telemarketing, technical support service, customer support service, insurance processing, data entry and conversion services. Thus, there can be no standardized training program suitable for all the BPOs. In many cases, the outsourcers think only of achieving targets which can at times be unrealistic. Thus , this creates dissatisfaction in an employee Attrition in BPOs

Future Prospects
Global GDP, which grew by 2.7 per cent in 2011, is expected to grow 2.5 per cent in 2012 Better economic conditions in the second half of the year signifying return of consumer confidence and renewal of business growth, is expected to drive IT spending going forward.

Developing economies to grow thrice as fast as the developed economies.

Future Prospects
Indian IT-BPO services exports expected to grow by 11-14 per cent while domestic services to grow by 13-16 per cent (in Rs terms)

Action themes for the IT-BPO industry to remain competitive and profitable
To increase operational efficiencies, reinvent and embrace new business models to offer customers a transformed business proposition Continue the use of ICT for inclusive growth. Ensure that the basic necessities like education for masses, quality healthcare and employment and skill generation is benefited by ICT Drive concerted initiatives to strengthen the innovation capacity and research capabilities through specific domain focus and by encouraging R&D collaborations and public-private partnerships.

Enhance the skilled talent pool in the country and focus on specialisation

Continue to strengthen the long-term entrepreneurial environment