39508643--FINAL-IA-IT-G12 - A DETAILED ANALYSIS OF INDIAN...

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Unformatted text preview: A DETAILED ANALYSIS OF INDIAN INFORMATION TECHNOLOGY INDUSTRY UNDER THE GUIDANCE OF PROF. SAMIK SHOME SUBMITTED BY: GROUP NO: 12, MARKETING ± C PGP (2009-2011) GROUP MEMBERS: ANANT GOPAL (09PG068) JUZAR HUSSAIN (09PG256) PALAK S. DUBEY (09PG449) PRADHEEP R.A. (09PG334) TRIPTI JOSHI (09PG178) 1 2 DECLARATION We, the members of Group 12, Marketing Section C, PGP (2009-2011), would like to declare that the project on ³Information Technology Industry´ is an exclusive & detailed analysis carried out by us. The information, facts & figures in the report have been taken from reliable sources such as Capitaline, NASSCOM, Annual reports of the companies and corporate websites. SR. NO. NAME OF THE REGISTRATION STUDENT NUMBER 1 Anant Gopal 09PG068 2 Juzar Hussain 09PG256 3 Palak Shruti Dubey 09PG449 4 Pradheep R. A. 09PG334 5 Tripti Joshi SIGNATURE 09PG178 3 CERTIFICATE This is to certify that the members of Group 12, Marketing c, PGP (2009-2011) have completed the analysis on ³Information Technology Industry´ under my guidance for the course Industry Analytics in Term III in their PGP in Management (2009-11). NAME OF FACULTY GUIDE: PROF. SAMIK SHOME SIGNATURE: DATE: 4 ACKNOWLE E E NT We express our heart elt gratitude to Prof. Samik Shome for providi g us a chance to explore the Information Technology industry, which has helped us a lot to know the past and the present scenarios of the industry. We are grateful to his valuable suggestions, which helped us to refine our thoughts and his timely feedback helped us to improve our analysis and the report. We express our heartfelt gratitude to the Management of Alliance Business School for providing us the excellent facilities, which enabled us to improve the quality of our work. 5 TABLE OF CONTENTS Chapter No. Topic Page No. 1 Executive Summary 17 2 Review of Literature 18 3 Global Scenario of the IT Industry 24 3.1 Introduction 24 3.2 Evolution of IT 24 3.3 Rise of IT 25 3.4 Development of IT industry 27 3.5 R eview of development in IT industry 28 3.5.1 Early Development- till 1960¶s 28 3.5.2 Early Developments- till 1980¶s 31 3.6 Timeline 32 3.7 Major Global Players 36 3.7.1 IBM 37 3.7.2 Microsoft 38 3.7.3 SAP 38 3.7.4 Yahoo! 39 3.7.5 Symantec 40 3.8 Global Human Capital 40 6 4 Indian Scenario of IT Industry 42 4.1 IT, Hardware and Software 42 4.2 History 44 4.2.1 Pre 1991 44 4.2.2 1991-2001 45 4.2.2.1 Software Technology Parks 45 4.2.2.2 1991 Liberalization Policy 45 4.2.2.3 Satyam Scam 46 4.3 Milestones in Indian IT Industry 47 4.4 Top 20 Software Companies in India 47 4.5 Current Scenario 48 4.6 Indian Software Industry 49 4.7 The NASSC M-McKinsey Report 49 4.8 Invest ments 50 4.8.1 Rural penetration 50 4.8.2 Government initiatives 50 4.9 Employment under IT/ITES 51 4.9.1IT and ITES 51 4.9.1.1Trends in Hiring 52 4.9.1.2 Trends in Salary Hikes 52 4.10 Factors for success of IT in India 4.10.1 Indian Education System 4.10.2 High Quality Human Resources 52 52 53 7 4.10.3 Competitive Costs 53 4.10.4 Infrastructure Scenario 53 4.11 Promotion of IT 53 4.12 Global Sourcing Trends 54 4.13 IT-BPO Sector 55 4.14 IT Services, Engineering Services, 55 R D and Software Products 4.14.1 IT services 55 4.14.2 Engineering Services, R D and Software Products 55 4.14.3 BPO Market 56 4.14.4 Hardware Market 56 4.14.5 India¶s IT-BPO value proposition 56 4.15 Future Outlook 57 4.16 Major Indian Players in IT Industry 57 y y y y y 5 TCS Infosys Wipro Tech Mahindra Oracle Industry Analytics 59 5.1 SWOT 59 5.1.1 Strengths 60 5.1.2 Weaknesses 62 5.1.3 Opportunities 63 8 5.1.4 Threats 64 5.2 Port er¶s 5 Forces Model 65 5.2.1 Substitute products/services 5.2.2 Potential new entrants 66 5.2.3 Rivalry amongst industry firms 67 5.2.4 Empowered buyers 68 5.2.5 Empowered suppliers 6 65 69 Company Analysis 70 6.1 Inter-Company Analysis 70 6.1.1 Current Ratio 70 6.1.2 Debtors Turnover Ratio 71 6.1.3 Interest Coverage Ratio 72 6.1.4 Profit Before Interest and Tax 73 6.1.5 Price to Earnings ratio 74 6.2 Intra-Company Analysis 6.2.1 Infosys 6.2.1.1 Current Ratio 6.2.1.2Debtors Turnover ratio 6.2.1.3 Interest Coverage ratio 6.2.1.4 Profit Before Interest and Tax 75 75 75 76 76 76 6.2.1.5 Price to Earnings Ratio 76 9 6.2.2 TCS 77 6.2.2.1 Current Ratio 77 6.2.2.2Debtors Turnover ratio 78 6.2.2.3 Interest Coverage ratio 78 6.2.2.4 Profit Before Interest and Tax 78 6.2.2.5 Price to Earnings Ratio 78 6.2.3 Wipro 6.2.3.1 Current Ratio 6.2.3.2Debtors Turnover ratio 6.2.3.3 Interest Coverage ratio 6.2.3.4 Profit Before Interest and Tax 79 79 80 80 80 6.2.3.5 Price to Earnings Ratio 80 6.2.4 HCL 81 6.2.4.1 Current Ratio 81 6.2.4.2Debtors Turnover ratio 82 6.2.4.3 Interest Coverage ratio 82 6.2.4.4 Profit Before Interest and Tax 82 6.2.4.5 Price to Earnings Ratio 6.2.5 Oracle 6.2.5.1 Current Ratio 6.2.5.2Debtors Turnover ratio 6.2.5.3 Interest Coverage ratio 6.2.5.4 Profit Before Interest and Tax 6.2.5.5 Price to Earnings Ratio 82 83 83 84 84 84 10 7 IT Related Industries 85 7.1 BPO 85 7.1.1 Background 85 7.1.2 Factors for success in India 85 7.1.3 Current Scenario 86 7.1.4 Top 10 Indian BPO Companies 88 7.1.5 Future Scenario 90 7.1.6 Challenges to Indian BPO Industry 90 7.2 KPO 91 7.2.1 Current Scenario 91 7.2.2 Future Scenario 92 7.3 ITES 93 7.3.1 Engineering Process Services 7.3.2 Legal Process Outsourcing 93 7.3.3 Insurance 94 7.3.4 Procurement Outsourcing 94 7.3.5 Healthcare 9 93 94 Vision and Growth Forecast of the 95 Indian IT Industry 95 8.1 Vision and Mission 95 8.1.1 Vision 95 8.1.2 Mission 11 8.2 Software Technology Parks of India 8.2.1 Basic Characteristics 95 96 8.3 Infrastructure Services provided by 96 STPI 8.4 Growth Forecast Industries in India of IT related 98 8.4.1 2010 Outlook 98 8.4.2 Indian BPO performance estimat es 98 8.4.3 Exports Markets 98 8.4.4 Domestic Markets 99 8.4.5 Market Drivers 99 8.4.6 Segments 99 8.4.7 Inference 100 8.5 Future of Indian IT Industry 100 8.5.1 Major Areas of Benefits 101 8.5.2 Inference 102 8.6 Challenges in Indian IT Industry 102 8.7 Conclusion of the chapter 106 9 Conclusion 107 10 References 109 12 LIST OF TABLES Table no. Topic Page no. Inter-Industry Analysis of 5 companies for 5 years- 1 Current Ratio 70 2 Debtors Turnover Ratio 71 3 Interest Coverage ratio 72 4 Profit before Interest and Tax 73 5 Price to Earnings ratio 74 Intra-Industry Analysis of 5 companies for years 6 Infosysy y y y y 75 Current Ratio Debtors Turnover Ratio Interest Coverage Ratio Profit Before Int erest and Tax Price to Earnings Ratio 13 7 TCSy y y y y 8 81 Current Ratio Debtors Turnover Ratio Interest Coverage Ratio Profit Before Int erest and Tax Price to Earnings Ratio Oracley y y y y 79 Current Ratio Debtors Turnover Ratio Interest Coverage Ratio Profit Before Int erest and Tax Price to Earning Ratio HCLy y y y y 10 Current Ratio Debtors Turnover Ratio Interest Coverage Ratio Profit Before Int erest and Tax Price to Earnings Ratio Wiproy y y y y 9 77 83 Current Ratio Debtors Turnover Ratio Interest Coverage Ratio Profit Before Int erest and Tax Price to Earnings Ratio 14 LIST OF GRAPHS Table no. Topic Page no. Inter-Industry Analysis of 5 Companies of 5 years 1 Current Ratio 70 2 Debtors Turnover Ratio 71 3 Interest Coverage Ratio 72 4 Profit before Interest and Tax 73 5 Price to Earnings Ratio 74 Intra-Industry Analysis of 5Companies for 5 years 6 Infosys 75 7 TCS 77 15 79 8 Wipro 9 HCL 81 10 Oracle 83 16 1. Executive Summary: The information technology (IT) industry has become one 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. Information Technology is the fastest growing as well as one of the most important industries in the Indian economy. The principal components of IT include: hardware, and its associated peripherals; software, which includes programming languages and their applications; communications devices, comprising both terrestrial and wireless units and related equipment; and the Int ernet, which is based on a whole generation of new computer languages and protocols that link individual computers into a vast network through which information can flow unimpeded. Mainframe computers though being used since 1950¶s, the introduction and acceptance of PC¶s really heralded the development of this industry. Nowadays the increased use of IT and the fast emergence and dominance of mobile and wireless technology has led to a surge in IT products. IT plays an important role in the economies of countries like India, America, and China. Since IT being a µsyst ems technology¶, it shows a spread effect and therefore has an extensive influence on other sectors. IT went through a structural change in the late 80s as the Asia and Pacific region emerged as one of the major players in global IT production in all the core segments of the industry. This included countries like India, China, and Hong Kong, Japan etc. The IT boom in the 1990s saw the emergence of many software companies and also made this sector as one of the most lucrative industries. Many software companies are among the richest and biggest corporations in the world. These include examples of software giants like IBM, Microsoft, Oracle, Yahoo, Symantec etc. The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers for installing system software for U.S. clients. The IT sector which started in unfavorable conditions like absence of local and govt. regulations today is one of the fastest growing industries. The Indian IT industry has built up valuable brand equity for itself in the global markets. The IT industry of India has registered huge growth in recent years. India's IT industry grew from 150 million US Dollars in 1990-1991 to a whopping 50 billion UD Dollars in 20062007. The contribution of India's IT industry to economic progress has been quite significant. During the t en year period 1992-2002, the Indian software industry grew at double the rate as the US software industry. 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. India's IT growth in the world is primarily dominated by IT software and services such as Custom Application 17 Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Software testing, and Web services. In the last few years Indian IT industry has seen tremendous growth. Destinations such as Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT parks have come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc. These parks offer Silicon Valley type infrastructure. Similarly STPI¶s have been set up under the Ministry of Communications to provide facilities like Infrastructure and technology assessment. In a world where information technology has become the backbone of businesses worldwide, 'outsourcing' is the process through which one company hands over part of its work to another company. The ITES or BPO industry is a sector in India that has been in exist ence for a little more than ten years. Despite its recent arrival on the Indian scene, the industry has grown phenomenally and has now become a very important part of the export-oriented IT software and services environment. Out of the U.S. $35-37 billion offshore BPO market in 2008, India remained the leading offshore destination with 35% market share. The export revenue from ITES-BPO sector is estimat ed to grow from US $ 10.9 billion in year 2007-08 to US $ 12.8 billion in year 200809, a year-on-year growth of over 17.5 per cent. The major Indian BPO players include giants like IBM Daksh, Wipro BPO, and GENPACT who have managed to create a distinct niche for themselves. Al of this depicts a very positive signal for the IT services as a whole which has been showing its increasing presence in contributing to the Indian GDP. However despite IT majors putting up a brave front, there are a number of challenges which are being faced by the faced by the Industry. For e.g. as per a Nasscom report India faces a strong challenge in IT industry particularly the BPO sector in the coming years from countries like China. Similarly the IT sector needs to create an environment for innovation that could be carried for a long time. Also challenges in the human resource aspect like the challenge of numbers, acquiring and retaining talent, decreasing attrition and turnover are one of the most important crises being faced by the industry today. Since IT is an industry which unlike other industries is knowledge based, people are the primary assets and efficient utili ation of skilled labour forces can help the IT industry achieve rapid pace of economic growth 18 2. Literature Review: 2.1 According to Thinmaya (2009), at the time when top Indian tech firms like TCS, Infosys, and Wipro planned to slow down their growth by hiring less number of people, multinational software companies such as IBM, Accenture and Cap Gemini continued to hire more software professionals in order to expand their offshore capabilities. He continues to say that the large organi ations are seeking to increase their offshore teams so as to lower their operational costs. Tesco, the world's second-biggest retailer, plans to add a few hundreds more professionals to its existing team of around 3,000 employees at the Bangalore centre. The retailer saves around $60 million every year by outsourcing to India. He also talks about many other companies such as Stanton Chase International, Atos Origin and Allegis India which are planning to increase its work force in India by a large number. 2.2 This article t ells about the potential of Indian IT-BPO market which is expected to touch $285 billion by the year 2020 growing at a compound annual growth rate (C AGR) of 15% per year. It also says that India will satisfy approximately 51% of overall global sourcing demand and is expect ed to retain its leadership position by 2020. It also claims about the achievement of impressive growth rates of the IT-BPO industry over the past decade. The contribution of developing countries like India, Sri Lanka, Pakistan and Bangladesh and Thailand are expected to make their mark on the global sourcing supply landscape by 2020. This would be possible as the nations in the Asia- Oceania region will aim for a much larger target market in the information, communication and t echnology (ICT) industry by 2020 and ICT is being used as a key enabler for growth, which is helping these economies move out of the downturn at a faster pace. 2.3 According to Pandey, there has been a clear change in the attitude of the people in the way Marketing has come to be defined in the IT industry. She first talks about the evolution of the IT industry wich took place in 70¶s and 80¶s but after the Y2K, a lot of new technology was adopted. This generated the need for branding and positioning the IT industry. She goes on to tell that marketing can be used to generate leads, create more openings, work to convert suspects into prospects and prospects into customers as one can reach out to them with a range of services that they can choose from. She also says that marketing should be focused towards not just making the customers invest more and more in technology but helping them get the maximum returns from the existing investments. Advertising can play a role but that should be just be an enhancement. Marketing, as she puts, helps proactively identify customer¶s problem and needs, creating value proposition for the customer and position a suitable solution for them, thus leading to business development. 19 2.4 According to Askari & Raghotha, (2008), the IT industry in India is recogni ing that Green Computing is a trend that will have comprehensive effects on both business and the environment. Green-ness of the IT technology would become increasingly important when it comes to selecting their suppliers. With increasing concerns over global warming and climate change, the focus has turned to the Information and Communication Technology (ICT) market and the carbon emissions of the IT industry. According to an estimat e, IT does as much damage to the environment as the airlines industry. They have also included in their excerpt what Naresh Wadhwa, Cisco¶s President and Country Manager for India & SAARC, has to say about the problem. He goes on to say, ³More power is consumed in the data center than in any other IT environment. The emissions that result from generating this power are a serious threat to the health of our global ecosyst em¶¶. Most IT user organi ations are demanding Green IT products. And so, most IT vendor organi ations are adopting the same strategy to meet this demand, by focusing on the energy efficiency of their products. It is an immense business opportunity, but the key is to innovate. Organi ations which come up wit h products and services which have not only a business impact but also social and environmental benefits stand to gain. By saving energy consumption and increasing efficiency can lead to cost savings and therefore, there is a RoI and lower lifecycle costs of IT. 2.5 According to Bhupta (2010), as India is showing great improvement in reviving from the global meltdown, many Indian companies are now investing heavily into hiring people extensively, including many from the IT sector. There will be an investment of over $250 million in the next three years on hiring people. He says close to a million new jobs will b e added by the organi ed sector in 2010-11, an increase of nearly 10 per cent over 2007. In order to understand trends and hiring plans, 1,000 companies have been qui ed, across all major industry segments, geographical areas and si e in the short and medium t erm. Wit h economic growth expected to be in the 7 to 8 per cent range, India will creat e 917,000 new jobs in 2010-11. The country is expected to be a $4-trillion economy by 2019. He says that according to a quarterly survey done by international recruit ment firm Antal on hiring and firing, about 71 per cent of Indian organisations are hiring in 2010 and 78 per cent are likely to hire managerial staff over the next three months. 2.6 According to Kovar (2010), Oracle and storage vendor Hitachi Data Systems are ending the long-term reseller agreement that HDS originally had with Sun in a move that could cause customer confusion but will probably mean channel opportunities. Hitachi Data Systems told its solution providers via an e-mail that the reseller agreement it signed with Sun nine years ago will end on March 31,2010. HDS also said it will provide "solid transition programs" to its partners to ensure its storage solutions continue to be available to partners and their customers under the Hitachi Data Systems brand name. 20 2.7 According to Ahuja (2000), over the years there has been a incredible transformation in the Indian IT industry, from a small sector to a large and growing industry. From being a sector to an industry, from being for specialists to masses, there has been a mention of a few criteria from being perceived what it was earlier and how it is changed now. He also talks about how, earlier, IT industry was not regarded as an industry and it was dealt with as any manufacturing industry. But gradually, it was given support to be considered as a nonconventional industry to make help India become an IT super power in the world. This document also tells about the government taking recommendations of the NASSCOM, who in return acts as a business strategist for the government. He also talks about the IT enabled services which has been recogni ed as a key opportunity area for Ind...
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