for future years up to 2015–2016. These figures do not include professionals who are getting trained by their employers and also do not include revenues or the number of professionals related to other business process services or hardware products. The revenue numbers given in the first four columns have been sourced from the National Association of Software and Services Companies (NASSCOM; www.nasscom.org); all other figures have been taken from Evalueserve ( www.evalueserve.com), a global research and analytics firm.
Since India’s GDP is expected to be $1, 100 billion in 2007–2008 and since this GDP is growing annually at an average of 8.5% in real terms and 14% in nominal terms, this GDP is likely to be $2,400 billion in 2015–2016. Consequently, if the forecasts provided by Evalueserve regarding the Indian IT industry turn out to be true, then by 2015–2016, the number of professionals working in the IT industry would have grown tenfold (from 2001–2002 to 2015–2016), and, in nominal terms, the total revenue would have grown by 22 times, which would end up being approximately 8% of India’s GDP.
To assess what may be ahead, consider the current and future status of three key elements of the Indian IT industry:
Export of IT Services: IT export services provided from India include custom application development, application management, information systems outsourcing, software and hardware development and support, training, education and helpdesks, IT consulting, systems integration, software testing, network consulting, and network integration. During the last 10 years, exports of these services have been growing at an annual rate of 32%. However, Evalueserve expects this growth rate to slow to approximately 19% in the next five to six years because of a lack of availability of enough talent, rising wages, and increased attrition. The U.S. and U.K. remain the largest export markets, accounting for approximately 61% and 18% of exports respectively in 2007–2008. However, IT exports have also been steadily increasing to other countries. In particular, IT exports to continental Europe have witnessed notable gains, growing at an annual rate of more than 55% during the period 2004–2007.
Domestic Use of IT Services: India
was a closed economy until 1991 and the Indian government owned many banks and companies that had little or no use for IT. However, in 1991, its government started opening up and most Indian companies had to compete with both domestic and multinational companies that wanted to sell in India. Consequently, many such companies—including domestic banks, airlines, railways, telecommunications companies, and other government-owned companies—have become or are in the process of becoming avid users of IT. Hence, the domestic IT services industry has been growing at an annual rate of 41% during the last two years and is expected to continue growing at 5%–6% per year more than export services for the next seven to eight years. This implies that by 2015–2016, the number of IT professionals employed in the domestic IT industry would be comparable to that employed in the IT exports industry. The domestic IT industry, which contributed only 0.8% to India’s GDP in 2006–2007, is likely to contribute 2.7% by 2015–2016. At present, internal company departments provide more than 90% of all domestic IT services. That provides a large opportunity market for third-party vendors, particularly as liberalization and globalization mean the types of domestic IT services provided within India are
similar to those found in the industrialized world.
Import of IT Products and Services into India: In India, the number of mobile phones has been increasing at approximately nine million per month, and the total number is likely to exceed 340 million by the end of 2008, thereby making India the second-largest mobile phone market after China. Interestingly, IBM is already servicing approximately 50% of the mobile phone subscriber base in India after signing three 10-year contracts with Bharti Air-tel in 2004, Idea Cellular in 2006, and Vodafone Essar in 2007. Most of these agreements require IBM to consolidate, transform, and manage comprehensive infrastructure and applications, as well as to jointly develop marketing IT and telecommunications solutions and services. Clearly, such a move frees up these clients to do aggressive marketing, sales, and business development. Although IBM may not have been the least-expensive provider, it probably won these contracts because it was able to bring its intellectual property, products, and services from other parts of the world where it has already helped other very large telecommunications companies. Since Indian financial services (such as banks and insurance companies) and transportation ( especially airlines) are also expanding and globalizing at a phenomenal pace, these sectors are likely to follow suit.
Across all parts of Indian IT, then, we see the synergistic impact of globalization. Globalization helps Indian IT companies to grow, while Indian IT is becoming a digital foundation for many globalizing firms. As the Indian economy becomes more integrated into the global economy, there is another two-way effect—more opportunity for global IT firms to sell to Indian clients. And, of course, more opportunity for Indian IT firms to sell globally.
This is the first of the “Emerging Markets” columns. Subsequent columns will address the roles of other emerging countries in the globalization of IT, including China, several Eastern European countries, the Middle East, and Latin America.
Alok Aggarwal ( alok.aggarwal@evalueserve.com) is the co-founder and chairman of Evaluserve, Inc. in Saratoga, CA.
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