India’s IT/ITeS Industry: The Next Phase

Entrepreneurship & Broad-Based Innovation

Dr. Anupam Khanna. Chief Economist

National Consultation on Women’s Entrepreneurship

New Delhi February 19. 2013

Hardware Products Services

IT Services BPO

• Project

Oriented

• Outsourci

ng

• Support &

Training

Embedded

Systems

• Software

Products

• System

Software

• Enterprise

applications

• Vertical

applications

• Personal

Computers

• Network

Equipment

• Storage and

Security

• Servers

• Printers

IT-BPO

ER&D OSPD

• Horizontal

Specific

• Vertical

Specific

2 17-Apr-13

The IT-BPO industry segmentation

INDIAN IT-BPO INDUSTRY

Source: NASSCOM

Brief history of Indian IT-BPO revenue

3 17-Apr-13

The industry added 230,000 jobs in FY2012

Brief history of Indian IT-BPO direct

employment

INDIAN IT-BPO INDUSTRY

Source: NASSCOM

* Excluding Hardware

Figures (‘000)

4 17-Apr-13

Composition of India’s exports basket

Source: Eichengreen and Gupta, 2012

5 17-Apr-13

6

Current Scenario – IT Contd……

Sophistication of Services Exports

Industry moving from “Enterprise service providers”

to “Enterprise solution creators”

Source: CLSA, NASSCOM

DIMENSIONS 1990 2000 2010 onwards

SERVICE DELIVERY

DEALS STRUCTURE

PRICING

RESOURCES

TIME TO DEPLOY

SERVICES

STRUCTURE STRUCTURE STRUCTURE

STRUCTURE STRUCTURE STRUCTURE

STRUCTURE STRUCTURE STRUCTURE

STRUCTURE STRUCTURE STRUCTURE

STRUCTURE STRUCTURE STRUCTURE

STRUCTURE STRUCTURE STRUCTURE

Custom,

People-driven

Input-based,

Fixed costs

Staff augmentation

Years Months Weeks or Days

Industrialised, capacity

and method-driven Capacity and IP-driven

Small deal wins, short

duration. End-to-end

Output-based, fixed

costs or gain share Pay per use

Fixed capacity Non-linear

TECHNOLOGY STRUCTURE STRUCTURE STRUCTURE Mainframe to Client

server

Y2K, dotcom

enablement

Cloud, virtualisation,

Mobile computing

Source: CLSA, NASSCOM

CUSTOMER CENTRIC

Enterprise services Enterprise solutions

Multiple vendors, large

size, long duration

Deals related to CAD/M

and maintainence

One client, one solution

Service providers’ value proposition maturing beyond

cost to delivering business outcome

Source: NASSCOM

Service Providers

<2004 2004-2007 2007-2009

•Asset heavy •Dedicated/captive model

•Time & material •Staff augmentation

•Asset-light •Shared services •Resource sharing •Test Labs •Emergence of Managed services

• Shared, Managed services

• SLA driven •Agile •Cloud, Platform •Test Labs, CoEs • Pay-per-use

Shift to Managed

services

2009-2013

Shift to “Pay Per

Use” model

• Shared, Managed services

• Business Tech Mgmt

•Monetisation of assets/platforms

•XaaS, Cloud, Mobility, Social

•Agile methodology

• Verticalised CoEs • Pay-per-use, Risk-reward

COST

• Labour arbitrage

QUALITY

• Process excellence

MATURITY

VA

LU

E

OUTCOME

• Verticalisation

• Innovation

• Transformation

DIFFERENTIATION

• Lower lifecycle

costs

• Faster time to

market

• Differentiation

Efficient Delivery Effective Outcomes

‘Verticalisation’–Business transformer

1. Organisational Design

Verticalised across business functions –

going beyond sales

2. Organic- Internal Capability

Investments in vertical specific tools and

talent

E.g. Hiring doctors/nurses for domain

intensive healthcare - medical coding etc.

3. Inorganic- Value Additions

Fill vertical specific gaps through

acquisitions or enter newer verticals

E.g. Acquisition of platforms such as Life

Admin / Claim adjudication (Insurance)

4. Alignment of KPIs, metrics

Vertical specific P&L accountability, goals

E.g. Horizontal capabilities such as

analytics getting aligned to verticals

Cost Low

No

n P

rice

Va

lue

High

High

Low

Initiate Non Linear Play Offerings- Products, Platforms,

Software assets, Solution

Accelerators

Extending Cost

Proposition Offerings- RIM, Testing, BPM

Through- Changing employee

mix, pyramid, tier 2/3

Moving up Value Chain

Offerings- Consulting and SI,

Specialized voice

Through- Global delivery and

workforce

The Indian IT-BPM industry today moving

along three paths to offer more value

Source: NASSCOM

India: World’s largest employable talent pool

India: Human Capital

379

1,158

FY2006** FY2013E**

36%

14%

12%

9%

16%

6%

6%

COMPOSITION

100% ~4.74 million

Postgraduates

3 yr Engg Diploma/MCA

4 yr Engg

Degree

Science

Graduates

Commerce

Graduates

Arts + Other

Graduates

Other Graduates

2,557

3,584

FY2006** FY2013E**

OUT-TURN Technical Graduates, Post Graduates

‘000 nos

Notes: E: Estimate ** NASSCOM estimates based on past trends in annual enrollments / intake and outturn Source: NASSCOM

Non-technical Graduates, Post Graduates

‘000 nos

FY2013E

CAGR

17%

CAGR

5%

• 4.5 million graduates each year

• World’s largest employable

graduates: ~36-37 per cent

• English speakers: Second

largest in the world

• Network of ~389 universities,

14,169 colleges and 1,500

research institutions

COMPLETE

India: Human Capital

India’s uniquely diverse workforce and established

training engine ensuring a future ready workforce

Talent diversity1: IT Services

2012, per cent

Talent diversity1: BPO

2012, per cent

70%

12%

8% 10%

Technical (Incl. Post Grads) Non Technical (Incl. Post Grads)

Domain Specialists Others

16%

66%

9% 9%

Technical (Incl. Post Grads) Non Technical (Incl. Post Grads)

Domain Specialists Others

Source: NASSCOM

INDUSTRY TRAININGS

• Communication

• Soft Skills

• Technical Skills

• Domain Knowledge

BUSINESS READY

• Verticalised solutions

• Tools & Platforms

• Industry Best Practices

• Adopt new technologies (SMAC)

~3 million

knowledge

workers

COMPLETE

“SMAC” – Social Media, Mobility, Analytics and Cloud

reshaping the future of the Indian IT Industry

Impact is highly evident

• Create a new digital

operating model and

transformation to a

permeable enterprise

• Engagement with a

growing digital ecosystem

• Empower enterprises to

embrace emerging

technology trends and to

benefit from the value

expectations of customers

• Innovative thinking in

business and enterprise

architectures

SMAC, is becoming a business reality

Social, mobility, analytics and cloud are reshaping

the business, the consumers and all traditional

approaches, Indian Industry has seen till now

Movement towards the next orbit of innovation with

consumerization of IT

Opportunity to move to higher-margin business

by offering creative solutions

Help businesses grow dynamically instead of

increasingly cutting margins for typical IT contracts

Launching luxury product lines that comprise the

SMAC suite of technologies to go the next level

Huge potential for revenue generation

IDC Indian IT vendors expected to generate over

$225 billion in SMAC related revenue by 2020

Drivers/ factors contributing to the changing landscape of Technology

Transformation

Remodelling business processes

through harmonizing technology

advancement

Client- specific outcomes

A meaningful change in the business

requirements i.e., end-to-end solutions

New paradigm for business

Efficiency, Enhanced customer

experience, Reduced time to market,

Connectivity, IT Consumerization

Journey to the Cloud continues; enthusiasm for Big Data, Mobility and Social Analytics also remains strong

Mobile payments Smart cities Connected Health Pivot merchandising

mBanking mHealth Smart Buildings mGovernance Platform-as-a-Service

Domestic IT-BPO market growing fastest in India; driven by increased PC/broadband and mobile penetration

INDIAN IT-BPO INDUSTRY > DOMESTIC

13

Source: NASSCOM-Zinnov India’s Domestic IT-BPO Market: Winds of Change

PC and Mobile Penetration in India

(Million nos)

Broadband Subscribers and Active Internet

Users in India

Hypermobility…but only for some ??

15 17-Apr-13

Technology can transform India’s ability to

provide basic services

Basic services Potential technology and services’ solutions

Healthcare 50% of Indians do not have access to primary healthcare –

technology can provide it at half the cost

Financial

services

80% of Indian households are unbanked – technology can

enable access for 200 million families

Education

India faces a 3-fold shortage in teachers – technology can

address this through remote solutions (e.g., virtual

classrooms, recorded lectures by senior faculty, modular

multimedia content)

Public

services

India suffers from a leakage of 40-50% in public food

distribution – technology can ensure transparency

17-Apr-13 15

Inclusive ITeS Innovation Examples

• Mobile Financial Services: EKO

• Mobile Phones for Data and Text

• Rural Development: Ekgaon , Nano Ganesh

• Health Diagnostics (Avoidable Blindness): 3nethra

• Public Health (Maternal & Child Health): e-Mamata

• Travel Services: iXiGO

• Unique Identification System: Aadhar

17

Blindness A Global threat

Problem

Challenges

• Blindness is a Global threat to health and productivity • Of the 39 Mn blind people in the world 12 Mn live in India • Africa has approximately 19% of the world’s blindness • 80% blindness caused due to –

• Cataract / Glaucoma / Refractive Errors/ Diabetic Retinopathy/AMD • Of the 60 Mn Diabetic patients in India 20% will develop diabetic retinopathy

• Scalability – Low Patient-to-Ophthalmologist ratio; 1:70000 in India • Affordability – Expensive devices which require trained ophthalmologist • Rural reach – Only 7-10% of the people are screened on time • Awareness – Lack of awareness about detecting eye disorders early

80% of blindness can be prevented if pre-screened

An Effective Pre-screening tool is the Unmet need!

Forus 3nethra

A Pre-screening Ophthalmology Device

Cornea Imaging

Retina Imaging

3nethra is an affordable multi-functional portable ophthalmic imaging system

Refractometer

3nethra ForCare

Cloud based Tele-ophthalmology capability

Banking and Financial Services:

Increasing security and convenience for end users

• Mobile and Internet Banking lower the requirement of cash

handling

• Specialised security software ensure data privacy and security

Improving Security for both the User and the Provider

• Ease of information access and issue resolution through call

centers

• Convenience due to higher responsiveness of online and

mobile banking

Improving Customer Service

• Enhanced efficiency in basic processes reduces number of

trips to a branch

• User-friendly mobile/online payment solutions

Increasing Agility in Processes

• Enhanced customer convenience due to integration of

applications

• Ability to demand customised solutions on basis of the past

track record

Integration of Different Services and Processes

Internet Banking

Mobile Bank

Branches

ATMs

SMS/Mobile Banking

Phone Banking

Benefit of IT-BPO

Products and

Services

on

Banking and

Financial

Services

Customer Care

Services

Core Banking

Solutions

Source: Evalueserve Analysis

21

• Licenses for semi-closed wallet being issued to non-bank entities like Bharti Airtel and ITZ Cash

• RBI considering a dedicated clearing house for m-payments

• Considerations underway on m-pin based m-banking POS, mobile linked no-frills accounts using biometric authentication, etc.

• Mobile payment service providers (like Obopay) evangelizing the need for mobile money for banks like Yes Bank, Union Bank of India, etc.

• Following the success stories like M-PESA in Kenya and M-KESHO in Africa, M-PESA has been introduced in India by Vodafone and HDFC Bank

• Mobile-based branchless banking platforms are being adopted by the banks, e.g. A Little World platform by SBI

• Large databases of information are available enabling automation of services like IVR

IT as

an

Enabler

Industry as

an Enabler

Government

as an

Enabler

Mobile

Banking India’s mobile banking customer

base was 0.887 million in Sep ‘10

RBI guidelines have restricted the

mobile banking transactions to INR

2,500 per transaction

Mobile Banking

Note: 1; IMG- Inter Ministerial Group,, MNO – Mobile Network Operators, POS – Point of Sale, IVR -Interactive voice response; SWIFT -

Society for Worldwide Interbank Financial Telecommunication

Source: ASSOCHAM Report Mobile Value Added Services (MVAS) 2010; Zinnov Analysis

Healthcare: Improving accessibility & efficiency

Increasing accessibility of health

services in remote areas

Increasing awareness about health-

related issues

Increase in efficiency by reducing

burden on doctors and optimising

resources

Scalable and cost effective health

services

Telemedicine

Electronic Medical

Record and Hospital

Automation

Automation of

Peripheral Healthcare

Services

Picture Archiving and

Communication System

Managed Healthcare

Services

Mobile Health Clinics

Key

technology

solutions

for

Healthcare

Source: Evalueserve Analysis

23

Retail Industry Growth Drivers

Increasing maturity of unorganized sector

Rising number of malls and supermarkets

New players entering the market, existing

players rapidly expanding

Innovative store formats: community

shopping, wedding malls, etc.

Private brands/labels by big retailers

Network all offices and outlets of the

company

Provide remote training to employees

Enable an efficient supply chain network

Improve customer service

Address security at all levels

Finance & accounting and HR

Note: 1NCR, Mumbai, Hyderabad, Pune, Bangalore, Kolkata and Chennai

Source: Zinnov Analysis

Ensure faster and efficient transaction

Te

ch

no

log

y

Dri

ve

rs

Business Trends Need for Technology

Companies establishing presence on the

internet/online platform

Take Away’s for Policy & Strategy

• IT not just for “big boys” or rich yuppies...can play

transformational role in society, polity and economy

• Refocusing Strategic Priorities for Indian IT in Next Decade

...Domestic Markets and Developing/Emerging Countries

...Not just about Growth, also about Learning

• Affordability, Scalability, Reach and Education/Awareness

Key to Direction of Entrepreneurship & Innovation

• Innovation is More Than R&D, Even D&E of Products

...Service Dimensions and “Business Models” also Salient

• Government Critical to Shaping “Demand” or Ecosystem

• Advance Market Commitment (e.g. Laptops for Students)

• Platforms (e.g. Aadhar)

• Incentives and Regulation

Enabling Women Entrepreneurs

• Skills and Training – both Business and Soft Skills

• Peer-Group Networks

• Information Dissemination

• Supplier Diversity Programs at Major Firms

• Encouraging (Actively Supporting?) Spin-Offs

• …in addition to usual aspects of the innovation eco-system

17-Apr-13

Thank You