Indian IT-BPO Industry: Driving India’s

Socio Economic Transformation

Rama Vedashree

rama@nasscom.in

Indian IT-BPO Industry – Young Industry

inventing, reinventing, transforming in a short span

Business

needs

Scalability

Lower operating

costs

Discrete Processes End-to-end

Development

Access to new

capabilities

Accelerate time

to market

Legacy migration

Y2 K deadlines

Mid 2000 to

present

Domain

expertise

End to end

services

Access to

R&D

capabilities

Value creation

IT-BPO

Product

and

Service

Offerings

Data Entry

Customer support

Software

development and

support

Application

development and

maintenance

Transaction

Processing of

non-core

activities

Y2K contracts

Application

development

and

maintenance

IT support

Integration

projects

New service

lines such as

KPO, LPO

Large scale

application

development and

maintenance

IT strategy and

consulting

High-end

services such as

analytics

Engineering

design services

Product

innovation

End to end

product

development

Business

transformation

and re-

engineering

Going

Forward… Early 2000s Late 90s Late 80’s-Mid 90s

S

cale

an

d c

om

ple

xit

y

Creation of a “Unique” Industry – Putting

India on the World Map!

Emerging as global multinationals

70 countries, >200 cities, ~560 delivery centers; 10 companies listed on overseas stock

exchanges; ~400 Fortune 500 customers

Participating in local ecosystem development

–~3-5% Foreign nationals employed

GIC- Largest network in the world

Global hub for ER&D

>750+ GICS; employing over 20% of the manpower

Generation of high quality employment and infrastructure

• Governance and quality- 35% of all CMMI 5 registered companies; highest proportion in S&P

ESG index

• Investments in employees and facilities- 200 mn sq feet of office space

Attracting investments

Accounts for ~7% of India’s total FDI in the last 12 years

~$ 12bn invested by PE/VC in the last 12 years

Global presence through cross border acquisitions

~200 cross-border acquisitions over FY08-10

Indian IT-BPO

industry: Leader in

Global Sourcing services

Lasting, Sustainable and Phenomenal

contribution over the last decade

Contributing to India’s economy

Empowering the diverse human assets

Putting India on the Global map

Socially responsible and inclusive

Driving Balanced Regional Development

Creating Innovation Platform

Multi-fold

impact on the

Indian

Economy

Catalysing India’s transformation to a

services-based economy

0%

10%

20%

30%

40%

50%

FY02 FY05 FY09 FY12Trade, Hotels,Transport & CommIT-BPOCommunity,Social & Personal ServicesFinancing, Insurance, Real Estate & Business Services

• Contributes to ~12% of

India’s service sector

revenues

• Unique “service led”

export oriented model

Indian IT-BPO Industry’s contribution to GDP

• By 2020, expected

to account for

–~10% of India's GDP

–14% of total

services sector

revenues

FY1998 FY2012

1.2%

7.5%

Sector-wise contribution to GDP

Contributes 13% to India’s total exports

Modified India’s export mix from traditional

commodities to services

Grown twice as fast as the total Indian

exports over the past decade*

67.1

4.1

68.7

FY00 FY12

Exp

orts (

US

D b

illi

on

)

Total Indian Exports Indian IT-BPO Exports

~8x

FY00 FY12

others

Manufacturing

Petroleum Products

Primary

IT-BPO

~17x

$524 bn

167.2

186.2

45.6

55.6 $67 bn

Expected to account for 18-20% of total India’s exports in 2020

*Includes invisibles, Primary – includes agriculture and mining

Others includes invisibles other than IT-BPO

524

68.7

10X increase in direct employment;4X increase

in the share of organized private sector

284

2,770

FY00 FY12

Dir

ect e

mp

loy

ee

s (

'00

0)

5%6%

8%10%

13%15%

18%20%

21% 21%

2000-01 2002-03 2004-05 2006-07 2008-09

Contribution of IT-BPO industry to organised private sector employment

Direct employment of ~2.8 million; Indirect employment ~9 million

>45% of total incremental urban employment in the last decade

~10x

By 2020 - Direct employment of 10 million; Indirect employment of 20 million

Employment opportunities for diverse

sections of the society

Livelihood for

Economically

backward

Empowering the

youth

Bridging the

gender divide

Employment

beyond

Urban areas

Employing the

Differently abled

~5% of the IT-BPO workforce from

economically backward sections

~74% of employees are less than 30 years

old;

~35% are less than 25 years of age

~31-35% women employees; account for 45% of

new intake

~26% of the female employees are chief wage

earners

~20% of the female employees are at

managerial level or above

~58% of the IT-BPO workforce is from tier

2/3 cities

~ 56% employees are chief bread earners

~60% of companies provide employment to

differently abled people

•Changing aspirations of

India’s youth

•Created high paying jobs

•Setting new standards of

work environment

•Emerging as a “Skill Factory”

By 2020

5 mn women

employees

4 mn direct

employees from

tier 2/3 locations

*NASSCOM Evalueserve survey findings, 7500 participants pan India

Significant downstream impact - employees

spent ~INR 76,000 crores

INR 3,700 crores

INR 7,400 crores

INR 7000 crores

INR 6,000 crores

INR 4,600 crores

~8% of the

revenues of

the

Entertainment

industry

~2.5% of the

Healthcare

sector

revenues

~7% of the

Hotel and

Restaurant

industry

revenues

Direct Contribution of

IT-BPO Employee

Spending on other Sectors

~3.5% of the

consumption

in the Textile

sector

Accounts for

around 3% of

the revenues in

the telecom

industry

~4% of the

consumption of

the Consumer

Durables sector

Actual value

spent in FY09 INR 4,600 crores

Fuelling India’s Growth - ~INR 15000 crores

direct taxes paid in FY09

Direct Tax Contribution by IT-BPO Companies

Tax Benefits to Industry

INR

15,000

crores

By 2020: Direct tax contribution of companies ~ Rs38000 crores; Direct tax

contribution of employees ~ Rs13500 crores

Led transformation in Tier 1 locations

Contribution

to State

GDP

Employment

Generated

Enhancing

the

Education

system

• Tier 1 locations generating 92.4% of industry revenues

– Constitute 14% of total GDP from Tier 1 states; As a result,

these states together contribute 34% of national GDP

• Direct employment in Tier 1 locations - 1.9 million

• Indirect employment in Tier 1 locations - 7.3 million

• ~ 2X growth during FY05-09 in number of engineering

colleges and technical graduates in tier 1 locations

–58% of the total engineering colleges in FY09

–62% of the total intake of technical graduates in FY09

• Creation of office space- 180 million sq feet

• 77% of the operational STPI units in tier 1 cities

• 70% of operational SEZ’s in tier 1 cities

Creation of

Infrastructure

By 2020: 325mn sq ft of additional office space creation; 4.1 mn incremental direct

jobs

Reaching out to Tier 2/3 locations;

changing the landscape

• Accounts for 7% of industry revenues; Constitute 4.5% of

total GDP from Tier 2/3 states

• 49 delivery centers opened in tier 2/3 cities as opposed to 25

in tier 1 over the last one year

• Accounts for 10% of total direct employment

–Direct employment in tier 2/3 locations- 1.7 lakh

–Direct dependents supported- 4X

• 1.7X growth during FY05-09 in number of engineering

colleges and technical graduates

–Number of engineering colleges- 985

• Creation of office space- 20 million sq feet

• 23% of the operational STPI units in tier 2 and tier 3 cities

• Almost 40% of notified IT SEZ’s and 30% of operational IT

• SEZ’s in tier 2/3 cities

Contribution

to State

GDP

Employment

Generated

Enhancing

the

Education

system

Creation of

Infrastructure

By 2020: 300mn sq ft of additional office space creation; 3.8 mn incremental direct

jobs

Started to impact the rural areas

• > 6,000 directly

employed at about

70-90 rural BPO

centers

• Direct: Indirect

employment ratio

1:1.4

• Development of

infrastructure,

internet connectivity

Creating Employment

and infrastructure

• Infusing ~INR 25

million per month into

rural communities

• Rural BPO employee

earns ~ INR 5000

every month

Creating Wealth and

Improving Living

Standards

• Training in language,

technical and soft

skills

• Better standard of

living

• Job security

Career and Personal

Development

• Majority is women

workforce - 66% of

the workforce;

• Existence of all-

women BPOs

Empowering Women

Rationale: Domestic market; local language; untapped talent; lower attrition

By 2020, 2 lakhs jobs to

be created in rural areas

Focusing on R&D and Boosting Innovation

Growing R&D spend Strengthening role in

IP creation

Developing software

products

Attracting global

technology players

Average R&D

spend 0.5–1% of

revenues; 2.5-5% of

profits

Patents in the

Computer/Electronic

s segment increased

30X over 2006–11

Software products

revenues more than

tripled over FY06–11

• Number of offshore

development centers

(ODCs) in 2011 is 3x-

4x of ODCs in 2006

Breakdown of R&D costs

Spearheaded India’s thrust on innovation –

30X increase in patents

Innovation driving

additional GDP

contribution of

~2% by 2020

Innovation identificatio

n & developme

nt, 61%

Process improveme

nt & reengineeri

ng, 38%

Other costs, 1%

Key initiatives driving innovation include setting up R&D centers, conducting trainings, events

and workshops around innovation, and collaborating with academic institutions

Social

Development

• Improved access to and delivery of

services in healthcare, education and

banking.

• Bridging the technological divide by

developing products and services for

rural and disadvantaged sections

• E-governance solutions

• ~63% of the companies proactively undertake

CSR activities

o ~50% companies focusing their CSR

initiatives toward education

o ~30% companies focusing on environment

o ~28% companies focusing at increasing

health awareness

Socially responsible corporations

Driven by companies, employees and personal philanthropy

By 2020, this industry can become a strategic growth

engine for India

IT/BPO industry size

US$ billion

101

360-375

2020

potential1

2012

4x

*Innovation driven growth scenario

Areas Contribution by 2020

Economy ~10% of annual GDP

18-20% of annual exports

Employment 30 million employment opportunities (direct

and indirect)

Job creation in rural and non-metro areas -

20-fold increase in the number of employees

operating from tier 2/3 locations

Increased diversity (women are 50% of the

total workforce)

Significant global career opportunities due to

location-independent models

Balanced

Regional Growth

8-10 satellite townships around Tier-I cities

10-15 Tier-II cities with upgraded basic and

business infrastructure

Reduced fiscal

burden

ICT can provide solutions at a fraction of the

cost of traditional solutions

Globally reputed

innovative

solutions

Innovation driving additional GDP

contribution of ~2%

Thank You