my final thesis

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INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

NEW DELHI

PROJECT TITLE:

“EFFECT OF GLOBALIZATION ON IT INDUSTRY & ITES IN INDIA ”

EXTERNAL GUIDE:

MR. Sushant Kisore

SUBMITTED BY: SUBMITTED TO:Rai Ankit Ray Prof. SUMANTO SHARMABatch: PGP FW 2006-08 ASSOCIATE DEAN PROJECTAlumni Id:

ALUMINI-ID-DF57-M266

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CERTIFICATE OF THE GUIDE

This is to certify that the thesis titled “GLOBALISATION AND ITS EFFECT ON IT

& ITES SECTOR IN INDIA” is an original work done by Mr. Rai Ankit Ray under my

guidance.

The thesis report has been thoroughly revised and I also declare that this study has never

been carried out by any student or submitted to any institute.

I congratulate him for the successful completion of this research study (thesis).

I wish him every success in life

Regards

Sushant Kisore

Manager-Client Operation

EXL Service.com India Pvt Ltd

Noida

Mob-9810142223Mob-9810142223

Date: Date:

Place: NoidaPlace: Noida


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Desired area of Research :-

IT & IT Enabled services

Title of the Thesis:-

Globalization and its effect on IT & ITES sector in India.

Problem Definition/Hypothesis/Research Objective:-

The objective of the research is to study about IT & ITES in India like BPO, Software

Technology Park, legal outsourcing, banking industry, education system etc. Apart from

this the research will focus on the current status of IT & IT Enabled services, areas in

which they have been used, there applications in different sectors, how far they are

successful and what are the future prospects of IT industry and its effect due to

Globalization. How they contribute for the growth and development of country & society.

Introduction to the area of Research :-

IT & ITES is booming sector in India, which comes under service sector and provides

great employment opportunities. Due to Globalization there are lots of changes occurring

in this sector, Foreign companies come to India to start their business, because in India

skilled and cheap labor force are available and large number of English speaking

population are there. They also bring latest technology in India. .

.Scope of thesis work:-

The thesis would focus on IT & ITES, its types, areas of application like medical

services, education, legal system, banking industry etc. What are the changes occur due

to Globalization, past, present and future trends in this sector. In addition, we have to

analyze that whether they will sustain in future or not, how they contribute for the growth

of society and country.


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Research Methodology:-

The methodology that will use is Primary research as well as Secondary Research.

Primary data- Primary data are data freshly gathered for a specific purpose or for this

research project. It includes open-ended questionnaire from company’s employee or

external guide.

Secondary data- Secondary data are data that were collected for another purpose and

already exist somewhere. It includes Information from various books related topic,

magazines and internet.

Justification for choosing the Research Proposal:-

The topic of thesis i.e. Globalization and its effect on IT & ITES sector in India has been

taken looking into the current scenario. In almost all the sectors, IT & ITES plays a vital

role for the development and growth of that sector nowadays. With the application of IT

in every sector work become easy and it saves our time and money. Therefore, it is

necessary to analyze its current state and sustainability in future and what changes are

required in this sector due to Globalization, so that they can contribute maximum for the

development of society and country.

Details of External Guide :-

Name : Mr. Sushant Kisore

Qualification : B.E., MBA

Designation : Divisional Director

Mott Mac Donald, Noida


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ACKNOWLEDGEMENT

I wish to express my grateful appreciation to Prof. Sumanta Sharma for providing

guidance throughout my research. His guidance helped me to come out with new facts

and finding about IT & ITES sector and effect of Globalization on it, without whose

effort this thesis would not have been possible.

I am also grateful to my external guides Mr. Sushant Kishore for showing patience in

numerous revision and for sharing his vast experience and knowledge on the subject.

I am thankful to all the respondents, without whom this study would not be possible.

I am beholden to my parents, family members, faculty and friends for their blessing and

encouragement that keeps me going.


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EXECUTIVE SUMMARY

The IT & ITES Sector is growing at a very fast rate and its effect is seen on industry in

India. In this report main emphasis is given on Globalization and its effect on IT & ITES

sector because due to Globalization this industry has gain a lot and contributed for society

and nation. In this thesis we would mainly concentrate on what exactly IT & ITES sector

is and Apart from this the research will focus on the current state of IT & ITESand future

trend, areas in which they have been used there application in different sector, how far

they are successful. Also what are the changes in Education system is required due to

globalization. What are steps and initiatives taken by government to promote IT & ITES

sector and provide better facility to IT companies and its employees. Employment

opportunities and foreign exchange earning etc. At last there are some negative effects

are there but not so much so this is also highlighted in this project also taken Satyam

Computers as a example and discuss about company background, merger and

acquisitions and effect of globalization on Sataym Computers.


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TABLE OF CONTENTS

TITLE PAGE NO.

1. RESEARCH METHODOLOGY 09

2. INTRODUCTION 12

3. MAJOR SEGMENTS OF IT & ITES 15

4. BPO – INDUSTRY 16 a. GOVT SUPPORT TO BPO SECTOR 17 b. CONTRIBUTION OF BPO TO THE ECNOMY 18 c. M&A IN BPO 195. INDIAN IT & ITES-BPO INDUSTRY NASSCOM ANALYSIS 20

6. CURRENT AND PROJECTED MARKET SHARE 22

7. GLOBALIZATION AND ITS EFFECT ON IT EDUCATION 27

8. ROLE OF IT ON INDIAN ECONOMY 32

9. IMPACT OF BUDGET ON IT & ITES 34

10. GOVERNMENT INITIATIVES 35

11. ADVANTAGE OF IT IN INDIA 41

12. TRENDS IN IT INDUSTRY 42

13. FDI POLICY AND FOREIGN TRADE POLICY 46

14. MERGER AND AQUISITION 48

11. CHALLENGES IN IT & ITES SECTOR 53

13. NEGATIVE EFFECT OF IT & ITES SECTOR 59

14. NEED FOR UNIONISATION 62

15. THREADS TO IT & ITES SECTOR 64


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16. SATYAM COMPUTRES 66

17. RECOMMENDATION 98

18. BIBLIOGRAPHY 100

19. ANNEXURE- QUESTIONNAIRE 101


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RESEARCH METHODOLOGY

OBJECTIVE OF THE STUDY

To study the IT & ITES sector and its application

To study current and expected market share of IT & ITES sector

To analyze the effect of Globalization on IT & ITES Sector

To analyze the changes required in education system India

RESEARCH METHODOLOGY

Research is an original contribution to the existing stock of knowledge making for its

advancement. It is the pursuit of truth with the help of study, observation, comparison

and experiment. In short, the research for knowledge through objective and systematic

method of finding solution to a problem is research; it also covers the systematic

approach concerning generalization and the formulation of a theory. Different stages

involved in research consists of enacting the problem, formulating a hypothesis,

collecting the facts of data, analyzing the facts at reaching certain conclusions either in

the form of solutions towards the concerned problem or in certain generalizations some

theoretical formulation

The main aim of the research is to explore that what is IT & ITES sector, its

application in different field, improvement in education system required due to

globalization, current and expected market share

RESEARCH DESIGN

Research design is a purposeful scheme of action proposed to be carried out in a

sequence during the process of research focusing on the management problem to be

tackled. It must be a scheme of problem solving through proper analysis, for which

systematic arrangement of managerial effort to investigate the problem is necessary. It


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destines the task of a researcher from identifying a managerial problem and problem area

to report writing with the help of collection, tabulation analysis and interpretation of data.

Though not exhaustic, Claire Selltiz’s definition of research design reveals some

important aspects of research design. “A research design is the arrangement of conditions

for collection and analysis of data in a manner that aims to combine relevance to the

research purpose with economy in procedure”.

The present study Globalization and its on IT & ITES sector in India are exploratory in

nature.

DATA COLLECTION

The webs IT & ITES, newspaper and IT magazines, are used where the data is to be

collected will be short listed based upon the application, effect and future prospect of

IT & ITES.

Primary Data

Interviews of company employees, with the help of the structured questionnaire as it

are the most suitable method to collect information in this type of study. The

questionnaires are proposed to be designed based on the experience of the people in

this field.

In questionnaire I asked question to different employee through mail, consist of

Docholomony and Multiple Choice questions. This helps me to understand a lot about

view and mentality of employee about present trend and future expectations.

Secondary Data

Magazines of IT industry, webs IT & ITES, corporate magazines and newspaper. In

order to accumulate this knowledge I had to go through a lot of secondary data namely

The Hindu, Business line, webs IT & ITES etc.


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Secondary data provided a starting point for research and offered the advantage of low

cost and ready availability. Standardized questionnaires were prepared after studying the

secondary data carefully and doing a pilot survey.


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INTRODUCTION

IT ENABLED SERVICE IN INDIA

Any activity carried out based on the application of Information Technology could be termed as IT Enabled Service (IT & ITES). In other words IT & ITES cover the entire range of services which exploit information technology for empowering an organization with improved efficiency or a type of service which may not be possible to be rendered cost effectively without IT. The activity could be internal to the organization i.e. meant to increase the operational efficiency through work force residing within the organization or could be outsourced. The outsourced or cross-border IT & ITES is now receiving greater attention as this category of IT & ITES has a great potential for growth and contribution towards employment opportunities in India.

IT Services are broadly defined as systems integration, processing services, Information Services (IS) outsourcing, packaged software support and installation, hardware support and installation and IT training and education.

IT & ITES Spectrum in India The spectrum of I.T. Enabled Services applications already evident in India includes the following segments:

Call Centers Medical Transcription Back Office Operations, Revenue Accounting and other ancillary operation Insurance Claims Processing Legal databases Content Development/Animation Payroll Logistics Management

1. CALL CENTRES A typical call center is a service center that has adequate telecom facilities, trained

consultants, and access to wide databases, Internet and other on-line information support infrastructure to provide information and support to a customer. It operates to provide round the clock and year round service.

Call centers are normally operated by large airlines, by banks to provide services to the customers/ callers, by investment banks, mutual funds, telecom services, companies providing customized and high value services, IT products companies,etc. The primary determinant is any industry that has frequent interaction with a broad client base and intensive stakes in services being offered to the customer, where time and material value is of paramount importance. These services are very popular in countries such as the USA, Europe, Japan and Australia.


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2. MEDICAL TRANSCRITION In countries like the USA, doctors’ time is at high premium. The current practice by

doctors is to simply record their findings through a dictaphone or some such device. These sound tracks are then sent through datacom lines to overseas companies (where costs are much lower) that employ "medical transcripionists" who hear these recordings, transcribe them into reports and send them back electronically through datacom lines. This has now become a specialised discipline with people needing adequate training. Turnaround time is often as low as two hours and, therefore, is often better than what the hospital may have achieved if it had done all of it in-house.

Initially, it was only being contracted out to companies that were in close proximity to these hospitals. Increasingly, however, to take advantage of lower costs, this work is being sent abroad to Mexico, West Indies etc. Because of the availability of high speed satellite links, it is now entirely feasible to do this in India in technical terms.

3. BACK OFFICE OPERATIONSRevenue Accounting, Other Ancillary Operations

Industries such as Banks, Airlines require large scale data entry and revenue accounting work to be done. For revenue accounting and other BackOffice accounting operations, paper documents/ raw data are sent to remote locations, which are used for data entry and necessary reconciliations. Using high speed datacom links for their back office and data processing operations, these banks, airlines and other organizations with extensive data turnover and customer interface, are able to save costs and valuable resources. The prime concern of these companies is 100 percent availability of data and uptime of facility. This can be ensured through high speed datacom links from India to the parent country. Over the last few years, there has been a steadily growing trend to outsource these services to major I.T. service providers, with contracts running into decades. The prime criteria for such projects are quality of organizational processes, availability of abundant manpower and ability to dedicate resources to clients’ needs. India stands to gain from such a trend as the Indian software industry has been able to make a mark and also has access to huge pool of skilled as well as semiskilled professionals with relative cost advantage.

4. INSURANCE CLAIM PROCESSING Large insurance companies get myriad claims. Since there are well laid down rules on

how they are to be processed such processing can be done anywhere, as long as there is availability of graduates who can read and write English in large numbers, a few doctors and a few accountants. As a result, to save costs, large insurance companies in the U.S. are now outsourcing a lot of this work.

5. LEGAL DATABASES There is a constant need for lawyers who counsel cases to go through relevant laws,

rulings and precedents in order to build up their case. This is usually done by very junior lawyers in legal firms. However, in the U.S. and other developed countries, even junior lawyers’ services are highly priced. One of the ways to get around this hurdle is to have a readily accessible source of well managed and intelligent information. One of


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the most promising and low cost ways of having ready access to information is information technology. Therefore, many legal firms have started to outsource this work to organizations that have large English speaking, lower priced workforce of trained lawyers. The job comprises working closely with the firms to create a database of their existing records, index on the basis of various useful and common understood criterions, keeping track of new documents being created and incorporating them into a database as per well established parameters. Lawyers can then simply use their computers to draw up a history of like cases and draw a clear plan of action. Once again, the rules are clear and only average qualifications and ability are required.

6. DIGITAL CONTENT DEVELOPMENT/ANIMATION New Media content development is emerging as one of the fastest growing service

segments in the global I.T. services industry. It caters to needs of web site management, production of content for new media such as Compact Disk, Digital Versatile Disk and products of convergent technologies such as Internet enabled TV. It offers a large emerging potential; as more and more offices, homes, institutions, students and professionals realize an ever growing need to have easy access to information that can also be suitably fused with other media. It consists of compilation and development of digital content for intra-organization dissemination, cross-institution usage, collaborative projects, public domain information, and programs for public/specialized education, web content development and management, developing animated movies. The acceptability of outsourcing such work to distant countries and the recognition of the cost savings is rapidly growing.

IT & ITESare human intensive services that are delivered over telecom networks or the internet to the range of business segments which inter alias include-

Medical Transcription Legal Database Processing Digital content development / animation Remote Maintenance Back office operations – Accounts, financial services Data Processing Call Centers Engineering and Design Geographic Information Services Human Resources Services Insurance Claim Processing Payroll Processing Revenue Accounting Support Centers Website Services Business Process Outsourcing (BPO’s)

Major Segments of IT Enabled Services


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Following is a fairly detailed generic classification of IT & ITESwhich Already exist or which have potential for evolving into areas of entry:- Customer Interaction Services such as Call Centers Finance and Accounting Services such as back office data processing for Airlines,

etc. Engineering and Design Services such as outsourced design activities Human Resources Services such as outsourced payroll preparations, etc. Animation for movies and TV serials, cartoon strips, etc. Translation, Transcription and Localization such as Medical Transcription

Services. Network Consulting and Management covering outsourced network designing

and maintenance. Data Search, Integration and Analysis covering areas such as preparation of legal

data bases, research & preparation of reports based an data bases on past records, etc.

Marketing Services such as bureaus for marketing products or services based on Call Centers or local market data bases, etc.

Web Site Services for creating site contents, advertising, etc. Remote Education for utilizing IT infrastructure to strengthen formal education

system for remote and expertise starved areas. Medical Consultancy by providing expert advice based on data or making

available data bases.

IT & ITES DRIVES REAL ESTATE

Having saturated large cities like Delhi-NCR, Bangalore and Mumbai, the IT & ITES action is slowly shifting to small towns and Tier II cities, like Chandigarh, Vizag and Jaipur, which are driving future growth. A number of IT and IT & ITES companies are expanding to newer locations as they grow to deliver high-end services in the value chain driving growth in commercial real estate.

While the sector accounted for 75 per cent of the total office space absorption in Pune in the fourth quarter of 2006, Bangalore continues to be the major IT/IT & ITES hub of India with 70 per cent of total absorption of office space by such knowledge-based companies. In fact, the city-wise snapshots released by real estate consultancy DTZ Debenham Tie Leung recently put the 14.2 million office space absorption in Bangalore as the highest in the country.

The report makes special mention of Hyderabad, which has emerged as a preferred IT/IT & ITES destination in south India with Madhapur and Gachibowli micromarkets becoming one of the most sought after IT/IT & ITES destinations in the city.

BPO- BUSINESS PROCESS OUTSOURCING


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IntroductionBusiness Process Outsourcing (BPO) is a buzzword among the corporate in the world Today, corporate benefit significantly from outsourcing of business processes almost everywhere on the planet. Looking to the growth and government's support to it, BPO is being recognized as a specialized sector in India.

BPO in IndiaOver the last few years, outsourcing of business processes has been gaining popularity driven by the fact that US firms have been enjoying much success from adopting this business strategy. European organizations have increasingly been focusing on what they identify as their core competencies and have been looking to reduce costs while maintaining high levels of quality for non-core activities and processes. In India, as far outsourcing of business processes is concerned, the outsourcing of legal services comes on the first count. In other areas BPO is quite in vogue in India. Nowadays, more and more companies are announcing BPO and call centre projects in India. As per estimates, India is set to become the most popular destination for BPO operations. A large number of multinational companies are outsourcing their business processes offshore to Indian BPO companies. BPO has got impetus with the technological breakthrough with Internet for communication across the globe which has been the largest advantage for the success of the BPO business. More importantly, India has a pool of talent and has the second-largest English-speaking population with computer knowledge in the world after US. Also, costs are lower in India compared to other countries for outsourcing. The technology in India is state-of-the-art and the country is rightly located in terms of the geographical position, and the policies of Govt. of India are also favorable for software and BPO sector.

Major Areas of BPO Sector-The non-core business process areas are the core areas of BPO business. These non-core business processes areas may include IT & ITES(IT & ITES), e-logistics, management of facility & operations and legal services. Of these, outsourcing in IT & ITES e.g. software & call centers is amazingly popular across the globe.

GOVERNMENT SUPPORTS TO THE BPO SECTOR IN INDIA –


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Government of India has introduced various policy concessions and initiatives to accelerate the growth of the IT-enabled outsourcing market. Spearheaded by associations such as National Association of Software and Service Companies (NASSCOM), the Indian software and services industry has also taken various steps to ensure that India becomes the global hub for IT-enabled outsourcing in the future. Some of the steps take by the Government and industry for the IT & ITES/BPO sectors are as follows:

1. In May 2002, the Government of India has accepted the recommendations of NASSCOM and removed certain procedural bottlenecks that were hampering the

Growth of the Indian call center industry.2. The Government of India (Central Board of Direct Taxes - CBDT) has allowed total

Income tax exemption on the export of IT enabled outsourcing services under Sections 10A/10B of the Income Tax Act, 1961. These IT enabled products or services are:

Back-office Operations Call Centers Content Development or Animation Data Processing Engineering & Design services Geographic Information System Services Human Resource Services Insurance Claim Processing Legal Database Medical Transcription Payroll Remote Maintenance Revenue Accounting Support Centers; and Web-site services

3. Foreign Direct Investment (FDI) for 100 percent of the equity has been permitted in BPO companies.4. Permission of duty-free imports of capital goods (under the Export Promotion of Capital Goods scheme) for BPO companies.5. The Government has promoted several Software Technology Parks (STPs) which Provide ready-to-plug IT and telecom infrastructure. STPs also allow single-window Clearance for all regulatory compliance issues.

CONTRIBUTION OF BPO TO THE NATIONAL ECONOMY


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As per the NASSCOM-McKinsey Report, 2002, the revenue from BPO will reach $24 billion by 2008 and the IT-enabled services (IT & ITES) sector will contribute 37 per cent to the total IT software and services export market. Thus, BPO is likely to contribute up to 3 per cent to India's gross domestic product (GDP).The BPO sector is expected to provide employment to 1.1 million people by 2008 as per a report by the NASSCOM.

BPO and the Indian economy The educated young Indian can deliver low-end services like basic customer support and increasingly carry out high-end research work at a fraction of the cost in the West — with little or no compromise in quality the squeeze is on high-tech workers in the U.S. and the beneficiaries are the educated Indians working in Gurgaon, Bangalore, Hyderabad and Chennai. NASSCOM estimates that companies in the West can save up to 60 per cent in the costs of the services they outsource to India. How far will out-sourcing go and what impact will it have on India's economy? There are three sets of questions to be answered in this connection.. All have a case to make out in favor of IT & ITES/BPO and that makes an informed assessment difficult. NASSCOM cIT & ITES sees global IT & ITES business rising from $570 billion in 2002 to $1,200 billion in 2006. The recent E-Commerce and Development Report 2003 cIT & ITES a Goldman Sachs figure of $570 billion in 2005 for global BPO contracts. Forester says that because of unreliability of suppliers, the global BPO business will rise to only $145 billion by 2008.

NASSCOM estimates (again) are of 160,000 people working in all IT & ITES sectors. In the U.S. and the U.K. there is as yet no discernible increase in unemployment among IT & ITES and high-tech workers that can be attributed directly to outsourcing to India and other developing countries.. The most extreme is the one made by Forrester, which claimed that the U.S. would lose 3.3 million jobs in IT by 2015 of which 2.3 million would go to India. The third question is about the impact IT & ITES/BPO can have on India First software, then IT & ITES. There is no question that India has made a mark in these particular areas of IT. They have facilitated the emergence of a new class of entrepreneurs who have put


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the "old economy" industrialists in the shade. And they have contributed considerably to India's export growth. The boom that has lasted a decade and promises to continue has changed the face of urban India — pockets of urban India to be more precise. Today, there are 500 million Indians in the work force while NASSCOM estimates are of 160,000 men and women in the IT & ITES sector.

Mergers & Acquisitions in the BPO SectorM&A in the BPO sector in India are not confined to Indian companies alone .In India, M&A in BPO sector are proceeding on two fronts. Even as some Indian BPO companies are getting acquired, other Indian BPO companies are acquiring operations both in India and abroad.

HCL Technologies acquired over a year ago a 90 percent stake in the Apollo Contact Center in Belfast of BT Group. The deal gave HCL a beachhead in the European market, and helped it bag business from the London-based BT, including a $160 million order for setting up a BPO operation for BT in India.

TransWorks Information Services Pvt. Ltd., a Mumbai based BPO company, was acquired recently by the Aditya Birla Group, a large Mumbai based business conglomerate.

Customer Asset, a Bangalore based BPO company, was acquired a year back by ICICI OneSource. Customer Asset had about 750 employees and operated a 350 seat call center in Bangalore.

Wipro, a Bangalore-based software and services company, acquired Spectramind eServices, a CRM (customer relationship management) services company in Delhi a few months back.

ConclusionAs per the estimates, India is poised to become a No. 1 BPO destination in the Asia-Pacific overwhelming all the so called odds. Particularly, when it comes to IT & ITES-BPO tier, with a current base of 96,000 call centre seats, India is supposed to grow by 85 per cent to reach a capacity of 1,77,000 seats over the next 12 months to become the biggest BPO hub in the region. Newspaper and magazine articles and analysts' briefings throughout the globe are reporting the projected strong growth of the BPO market in India.

INDIAN IT & ITES-BPO INDUSTRY : NASSCOM ANALYSIS


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The Indian IT & ITES-BPO Scenario

The Indian IT & ITES-BPO segment continued to chart strong year-on-year growth at 37 per cent for FY 2005-06. Growth is being driven by a steady increase in scale and depth of existing service lines. Key Highlights of Indian IT & ITES-BPO sector performance

Employees IT & ITES-BPO (in ‘000)

Key drivers of the Indian IT & ITES BPO Industry include:• Improved efficiency and higher service levels due to streamline of processes


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• Quality improvements due to a better educated workforce• Cost savings between 40-50 per cent• Increase in off shoring by existing customers• Superior project management skills• Availability of a highly skilled, educated and English speaking labor pool

CURRENT AND PROJECTED MARKETS


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As per the report published by NASSCOM, on the basis of a study made by McKinsey, the world market for IT-enabled services is expected to be over $ 140 billion in the year 2008.

FIGURES IN USD BILLION

Market ShareAccording to Industry estimates, the IT & ITES market globally is expected to grow to US $ 142 Billion by 2008. The segments within IT & ITES that will witness tremendous growth include Back Office operations, Remote Education, Data Search, Animation, Market Research and Customer Interaction Services. As per Nasscom-McKinsey report 2002, the Indian IT & ITES industry can attain export revenues of US $ 21-24 Billion by 2008.

Growth of Indian IT-IT & ITES Revenue


SERVICES Year 1998 Year 2008 Customer Interaction Services 6.5 33.0Finance and Accounting Services 1.5 15.0Animation 1.3 2.0Translation, Transcription and Localization 0.3 1.2Engineering and Design 0.4 5.0HR Services 0.2 44.0Data Search, Integration and Management - 18.0Remote Education - 15.0Network Consulting and Management - 5.0Website Services - 3.0Market Research - 1.0Total 10.2 142.2

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Indian IT-IT & ITES Sector to Exceed USD 36 Billion in FY 2006

IT-IT & ITES sector estimated to grow by 28%, to account for 4.8% of GDP in FY06 Employment in software and services sector to touch 1,287,000 Software and service exports to grow by 32%, to reach USD 23.4 billionNASSCOM, the premier trade body and 'voice' of the IT software and service industry in India,

Estimates for FY06 (in USD billion)


Sector FiguresIT Software and Services Exports

23.4

Hardware 6.9Domestic Market 6.1Total IT-IT & ITES Sector 36.3

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Key highlights of the NASSCOM Strategic Review 2006

Steady growth: The Indian IT-IT & ITES expected to exceed USD 36 billion in annual revenue in FY06, an increase of nearly 28 percent in this current fiscal

Exports to account for nearly two-thirds of the total revenues IT-IT & ITES sector to contribute to 4.8 percent of GDP in FY06

Engineering and R&D, software products hold significant opportunity for India - growing at 37% and 43% (CAGR FY 2003-06E), respectively

Indian IT-IT & ITES sector on track to achieve the targeted USD 60 billion in exports by FY 2010

IT Industry-Sector-wise break-upUSD billion FY 2004 FY 2005 FY 2006EIT Services 10.4 13.5 17.5-Exports 7.3 10.0 13.2-Domestic 3.1 3.5 4.3IT & ITES-BPO 3.4 5.2 7.2-Exports 3.1 4.6 6.3-Domestic 0.3 0.6 0.9Engineering Services and R&D, Software Products

2.9 3.9 4.8

-Exports 2.5 3.1 3.9-Domestic 0.4 0.8 0.9Total Software and Services Revenues

16.7 22.6 29.5


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Of which, exports are 12.9 17.7 23.4Hardware 5.0 5.9 6.9Total IT Industry (including Hardware) 21.6 28.4 36.3

Employment trends: Total IT Software and services employment to reach 1,287,000 in FY06 Industry has already initiated several initiatives to further enhance the availability

of and access to suitable talent for IT-IT & ITES in India A comprehensive skill assessment and certification programs for entry-level talent

and executives (low-middle level management) launched An image enhancement program to build greater awareness about the career

opportunities in this segment NASSCOM is working with the academia across the country to encourage and

facilitate greater industry interaction

Employment figures-Software and Services sector

EMPLOYEMENT FIGURES-SOFTWARE AND SERVICES SECTOR

Emergence of newer locations: As global delivery matures, newer locations are emerging; however India remains

the undisputed leader India maintains its distinctive lead amongst offshore destinations


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Strong fundamentals will help sustain India's value proposition 28% of the suitable talent available across all offshore locations (outranks the next

destination by a factor of 2.5) Keen emphasis on security and quality Sustained cost competitiveness, gains from increased productivity, utilization and

scale expansion

Growth in Domestic market: Complementing the continued growth in IT-IT & ITES exports is a growing

domestic market Domestic market coming into its own, to grow by nearly 22% in FY 2006 Strong demand over the past few years has placed India amongst the fastest

growing IT markets in the Asia Pacific region Growth in the domestic market is witnessing the early signs of service line depth

that characterizes maturing markets Global product companies are also looking to introduce localized versions of their

software products to drive usability and penetration Several large domestic contracts announced last year were won by MNCs

Coming of age of Indian multinationals: Traditionally India-centric, indigenous players beginning to build noticeable

presence in other locations - through cross border acquisitions and organic growth in other low-cost locations

Global majors continuing to significantly ramp-up their offshore delivery capabilities - predominantly in India

Portfolio of services sourced globally continued to expand into higher-value, more complex activities

GLOBALIZATION AND ITS EFFECT ON EDUCATION IN IT & ITES SECTOR

1. STRESS ON QUALITY OF EDUCATION


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The quality of IT education must be upgraded according to the changes in industry and the requirements of users. This up gradation may include using new technology. Weight age should be given to practical work and the course design should incorporate more practical work. Online teaching methodology should be promoted using tools like teleconferencing, web etc. The system of gradation and ranking should be strengthened to maintain the quality of IT education.

2. FOCUS ON R&D In order for India to remain a centre of knowledge having the largest pool of IT Professionals on the world scene; research and inventions in IT education should be Accorded priority.

3. COLLABORATION BETWEEN CORPORATE SECTOR & ACADEMICS INSTITUTE

i) Curricula Development Interface between the IT industry and academia should be encouraged for the development of IT professionals. Industry needs in terms of manpower, skill sets and quality of professionals in various disciplines and at different levels. This will help realize the synergy between the two and strengthen Indian professional education ii) Faculty Development IT faculty should be trained with the help of the IT industry. Technocrats and personnel from IT Industry should interface with the faculty members of Universities, Deemed Universities, IT Institutes and Colleges. This would help in bridging the gap in teaching and will be an effective device in promoting regular interaction between academic institutions and the industry.

iii) IT Related Research IT Industry should take greater part in the promotion of IT-related research. The industry can be advised by the Government to provide scholarships and sponsor students to undertake research.

4. Faculty Remuneration There is a need to revisit the faculty remuneration which is not attractive. It should be Comparable with Industry salary. This will help attract the best talent in the industry to the teaching profession.

5. Sharing of talent between institutes There should be a system where national resources created at different points either by National institutes or by companies should be made available to the other engineering

Institutes in the region, for use by students of IT.

6. PhD Programme There is a general shortage of students for doctoral programmes. Teachers should also be encouraged to undertake research leading to Ph.D. This can be done by providing

incentives such as scholarships, sabbaticals and other financial support.

7. Frequent Course Revision IT courses need to be taught differently from conventional courses due to their high


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technical contents, fierce competition and fast changing nature. The course curriculum should be revised regularly.

8. Manpower Forecast Mechanism-- Data Bank Establishment of a Manpower Information System for the IT sector is crucial for Forecasting sufficiently in advance, the required number of IT graduates, post graduates & professionals so as to have a balanced growth of IT education. This requires a strong data bank to be built right at the education institutions and shared with the industry to understand the demand and forecast the future manpower requirement.

9. IT Council An autonomous body may be constituted exclusively to oversee the various facets of IT education in India. The Study team recommends establishing an ‘IT Council' on the lines of the Medical Council of India.

10. IT Infrastructure There is a need to improve IT infrastructure for better networking and connectivity between academic institutes which are not fully equipped with IT teaching tools and facilities.

11. Penetration of IT education at school level IT education should aim to “catch them young” - right from the school age.

12. Stress on English and foreign languages Fluency in English and other foreign languages should be targeted at the school level as it has become a necessity due to globalization and interdependence of countries.

13. Software technology parks More software technology parks should be established in cities across the country.

14. India's Brand Image: Role of Indian Missions Abroad Indian Missions abroad can help reinforce global perceptions about the high standards of India's IT education through education counselors and information network on IT Education in India by organizing IT education fairs, seminars and workshops in the context of globalization of Indian economy.

15. Integration of IT in rural sector Efforts should be made to cover the rural segment of population in the shortest possible time. To bring the rural sector into the mainstream IT revolution, the entry level for IT education should be made affordable for this sector.

.

IT Education Course material needs to be upgraded periodically to meet industry standards and

requirements.


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Training methodology should be at par with the developed nations Training to trainers to be provided by industry experts Early faculty induction to attract and build a strong faculty team. Adjunct Faculty - Bring back experienced professionals in the main stream. Sharing of Faculty - A consortium of colleges to be formed to pool senior level

faculty for imparting IT education in advanced areas. Research and Development Consortium of institutions and industry players Exchange of education programs with developed IT nations

Industry Standards & Practices World class software development Ensure zero defect delivery IT industry should provide feedback through ongoing interaction with academic

institutes to improve the quality of IT manpower. IT industry should have a regular training programme on co –operative basis as

prevalent in USA, UK, & Australia. Governance

Data Bank of IT skills and resources - A joint effort by education institutions and industry

Education Council - An IT education council is required to monitor the education standards and quality.

Infrastructure High speed internet connectivity Software Parks in less developed IT zones - To promote IT education in these

areas. Integration with other sectors

IT enabled processes should be promoted. Every sector and industry should be automated as far as possible and have the

capability to share information and data on a single platform.

IT EDUCATION IN TAMILNADU-

1. Availability of Skilled Talent: The key resource needed for IT & ITES is skilled manpower. Tamil Nadu has

proved to be a huge source of quality talent. The policy of the State on higher education in the last two decades has enabled the creation of this talent pool.

2. Large pool of English speaking professionals: Tamil Nadu has the largest number of English medium schools among the Indian

States. There are large numbers of Engineering, Medical, Law, Commerce and Arts and Science colleges. English being the business and social language, majority of these educated people are fluent in English. The Government will encourage Universities and Institutions in the State to create institutional infrastructure for acquiring foreign language skills.

3. Good quality talent:


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Premium educational institutions like the Indian Institute of Technology, Chennai, Anna University, Madras University, National Institute of Technology Trichy, Institute for Financial Management and Research (IFMR), Loyola Institute of Business Administration (LIBA), Institute of Mathematical Sciences, Madras School of Economics and others produce some of the best and diversified talents in the country.

4. Industry Academia Interface: The large base of educational institutions in the State is a significant asset. These

institutions will be encouraged to include IT & ITES specific curricula designed to industry needs as part of their syllabi so as to promote on-campus recruitment by IT & ITES Companies.

5. High Computer Literacy: Tamil Nadu is the first State to introduce Computer education in schools and

colleges with Public-Private participation. The computer literacy programme is being successfully implemented in Higher Secondary schools spread all over the State. Being aware that the future manpower needed by the IT & ITES sector is still in the schools, Government of Tamil Nadu intends to provide both language and IT & ITES specific skill sets in the Schools. Imparting of IT & ITES skills at the level of 9th and 10th standards will be taken as a goal from the next academic year.

IIT, National Institute of Technology 252 Engineering Colleges 210 Polytechnics 600 + Industrial Training Institutes 79800 Engineering Graduates 56000 Diploma Holders

Role of NASSCOM for improving the talent pool in India due to globalization

The Indian IT & ITES BPO industry is constantly decrying the lack of right talent pool and quality manpower despite churning out graduates and engineers by dozens every year. To be precise, the vast network of academic institutions churns out 3.1 million graduates annually. The main problem lies in the disparity in learning of the fresh graduates at their colleges and engineering institutions and the actual skill sets required to work in the IT & ITES BPO industry.To address this challenge, NASSCOM and the Indian IT-BPO sector have taken the lead in ensuring that requisite remedial actions are undertaken well in time to avoid any form of talent crisis. The association has announced the NASSCOM Educational and Workforce Enhancement Initiative. "Slowly it is becoming imperative to enhance the Indian talent pool to maximize the industry's potential and enable the sector to further catalyze the growth rate of the industry. The educational institutions need to train the young graduates on some of the key skills needed to join the IT & ITES BPO industry.

Need for the extra pushAccording to some leading industry experts, the onus of training the manpower to be fit for joining the team currently lies on the shoulders of the companies. "We need to train


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the fresher for at least two months before they can be taken in to a project,” This in turn increases the cost of employment and total turn around time for the companies and the industry as a whole. To create the right balance between industry academia need and supply, the association has started the IT Workforce Development (ITWD) program. According to NASSCOM, this initiative was created keeping the issues and concerns of the industry at one end and challenges of the academia at the other end. As part of this initiative, NASSCOM has been nurturing the industry-academia interface through workshops and conferences, faculty sabbaticals, training programmes and mentorship initiatives to ensure better synchronisation between IT education and the industry requirements. Along with this NASSCOM has also initiated a mentorship programme where IT/IT & ITES and BPO companies are providing consistent guidance for over 12-24 months to a particular college or institute. They are also closely working with academic bodies such MHRD, AICTE and UGC to standardize the curriculum and pedagogy.

The finishing touchOne of the key moves by NASSCOM is the initiative to work with the Ministry of Human Resource Development (MHRD) to set up new Indian Institutes of Information Technology (IIITs) and Finishing schools. The aim of these institutions will be to enhance and produce competent professionals and engineers, incubate new companies and clusters and nurture existing clusters of knowledge-based companies. The MHRD with support from NASSCOM and the IT industry has recommended the launch of five new IIITs based on the Public-Private Partnership model by 2008. On the whole the ministry aims to set up around 20 IIITs over the next few years. Another pioneering initiative by NASSCOM in partnership with the MHRD is the "Finishing Schools for Engineering Students" programme, which is expected to enable young technical graduates to become industry-ready. The pilot of the "Finishing School" for engineering graduates, still seeking employment, was launched in May this year. The pilot was conducted during the summer months of May-June, 2007, for a period of eight weeks in eight institutions, including IIT Roorkee and seven NITs namely Calicut, Durgapur, Kurushetra, Jaipur, Surathkal, Trichy and Warangal. The "Finishing School" is covering the curriculum provided on technical and soft skill development. "The students get an opportunity to reinforce some basic engineering skills and in addition, acquire industry-specific knowledge and skills, soft skills, management and


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employment skills, which are being delivered by trained faculty and practicing IT and IT & ITES industry consultants NAC empowers entry level at BPOs In order to develop entry-level human-power, especially for the BPO industry and equip them with relevant hard and soft skills that ensure employability, NASSCOM launched a key endeavor, the NAC or NASSCOM's Assessment of Competence. It was launched as an industry standard assessment and certification programme to ensure the transformation of a "trainable" workforce into an 'employable workforce', thereby creating a robust and continuous pipeline of talent for the BPO sector. Now NAC is being taken to the next level, by proliferating it across Tier II and Tier III cities and towns that can be strengthened into BPO hubs and used as playgrounds for nurturing job-ready professionals. By the end of the year, NAC will be rolled out in various states of India, including Tamil Nadu, Gujarat, Chandigarh, Andhra Pradesh, North-Eastern States and West Bengal amongst others.NASSCOM has entered into a MoU with the Ministry of Development of North Eastern Region (DONER) for the rollout of NAC in the state. With this NASSCOM aims to conduct NAC test amongst 20,000 students across eight states in the region including Assam, Tripura, Manipur, Nagaland, Meghalaya, Mizoram, Arunachal Pradesh and Sikkim between September 2007 to January 2008. NASSCOM has reportedly entered into a similar understanding with Gujarat Informatics Ltd; the nodal agency of the state government, for promotion of information technology in the state, for the NAC Test. NAC's foray into Gujarat is being done on a pilot basis and hence has a limit of 2,000 seats. The Role of IT in the Indian EconomyThe linkages among different sections of an economy are of crucial significance in understanding the trajectory of any industry. The significance and potential of any industry can be observed by looking at three important indicators

The output multiplier, The employment multiplier and The degree of forward linkage.

As elaborated earlier, the output multiplier can be defined as a total increase in output generation for one unit increase of final demand in a particular sector. The employment multiplier is specified as man-years of additional employment created for an increased unitary output of the sector. Both these measures spell out the backward linkages with the other sectors of the economy in terms of output and employment effect. Forward linkages refers to the inter relationship between a particular sector and all other sectors which demand the output of the former as inputs. Output and Employment MultipliersIt is important to look at the economic implications of the above observations. For instance, the CSO has estimated that the value of output at current prices for the software sector during 1999-2000 is at Rs 21,263 crores and at Rs. 50,302 crores in 2002-03. With


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in this short gap of 3 years, the output of the software sector has increased by 29,039 crores and in this period the economy has been able to create 6.8 lakh man-years of employment or in simpler terms this sector has been able to create jobs for 24,500 people who would be able to work in this sector for the next 25 years. Its contribution to GDP in 1999-2000 was Rs 14,619 crores and Rs. 34,584 crores in 2002-03 current prices. The contribution of the software sector alone out of the ICT sector, in GDP has increased from 0.83 per cent in 1999-2000 to 1.54 per cent in 2002-03 Direct employment in the software sector in 1999- 2000 was 322983 according to CSO (corresponding figures for the year 2002-03 are not available). The contribution of the hardware sector to GDP in 1999- 2000 was Rs 796 crores and employed around 16,800 persons. The output of the hardware sector in 1999- 2000 was Rs. 4400 crores.. Though the ICT industry in India is mainly export oriented, domestic consumption does show a forward linkage that is not high as on date but is expected to increase in the coming years as the economy and the using domestic sectors mature making greater use of ICT in business, governance and society.

CONTRIBUTION TO GDP (IN CRORE)

Impact of the budget on IT

NASSCOM should be happy, and they are. Even though not much in the budget has been targeted at the IT sector, some of the major areas of the economy that the IT industry depends on —• Infrastructure,


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• Technical and general education, • Scientific and technological research, • Telecom, Government spending — has been given added attention.

While the Indian IT industry scores highly on skill and cost-effectiveness, poor infrastructure — especially power and telecom — pulls it down. This is why NASSCOM has been pressing hard for more to be done to modernize India's infrastructure.

The focus on rural development also holds some promise for the IT sector if some of the extra money being poured into agriculture and rural development is spent on using technological solutions to rural problems. According to a NASSCOM report, the government accounted for 9 per cent of total IT spending in India in 2002. This is estimated to go up to 15 per cent over the next five years.

Kiran Karnik, president, NASSCOM realizes this, "At the broader level, we will be happy to join hands with the government in leveraging technology as a tool for transformation. Information technology can play an important role in promoting agri-businesses as well as making food stamps a reality by ensuring efficiency and transparency. We suggest a similar entitlement based system for education too."

In a pre-budget assessment, Karnik had suggested setting up a special IT fund for boosting the rural economy: "We see great scope for accelerating (rural) growth by using IT for a range of applications including supply chain management, optimization of irrigation water releases, expert advise on farm practices, information on power availability, weather and market prices, details about loans and government schemes, and so on."

One initiative that could have a big impact on small and medium-sized (SME) IT companies is Indonext — an alternative national trading platform proposed to help SMEs raise equity and debt from the capital market. SME companies currently find it very difficult to raise capital from the market because of the high net worth criterion and have to rely on venture capital and financial institutions.

Another announcement that could have a positive impact on the industry is a soon-to-be-introduced bill on special regulation for the special economic zones (SEZs).

The industry was also happy with the general push towards greater foreign direct investment.

GOVERNMENT INITIATIVES

Information Technology Enabled Services (IT & ITES) Policy of TamilNadu 2005

1. Preamble


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Globalization and the drive to competitiveness are making all organizations to focus on their ‘core business competencies’ and outsource the ‘non-core business processes’. This provides an opportunity to global companies to relocate such processes in India. India has inherent strengths to support this.This sector holds immense scope for the common person as it provides employment to technical and non-technical graduates. Besides, this sector has the potential to generate enormous foreign exchange inflow into the country. Through this Policy, the Government of Tamil Nadu proposes to generate large-scale employment and attract increased Foreign Direct Investment.Tamil Nadu with its excellent physical, civic and social infrastructure and a large pool of talented, educated, hardworking, English – speaking workforce is well positioned to capture a substantial share of the IT & ITES market thereby generating massive employment opportunities in IT & ITES sector in Tamil Nadu.

2. VisionTo make Tamil Nadu the Global IT & ITES Capital To attract increased foreign direct investments To create large-scale employment opportunities To add value and wealth by leveraging the inherent strength of the State

3. BackgroundTamil Nadu has: -

A proactive and investor friendly Government. Back offices of several global multinational corporations. Abundant skilled and educated human resources, world-class educational

institutions, good infrastructure of connectivity. A tradition of commitment and ‘Devotion to duty’ among the work force resulting

in lowest attrition rates in IT & ITES sector in the country. An excellent Social and Civic infrastructure providing a very high standard of

life. Higher level of compliance to rules in work place and in the civil society. Availability of large International and Domestic Bandwidth for communication. Amongst the highest level of urban dispersal in India. Become the epicenter for the Banking, Finance Services, and Insurance segment,

Health Care, Electronic Publication Services etc.

4. Objectives To get the maximum global IT & ITES investments to Tamil Nadu To develop Human Resources specific to IT & ITES Sector To create world class infrastructure for IT & IT & ITES and an enabling frame

work for protection of intellectual property and data To generate employment and other IT & ITES opportunities in major cities in

Tamil Nadu To provide a conducive environment for the sector by reducing regulations and

increasing opportunities.


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5. Infrastructure for IT & ITES SectorInfrastructure is the backbone for IT & ITES companies impacting cost, quality and productivity. Government recognizes that high quality infrastructure is of paramount importance to make Tamil Nadu the Global IT & ITES Capital and has taken several steps in this direction.

Government of Tamil Nadu shall have a single window agency for IT and IT & ITES in ELCOT. This agency will ensure that all State level statutory clearances are issued without delay. Government will create Single window clearance agencies in Tier II cities / Tier III towns also.

Communication Backbone: The world’s biggest and India’s first private submarine Optical Fiber Cable

project i2i network with a bandwidth of 8.4 Tbps has made Chennai the "Connectivity Gateway of India". The Government of Tamil Nadu will ensure through Communication Providers, the availability of complete bandwidth requirements for IT & ITES companies at their doorstep.

IT & ITES Parks: Government of Tamil Nadu will lead as well as encourage the creation of IT &

ITES Parks in Chennai and other Tier II / Tier III Cities. A rating of the builders through an independent rating agency will be done and the land will be given to the eligible builders for the development of IT & ITES Parks as per the rating in the Government promoted IT & ITES Parks.

Power:

1. Tamil Nadu is one of the few States in India offering uninterrupted quality power supply to the IT & ITES firms at competitive tariffs.

2. Tamil Nadu Electricity Board (TNEB) provides uninterrupted quality power at adequate voltage and frequency within the prescribed technical limits.

3. TNEB provides round the clock maintenance services and is committed to provide new service connections within a time frame of one week to four weeks depending upon the level of supply infrastructure required.

4. IT & ITES firms / IT & ITES Parks do not require any license to set up captive power generation plants. These units will have open access to Tamil Nadu Electricity Board transmission and distribution network for wheeling purposes. Electricity supplied to IT and IT & ITES units is charged at industrial tariff.

5. Tamil Nadu is free of power cuts and load shedding. IT and IT & ITES units will be exempted from statutory power cuts, if any, in future.

6. IT and IT & ITES units are eligible for industrial tariff irrespective of whether the premises using these units are owned by them or leased.

Transportation

1. The Government will develop sustainable means of public transport to serve the needs of IT & ITES units.


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2. The Government, wherever needed, will create Public Bus Terminuses near the IT & ITES Parks.

3. The Government will deploy adequate security near the IT & ITES Parks.

Air Connectivity Tamil Nadu has three international airports providing good connectivity to prime

locations both overseas and India. These locations include Bangkok, Malaysia, Singapore, London and Frankfurt. Chennai is also well connected to important domestic locations such as Mumbai, Delhi, Bangalore, Hyderabad and Kochi.

Government will strive to connect its two major tier II cities viz Coimbatore and Trichy to more national / international destinations through direct flights to these airports.

Road Transport Chennai as well as other Tier II cities have excellent bus services infrastructure,

which is rated as the best in the country. Government of Tamil Nadu shall build bus stops near IT & ITES Parks. Regular bus services shall be run connecting IT & ITES parks.

The developers of IT & ITES Park will be encouraged to get into public private 9.5.3 MRTS Chennai offers a fast track Mass Rapid System for Transport (MRTS) from the

city centre to major commercial and IT & ITES hubs along a corridor for 16 Kms. This is well integrated with the bus and rail transport system in the city. It is proposed to extend the scope and coverage of MRTS in the near future and technical studies have already been initiated. A state of the art highways is being developed to connect all IT / IT & ITES ventures located in the southern corridor of the city.

Tamil Nadu, a perfect blend of tradition and modernity, has an excellent social infrastructure, which offers unmatched ‘Quality of Life’ for IT & ITES professionals both citizens and expatriates .They are:

A law abiding citizenry Perfectly maintained law and order and social harmony in the State Vibrant and varied cultural life Shopping Malls of international standards Excellent schools including international schools like American School, Chennai,

Kodai International School etc Top Quality Hotels to suit all budgets International and National food chains Range of tourist destinations Beautiful 18 hole Golf Courses Health Clubs and Sports like Rowing, Swimming, Bowling, Pool etc., Global Standard Corporate Health care systems The only city which has an Entertainment Corridor of 25 km running parallel to

IT Corridor


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Being aware of the 24/7 operations of IT & ITES sector and in order to maintain business process continuity Government of Tamil Nadu has allowed 24x7x365 operation as well as employment of women during night shift in IT & IT & ITES industries.Vehicles of IT and IT & ITES units transporting women employees during night hours will be issued special passes/permission.

6. Supportive Environment

1. Concessions extended to the IT & ITES Industry: IT & ITES industries will also be extended the following Fiscal and

Administrative incentives: Rs 50 crores and above and below Rs 100 crores would be eligible for a

capital subsidy of Rs 25 lakhs. Rs 100 crores and above and below Rs 200 crores would be eligible for a

subsidy of Rs 50 lakhs. Rs 200 crores and above would be eligible for a subsidy of Rs.100 lakhs. This subsidy will be payable after commencement of commercial

operations. One time reimbursement for patent registration after 1.1.2004 up to 50%

of expenses or Rs 1.00 lakh (whichever is lower) will be given to any production unit in Tamil Nadu.

New industrial units (small, medium or major) where more than 40% of the total workers employed are women shall be eligible for an additional Capital subsidy of 5% of investment in fixed assets subject to a ceiling of Rs.10 lakhs.

Relaxation of FSI (Floor Space Index) to the extent of 100% will be given in designated IT Parks. Such requests need to be addressed to the concerned Regional Development Authorities.

50 % exemption of the Stamp Duty and Registration fee will be given at the time of purchase of a land/ building for IT industries.

Apart from development of software and hardware Industry through ITPs /STPs the Government will also encourage software development outside the Parks by giving such stand-alone units the same incentives as the Units in the ITPs / STPs.

IT & ITES industries will be assisted in obtaining necessary cable and satellite links for connectivity. ELCOT will be the nodal agency for the above.

Special concessions will be given to the IT & ITES companies giving employment opportunities to the physically challenged persons. Government of Tamil Nadu will collaborate with leading institutions for the development and promotion of specific software for the use of physically challenged persons.

IT Policy 2002 allows IT Companies to self certify that they are maintaining the registers and forms as contemplated under the following 9 Acts.


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Payment of Wages Act. Minimum Wages Act. Workmen Compensation Act. Contract Labor Act. Employees State Insurance Act. Employment Exchanges Compulsory Notification of Vacancies Act. Payment of Gratuity Act. Equal Remuneration Act.

This self-certification will be regarded as sufficient compliance with the requirements of the different Acts and the rules made there under regarding the maintenance of registers and filing of the returns. Along with the above 9 Acts, the following 3 Acts are also included in the list for IT & ITES Policy.

Labor welfare Act 1972 Maternity benefits Act 1961 Industrial Employment (Standing Orders) Act 1946

2. Incentive for Quality Certification & Award for ExcellenceIn order to promote the highest quality standards of operation in the IT & ITES Sector, Government of Tamil Nadu will encourage IT & ITES Industries to obtain International Process Quality Certification like COPC, ISO etc. by providing a cash reimbursement incentive of Rs. 5 lakhs or the actual amount spent whichever is less to the IT & ITES companies.

3. Information Technology DayOne of the Greatest Mathematicians of the present age Ramanujam was born in Tamil Nadu. His birthday (22 December1887) will be celebrated every year as the Information Technology Day of the State. Presentation of State-level awards will be given for outstanding performance to ITS & IT & ITES units on Information Technology Day every year.

4. New EnactmentsAs an industry catering to international customers, the Government will enact / assist in enacting the following legislations for effective operation, early and stricter enforceability of violations:

Data Security And Customer Privacy Act: To reassure the IT & ITES companies and their customers the safety of their data

and to indicate the Government of Tamil Nadu's commitment to and respect for consumer privacy and for combating crimes and violations and to incorporate penal provisions for violation of IPR issues the Government of Tamil Nadu will formulate the Data Security and Customer Privacy Act.

Assistance In Clearances Under Central Acts: The Government of Tamil Nadu will assist the IT/IT & ITES Industry in

obtaining clearances/exemptions under various Central Acts in consultation with the Union Government for better and smooth functioning of the industry.


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C-TOSS: Chandigarh - Training On Soft Skills

The objective of the Policy is to make Chandigarh a major center for IT Enabled Services, by attracting a substantially large share of the IT & ITES industry in India and to enrich the skill sets of the Youth of the Union Territory to provide them with high level employment and to enable high quality delivery of IT Enabled Services

The IT & ITES Policy of Chandigarh has envisioned acceleration of economic growth of Chandigarh by leveraging the potential of IT and IT & ITES in the city, and creating a competitive knowledge base for sustaining the growth of the industry. The objective of the Policy is to make Chandigarh a major center for IT Enabled Services, by attracting a substantially large share of the IT & ITES industry in India and to enrich the skill sets of the Youth of the Union Territory to provide them with high level employment and to enable high quality delivery of IT Enabled Services.

To further strengthen the objective of making Chandigarh a Technology hub, the Society for Promotion of Information Technology in Chandigarh (SPIC) under the aegis of Department of Information Technology, Chandigarh Administration has taken the initiative to start C-TOSS: Chandigarh Training on Soft Skills programme to develop skilled professionals for the IT & ITES/BPO sector. The training programs are meant to upgrade the skill-sets in Chandigarh with emphasis on the skills required for IT & ITES professionals. The training modules to be imparted would cover Communications Skills and other IT & ITES industry specific skills. There would be training programs with different durations and selection for a particular training course will depend on the current skill level of the student. The training would be carried out by the training agencies at the respective college premises. The courses would be conducted on optional basis for students of the respective Schools and Colleges

ADVANTAGE OF IT IN INDIA

Evolution of global delivery model. Unbundling of large IT outsourcing deals with larger India-based delivery shares. Large contract values due for renewal over the next two years. Large client wins. Cross-border mergers and acquisitions.


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Movement of the industry towards a stable pricing model. Gradual positive shift in the outsourcing debate. Having aligned their internal processes and practices to international standards

such as ISO, CMM, Six Sigma, etc., companies in India are seeking to further increase the quality and productivity benchmarks by introducing adaptations more suitable for remote service delivery.

Global foraysIndian IT & ITES companies are looking at rapid growth through mergers and acquisitions, either of domestic players or niche-service companies abroad. The big players are on the prowl and already a string of acquisitions have been finalized. According to Grant & Thornton India (GT), an advisory firm, there have been 57 M&A deals in the first eight months of 2006 in the IT & IT & ITES sector valued at over US$ 1.73 billion. Some of the acquisitions that have hit the headlines are:

Hex aware Technologies, a provider of IT and BPO services, is planning to acquire an IT company in the US or Europe for US$ 20-40 million.

Hyderabad-based technology solutions provider, Prithvi Information Solutions Limited (PISL), is planning to close four acquisition deals in the US by December this year, for an aggregate consideration of US$ 40-50 million.

Para dyne InfoTech has acquired a US-based software services company with a turnover of around US$ 10 million.

Bangalore-based Subex Systems acquired UK-based Azure Solutions for US$ 140 million.

NIIT bought out the US-based US$ 80-million company, Element K, for US$ 40 million.

Sasken Communication Technologies acquired Finland-based Botnia High-tech for US$ 45 million.

Transworks acquired Canada-based Minacs Worldwide for US$ 125 million. Servion Global Solutions, a player in communications software, has acquired

California-based 5by5 Networks, a technology company

India's sunshine sector -- IT-IT & ITES -- continues to chart double-digit growth and is expected to grow to US$ 53 billion by the end of calendar year 2008, It will witness a compounded annual growth rate (CAGR) of 23.1 per cent till 2008, with exports growing by 25.3 per cent and the domestic market by 18.5 per cent. With growth in the sector being stupendous, the average increase in salary levels in the IT & ITES sector is between 16 per cent and 18 per cent.

TRENDS IN IT INDUSTRY

Exports: According to Nasscom, the IT & ITES sector is likely witness a growth rate of 32.6 per cent growth in total software and BPO export revenues in FY07, marginally lower than the growth of 33.3 per cent in FY06. Exports could touch US$ 31.3 billion in FY07 compared to US$ 23.6 billion in FY06. Nasscom predicts that the sector's revenues could touch US$ 39.7 billion in FY07, and if IT hardware sales are also included, the total


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revenues can touch US$ 47.8 billion in FY07. The IT industry's contribution to the GDP is expected to rise from 4.8 per cent in FY06 to 5.4 per cent in FY07. Growing at the rate it is now, the total IT industry can touch US$ 100 billion by FY10, says Nasscom.For exports, the US and UK were the largest markets. In fact the share of Europe has been increasing steadily. For FY06, revenues from the Americas totaled 67 per cent, Europe 25 per cent and rest of the world, 7.7 per cent. The growth in large deals and unbundling of multi-million dollar contracts has resulted in Indian players growing their share of the pie in the contracts of over US$ 50 million to 7 per cent in 2006, as compared to 1 per cent in 2002. Multinationals announced investments worth over US$ 10 billion in FY07, but the amount will be invested over a period of a few years.

EXPORT IN IT & ITES SECTOR

%GDP CONTRIBUTION


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Domestic market: The domestic IT industry has moved away from hardware-led growth and is deriving greater momentum from the software and services sector. It is projected at US$ 15.9 billion in FY07, representing a 21 per cent growth over the previous year. However, hardware is still a large portion of the domestic pie at US$ 7.6 billion compared to US$ 5.6 billion from services, US$ 1.6 billion from software and US$ 1.2 billion from BPO. At these levels, the domestic BPO industry has logged a sharp 30 per cent growth, IT services 25 per cent and hardware a 12 per cent growth over FY06.

DOMESTIC MARKET CONTRIBUTION IN IT & ITES SECTOR

IN US$ BILLION

Employment:


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The number of people employed by the software and BPO industry has also grown rapidly, from 2, 84,000 in 2000 to 1.6 million for FY06. This is a 26 per cent growth in manpower in FY07 compared to a 22 per cent growth in FY06. As before, the industry's growth was led by export services, which is forecast to be US$ 18.1 billion in FY07. However, engineering services, R&D and software product development services have made a substantial contribution to export revenues. Revenues from this segment are expected to account for US$ 4.9 billion, compared to US$ 4.0 billion recorded in FY06.

Production Profile According to (NASSCOM), the Indian IT software and services sector grew by 31.4 percent during 2005-06, notching up aggregate revenue of US$ 29.6 billion, up from US$ 22.5 billion in 2004-05. Encouraged by the 2005-06 performance, the IT and IT & ITES sector is confident of achieving the US$ 60 billion milestone in exports by 2010. The Business Process Outsourcing (IT & ITES-BPO) sector has emerged as a key driver of growth for the Indian software and services industry in 2005-06. The IT & ITES-BPO industry recorded a growth of 37 percent and clocked revenues of US$6.2 billion.

Key Growth Drivers According to NASSCOM, the high performance of the IT-IT & ITES sector was in large part due to factors such as

The emergence of a more efficient global delivery model, The unbundling of large IT outsourcing deals with larger India-based delivery

shares, The bagging of large contract by the country's players. Customer relationships, Cross border mergers and acquisitions, The move of the industry towards a stable pricing model

India's edge in the off shoring domain was based on factors such as


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Availability of people's skills, A conducive business environment, Focus on information security and Operational excellence by leading IT-IT & ITES vendors Relevant financial structures. Policy Framework

Industrial Approval Policy Industrial Licensing has been virtually abolished in the Electronics.

Information Technology sector except for manufacturing electronic aerospace and defence equipment.

There is no reservation for public sector enterprises in the Electronics and Information Technology industry and private sector investment is welcome in every area. Electronics and Information Technology industry can be set up anywhere in the country, subject to clearance from the authorities responsible for control of environmental pollution and local zoning and land use regulations.

FDI AND FOREIGN TRADE POLICY


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Foreign Trade Policy India welcomes investors in Electronics and IT sector. Government of India is

striving to bring greater transparency in policies and procedures to provide an investor friendly platform.

In general, All Electronics and IT products are freely importable, with the exception of

some defence related items. All Electronics and IT products, in general, are freely exportable, with the

exception of a small negative list which includes items such as high power microwave tubes, high end super computer and data processing security equipment.

Second hand capital goods are freely importable. Export Promotion Capital Goods scheme (EPCG) allows import of capital

goods on payment of 5% customs duty. The export obligation under EPCG Scheme can also be fulfilled by the supply

of Information Technology Agreement (ITA-1) items to the DTA provided the realization is in free foreign exchange.

Special Economic Zones (SEZs) are being set up to enable hassle free manufacturing and trading for export purposes. Sales from Domestic Tariff Area (DTA) to SEZs are being treated as physical export. This entitles domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax exemption.

Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items in the Domestic Tariff Area (DTA) by EOU/EHTP/STP/SEZ units are counted for the purpose of fulfillment of positive Net Foreign Exchange Earnings (NFE).

The import of second hand computers including personal computers and laptops are restricted for imports. However, second hand computers, laptops and computer peripherals including printer, plotter, scanner, monitor, keyboard and storage units can be imported freely as donations by the following category of donees,

1. School run by Central or State Government or a local body 2. Educational Institution run on non-commercial basis by any

organization 3. Registered Charitable Hospital 4. Public Library 5. Public funded Research and Development Establishment 6. Community Information Centre run by the Central or State

Government or local bodies 7. Adult Education Centre run by the Central or State Government or a

local body 8. Organization of the Central or State Government or a Union Territory

FDI POLICY FOR INFORMATION TECHNOLOGY


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FDI up to 100 percent is permitted for E-Commerce activities subject to the condition that such companies would divest 26 percent of their equity in favor of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) E-Commerce and not in retail trading, inter alia, implying that existing restrictions on FDI in domestic trading would be applicable to E- Commerce as well.Special schemes are available for setting up Export Oriented Units for the Electronics/IT Sector. These schemes are:

Export Oriented Unit (EOU) Scheme Electronics Hardware Technology Park (EHTP) Scheme Software Technology Park (STP) Scheme Special Economic Zones (SEZ) Scheme Export promotion Capital Goods (EPCG) Scheme Duty Exemption and Remission Scheme

Major IT and IT & ITES Companies in India

Tata Consultancy Services Wipro Technologies Infosys Technologies HCL Intel

GE IBM Dell Microsoft Cisco

MERGER AND AQUISITION


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M&A in Indian IT/IT & ITES Sector - Facts Classifying M&A – by geography and service offering Future Expectations Investment Trends (Financial Investments) Impact on Stakeholders Participation in Consolidation – is it a Choice? About Baring Private Equity Partners

MERGER & AQUISITION –• IT & IT & ITES exports from India have grown almost 4x in last five years,

reaching US$ 23.4 billion dollars in FY 2006– Tremendous growth in size and scale of companies has accelerated the

M&A activity in recent years

• Over US$ 1.3 billion in M&A in CY 2005, around 80 deals– In terms of number of deals, IT/IT & ITES was the largest contributor

among all sectors– In terms of value of deals, it was third after Telecom and Energy

• In excess of US$ 1 billion in first four months of CY 2006 around 30 deals– M&A activity in IT/IT & ITES sector growing rapidly– Deal sizes are getting bigger


CLASSIFYING M&A

Same Services

New Services

Same Geographie

s

New Geographie

s

High risk; indicates saturation of growth opportunities in core business

Low risk; customer base or execution capability developed quickly; indicates increased globalization

Medium to high risk; could lead to diversified focus (for instance an IT services firm acquiring outsourced clinical research company)

Consolidation primarily for market share; indicates mature market

Shaded boxes above reflect globalization and diversification of service offerings

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Indian Scenario - Same Geographies, New Services

• Examples– Oracle’s acquisition of iFlex (core-banking solution, US$ 600 million)– Subex’s acquisition of Azure (revenue assurance and fraud management,

US$ 140 million)– Wipro’s acquisition of Spectra mind (BPO services, ~ US$ 100 million)– Flextronics’ acquisitions of Future Soft and Deccanet

• Characteristics– Global players acquiring Indian vendors’ capabilities – various deal sizes

from small to large– Indian vendors acquiring companies – small to medium size deals

Indian Scenario - New Geographies, Same Services

• Examples– EDS acquisition of Mphasis BFL (US$ 380 million)– RR Donnelley acquisition of Office Tiger (US$ 250 million)– TCS’ acquisition of Comicrom BPO in Chile (US$ 23 million)


Break-up of M&A Activity in IT/ITES Sector in India

Value of M&A Deals - Jan '05 to Apr '06

(16 months)73% - Same geographies, new services

27% - New geographies, same services

Negligible activity in other classifications

M&A in Indian IT/ITES industry reflects globalization and diversification of service offerings

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– Secova’s acquisition of Ultra link

• Characteristics:– Global IT services vendors acquiring execution capability in India. Tend

to be large deals as scale is a must– Indian vendors acquiring execution capability in other geographies. Small

to medium size deals– Indian vendors acquiring customer base abroad. Small to medium size

deals

Future Expectations

Would expect to see larger acquisitions going forward by Indian companies, primarily in new service areas

• Drivers– Indian companies are cash-rich. Total cash on balance sheet of TCS,

Infosys and Wipro alone is around US$ 4 billion– Companies have grown to a size where small acquisitions do not have

short to medium term impact– Increased risk appetite; ability to assimilate large acquisitions being built

over period of time – Wipro’s ‘string of pearls’ strategy

• Success factors:– Guarding against excess diversification– Quick assimilation and integration of the acquisitions

Investment Trends (Financial Investments)• Majority of transactions being done currently:

– Hiving off captives / divisions of large firms• GENPACT (from GE by Oak Hill and General Atlantic, US$ 500

million)• Flextronics Software Systems by KKR (US$ 900 mn)

– Growth capital / turnaround for existing companies– Platform plays in niche areas

• Secova, Pharmarc, Quatrro, Newgen– Secondary deals

• Softbank’s purchase of Barings’ stake in Slashsupport

• No Greenfield activity in previously ‘hot’ areas - voice-based support, CRM etc.

Summary• M&A activity in Indian IT/IT & ITES industry


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– Acquisition of execution capability in India or abroad– Acquisition of customer base abroad– Acquiring new service offering capabilities (expected to accelerate in the

future)

• Investment activity in Indian IT/IT & ITES industry– Hiving off large captives– Growth capital / turnaround– Platform plays in niche areas– Secondary deals

Impact on StakeholdersEmployees

• +ves: Provides global opportunities for growth• -ves: Improper integration could lead to uncertainty and dissatisfaction

Customers• +ves: Increases range of services and geographies to choose from• -ves: Integration issues could lead to customer dissatisfaction

Shareholders• +ves: Increases growth opportunities, and scalability, leading to greater

shareholder returns• -ves: Excess diversification, improper integration could hurt shareholder returns

Vendors• +ves: Provides a platform for global growth along with the company• -ves: As company becomes larger, older vendors could be marginalized

Mergers & Acquisitions in the BPO SectorM&A in the BPO sector in India are not confined to Indian companies alone .In India; M&A in BPO sector are proceeding on two fronts. Even as some Indian BPO companies are getting acquired, other Indian BPO companies are acquiring operations both in India and abroad.

HCL Technologies acquired over a year ago a 90 percent stake in the Apollo Contact Center in Belfast of BT Group. The deal gave HCL a beachhead in the European market, and helped it bag business from the London-based BT, including a $160 million order for setting up a BPO operation for BT in India.

TransWorks Information Services Pvt. Ltd., a Mumbai based BPO company, was acquired recently by the Aditya Birla Group, a large Mumbai based business conglomerate.


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Customer Asset, a Bangalore based BPO company, was acquired a year back by ICICI OneSource. Customer Asset had about 750 employees and operated a 350 seat call center in Bangalore.

For example Wipro, a Bangalore-based software and services company, acquired Spectramind eServices, a CRM (customer relationship management) services company in Delhi a few months back.

CHALLENGES IN IT & ITES SECTOR

The challenges facing the Indian IT & ITES BPO Industry are- Moving up the value chain will become a challenge for Indian companies as

customers seek vendors with significant domain experience and expertise. It will be critical for Indian vendors to be able to scale up quickly because large

customers prefer vendors with size and with a proven track record. There is a plentiful supply for entry level positions; there is a dearth of candidates

for middle management positions. This has led to an increase in attrition rates to about 25-40 per cent

Local infrastructure like roads, bridges, airports, urban transportation is now becoming a bottleneck to the expansion of capacity. An adequate legal framework for setting up IT companies and the execution of their businesses exists in India. The IT bill passed in 2000 provides a legal framework which recognizes electronic contracts, prevention of computer crimes, electronic filing of documents etc. Foreign companies have been permitted to invest in India and set up offices under the provision of the Companies Act and FEMA (Foreign Exchange Management Act). In this light it can thus be observed that there is a major role that IT can play in the implementation of the second-generation


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reforms and also to growth. It is also very clear that second-generation reforms are critical if the country in to make strides in growth and productivity.

Increasing awareness of potential benefits of ICT in rural development. India’s attempts at moving towards an e-ready economy should therefore focus on providing a favorable environment for the Central and State governments.

THE slew of protectionist measures announced recently by the federal government and the governments of some States of the United States against the outsourcing of jobs to cheaper destinations in developing countries do not appear to have unduly worried the leaders of India's Information Technology (IT) sector, even though India will be the first to be affected by the BPO (Business Process Outsourcing) `backlash'. Reacting to what is perhaps the strongest expression in recent times of protectionist intent by the U.S. government, namely, a clause in a $328-billion spending Bill passed by Congress prohibiting the outsourcing of federal government contracts to India, Kiran Karnik, president of the (NASSCOM), emphasized the relatively minor impact of the law on business in India. The law will be in operation only until September 2004, and its impact can be gauged from the fact that the share of U.S. federal government contracts in exports of IT software and services from India is less than 2 per cent.

With a projected annual growth rate of 11 per cent, the Information Technology Enabled Services (IT & ITES) segment, which accounts for the lion's share of outsourced jobs, is considered by NASSCOM as representing the "most significant business opportunities for the Indian software and services industry. There are at present 350,000 workers in IT services and outsourcing in India, a figure expected to cross one million by 2008. "The outsourcing law will have a definite impact, but at this time it is not very clear which agencies in the federal government will actually adhere to it.

The outsourcing of IT & ITES jobs to India has had a major impact on the country's IT industry. There was a time when Infosys, or for that matter any of the IT majors, their sprawling campuses and plush modern offices serviced by food courts and gyms for a large workforce of skilled and highly paid professionals, were the symbols of everything that the new IT-driven economic dream promised. Just a decade into the IT boom, these celebrated success stories have given way to new legends of entrepreneurial achievement. It is now IT & ITES, the fastest growing segment within the IT industry that is being projected as the promise of the future. The outward signs of the aggressive penetration of this segment of the IT industry are nowhere more dramatic than at the International Technology Park Ltd (ITPL) in Whitefield, on the outskirts of Bangalore, India's IT capital. It is here that a large segment of the city's 100,000 outsourced jobs are located.

The urban call-centre worker who has now become the symbol, in IT industry hard-sell, of the supposedly exploding employment opportunities that globalization has brought India. Popular media representations of the typical call-centre operator celebrate the new lifestyles spawned by this young, Western-oriented, urban workforce of contract workers, who work by night, sleep by day, and supposedly make enough money to party wildly over the weekends.


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GLOBALIZATION OF SERVICES- OTHER CHALLENGES AND

OPPORTUNITY

The following sections present perspectives on the key challenges and opportunities in each of these areas.

1. Building and managing an effective cross-cultural workforceAs globalization accelerates, a globally distributed organization is more likely to involve a large number of people from different nationalities, cultures and backgrounds interacting on a regular basis. Further, the success of this organization’s operations will be driven by the effectiveness of these interactions. Hence, building and managing an effective cross cultural workforce will increasingly assume critical importance.Take the case of a global automobile manufacturer and a global IT-IT & ITES service provider. The auto major may source its design and parts from India, locate its production in China, to manufacture cars for sale in different parts of the world. Clearly, these distributed workgroups need to be culturally oriented towards working together effectively. Yet the need for cross cultural orientation is likely to be even higher in the case of a global IT-IT & ITES provider providing 24X7 support to a leading bank in the US, from its delivery units in India, South Africa and the Philippines. While the former (auto major) scenario will entail limited or no interaction between the car salesman / potential customer and the teams in India or China, the latter (IT-IT & ITES provider) could have the teams across delivery centers in three countries potentially interacting with the same customer in the US – at different times of the day.

Over the past twelve-eighteen months, several leading India based IT-IT & ITES service providers have expanded their global delivery footprint to other countries to leverage benefits of a specific location, language and cultural affinity, and proximity to their customers. As these firms build scale in multiple locations, the share of an international (non-Indian) workforce is rising rapidly. To ensure that their globally dispersed teams build healthy working relationships, firms are beginning to experiment with various means of raising the levels of interaction amongst them.

2. Boom time in Cyberia According to news reports in August 2003, research firm Gartner has predicted

that India has the potential to generate $13.8bn in exports through business process outsourcing (BPO) contracts by '07, despite a negligible growth in '02-03.

India's revenue from offshore BPO, Gartner says, will represent 66% of the global offshore BPO market. The size of the global BPO market by '07 would be $173bn, of which $24.23bn would be outsourced to offshore contractors.

Since organizations have been cautious in their adoption of offshore BPO services, growth in offshore delivery, though continuous, would be moderate compared to that last year," Gartner, vice president research, Sujoy Chohan said. According to Gartner, the global offshore BPO market is expected to reach $1.8bn


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this year ('03), a 38% increase compared to $1.3bn in '02. In '03, offshore BPO will represent 1.5% of the total BPO market.

The market's decidedly bullish. Take a look at figures for 2002-03 from National Association of Software and Service Companies (NASSCOM):

The Indian IT market grew from Rs. 5,450 crores (US$ 1.73 billion) in 1994-95 to Rs. 79,337 crores (US$ 16.5 billion)

IT accounted for 3% of India's GDP The software and services exports registered a growth of 18.4%, recording

revenues of Rs. 34,800 crores (US$ 7.2 billion) IT & ITES-BPO segment witnessed a growth of 59% to reach Rs. 11,300 crores

(US$ 2.3 billion) Total software & services exports (including IT & ITES-BPO) increased to US$ 9.5 billion (Rs. 46,100 crore) from US$ 7.6 billion (Rs. 36,500 crore) during 2001-02. The total number of IT Software and Service companies in India is estimated to be 5000. Of this, while 60% of the companies are domestic players and 40% are MNCs, the split in terms of revenue is around 35% from domestic players and 65% from MNCs. From a base of 6,800 knowledge workers in 1985-86, the number of IT software and services professionals had grown to 650,000 by March 2003.

One of every four global MNC IT giants outsource their software requirements to India. IBM, Philips, Dell, Oracle, Hewlett-Packard, Cisco, Intel, Bosch, Siemens and GE have operations in Bangalore, Delhi and Mumbai. The boom isn't merely confined to IT. Insurance and banking, which have been among the first to use call centers, have shifted to India. At least 70,000 jobs in the UK would be lost to India by the turn of the next decade, according to Accenture. UK train operating companies plan to shift to Bangalore, in


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South India, putting 1700 jobs at risk in Cardiff, Derby, Newcastle and Plymouth, reported The Guardian.

3. Laying Down the Red Carpet The Indian government and various state governments have initiated several steps to promote India as a major destination for the IT & ITES sector. These include a proposal to set up an 'India Brand Marketing Fund', the creation of infrastructure in various parts of the country and the inclusion of IT & ITES in educational curriculum. The Government of Karnataka, which has been promoting Bangalore as India's IT capital, has, in collaboration with McKinsey, initiated a 'Millennium BPO policy' which seeks to generate a million jobs in this southern Indian city by 2010. Along with other southern states, notably Kerala (which is promoting the coastal city, Kochi), Karnataka also boasts the 'Last Mile Access' and a geographical positioning that favors satellite and submarine cable networks. The policy outlines the development of small towns like Hubli, Gulbarga, larger cities like Mysore and Mangalore, and creating an IT corridor outside Bangalore. In addition, the Karnataka government has awarded concessions like a 50% waiver of stamp duty on lease or sale of property; exemptions on payment of entry tax on capital goods and other rebates. The governments of Andhra Pradesh and Tamil Nadu have initiated almost similar policies.

4. Making Inroads into Small Town India NASSCOM Mumbai has 35 registered BPOs in the Western region of India, with at least 90 percent of these located in Mumbai and Pune. Around five percent are located in Gujarat and the remaining in Bhopal and Goa. Bangalore, touted as India's IT capital, continues to be a popular location, as are Delhi, Mumbai and Chennai. But providing stiff competition to these metros are Hyderabad, satellite towns like Gurgaon (near Delhi), Pune (near Mumbai) and other cities like Jaipur and Nashik.

5. Easy Money, "Cool" Working Environment Trasnworks, recently taken over by the Aditya Birla group, boasts of several Fortune 500 companies in its list of clients The atmosphere in a call center is like a typical college - casual, friendly and cool, munching chips and colas. The hierarchy is not very obvious and employees in their early 20s have a good time, salaries are high at Wipro Spectramind. Ranging from Rs 9000 -12,000 per month [US$ 187- 250] with productivity incentives, employees can also avail of transport pickup and drops, 24 hrs medical facilities with a doctor and nurse in attendance, a gym and 24-hour health food café (all these are not free, but subsidized. India's ocean of skilled, computer-literate, English-speaking graduates are of the order of 250 million, helping to absorb a stiff attrition rate of anything between 30 to 60 percent.

The services sector is not a product of recent economic evolution – and trade in services is not restricted to IT-IT & ITES.1 However, developments in this sector (ICT/ IT-IT & ITES) have played a integral role in the globalization of services, not only as a prominent output of the phenomenon, but also by facilitating the influence of other underlying drivers.

1


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Today, the Indian IT-IT & ITES sector provides services to a majority of the global 1000 companies (over two-thirds of the Fortune 500). Several leading global IT-IT & ITES service providers have chosen to build their service delivery centers in India and are aggressively ramping up their presence.

The Global ScenarioEvery nation is making serious efforts to participate in the digital economy. Asia has become an emblem of the borderless economy. India’s famed IT-enabled service (IT & ITES) sector, which now contributes an estimated US$17bn to the economy annually, is a shining example to the emerging markets. India’s success story has been replicated throughout the region—there are booming call centers surrounding Manila, customer help desk centers in Malaysia, and Korean and Japanese language software production houses in China.

Role of IT/IT & ITES Sector and its Unionisation IT/IT & ITES sector and its role in country’s economic growth, in terms of its contribution to GDP, exports and employment creation have been steadily increasing. As per NASSCOM estimates, the size of the industry is at $22 billion, comprising $4.8 billion of domestic revenues; $12 billion of software and services export revenues and $5.2 billion of revenues from exports of IT-enabled services and business process outsourcing (BPO).


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Revenues of this sector now amount to 4.5 per cent of GDP. This makes it an important segment of the non-agricultural sector. By way of comparison, the gross revenues from IT services was, in 2004-05, about 20 per cent higher than the GDP generated by the construction sector and almost three times as much as the GDP generated in mining, electricity, gas and water supply. In terms of value addition, as a percentage of GDP, the contribution of IT/IT & ITES sector is more than double the contribution of textile sector.

NEGATIVE EFFECT OF IT & ITES-

1. LOW EMPLOYMENT GENERATION IT/IT & ITES sector contribution to employment does not at all match with its role in the generation of income and foreign exchange. As per NASSCOM estimates, the employment in IT/IT & ITES sector is around ten lakh in 2004-05. This represents only around 0.21 per cent of the non-agricultural workforce and 0.08 per cent of the total workforce in the country. When compared to other sectors of economy, the IT/IT & ITES sector employment is quite low. For example, it constitutes a mere 3.4 per cent of the total employment engaged in textile production.


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This mismatch between employment generation and contribution to gross revenue and GDP of the IT/IT & ITES sector is not merely due to its technology savvy character but mainly due to the tutored shift in the IT policy of the government towards software services and away from hardware manufacturing. Originally, the emphasis of India's IT policy was on generating an indigenous hardware industry, with focus on domestic production of mini and microcomputers. But, the process of liberalisation and the experience from 2000 onwards saw a shift in emphasis away from hardware to software services. The hardware imports have been gradually liberalised to make available cheap imported equipment for the growing software and services export industry. As a result, the share of revenues from hardware sales fell from 44.4 per cent in 1995-96 to 17.8 per cent in 2004-05 and this trend is continuing. In the hardware sector, the domestic producers like PCL, DCM and ECI have been marginalised – rather, made to vanish – and the MNCs like HP, IBM, Compaq, Epson, Samsung etc. have monopolised the domestic market. Further, the absolute dependence of the domestic IT/IT & ITES sector on service exports, that too concentrated to one country, the USA, makes this sector extremely vulnerable to external shocks and raises doubts on its sustainability. Moreover, even within the domestic service providers, concentration of 61 per cent of the export revenues within the top 20 players (out of a total of around 415 firms) along with the overcrowding by numerous small firms with low turnover, lower margins, which in turn are leading to comparatively low wages, reflects a very high range of income inequality, uncertainty and extreme fragility of the service conditions among majority of the IT/IT & ITES sector workforce. This is quite contrary to what is being showcased by the advertisement blitz on the IT/IT & ITES sector by the media.

2. WORSE WORKING CONDITIONS This phenomenon is reflected in the extremely fragile working condition in the IT/IT & ITES Sector. The much rosy picture painted in the media may be true only in respect of a smaller segment of the IT/IT & ITES sector. The conditions generally prevailing in the larger segment of the IT/IT & ITES sector are:

Long working hours (without any compensation for the extra hours), Almost no leave or holidays, Strenuous work environment, Close surveillance on employees, No right to collectively represent or complain et al.., There are no social security provisions even for this tiny segment, except in a few

firms. There cannot be any sector – be it in industry or services – which can stake any claim that it should be a trade union-free sector or immune to unionisation. The employees of the Information Technology and IT-Enabled Services (IT/IT & ITES) sector also should have the basic right to association, which is a fundamental right guaranteed by the Indian Constitution. Moreover, the right to association and right to collective bargaining constitute the core conventions of the International Labour Organisation (ILO). The latter


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includes the right to strike as well. The industrial legislations in the country, including the Trade Union Act, are applicable to the IT/IT & ITES sector as well. The labour ministry, government of India, has taken a stand that the state governments are the “appropriate” authority under labour laws and legally vested with powers to deal with violations of labour laws that protect the interests of the workers of the IT/IT & ITES sector. Further, it had requested the chief secretaries of the states to get implementation of labour laws reviewed expeditiously. This, in itself, confirms the trade union view that the IT/IT & ITES sector can under no circumstances be outside the purview of industrial legislations. The present debate has been sparked off with the Centre of Indian Trade Unions (CITU) forwarding a list of several complaints it received from the employees in this sector to the labour ministry for taking suitable action. The CITU stressed that steps must be taken to see that this sector respects labour laws of the country and creates proper working and living conditions for the employees. 3. UNHEALTHY TREND Going against the human biological clock, essential for work in the BPO industry, has a direct impact on health, particularly women's health. The BPO industry even has a name for it: BOSS - Burn out Stress Syndrome. Here's what www.BPO.org has to say: BOSS syndrome is seen very commonly among young people working in call centers. Gastrointestinal problems are inevitable for those working at nights as the body is put under chronic stress. A potentially fatal increase in heart rhythm can result in severe chronic gynecological problems in women and sleep disorders in both men and women. A study (2001) by the Seattle based Fred Hutchinson Cancer Research Center, in association with the National Cancer Institute has shown that women who work the night shift may face an increased risk of breast cancer of up to 60 percent. The research looked at night-shift work and light at night as specific risk factors for breast cancer. Sleep deprivation and exposure to light at night may interrupt melatonin production, thereby stimulating the body to produce more estrogen, which is a known hormonal promoter of breast cancer. The astonishing finding that women who had worked the "graveyard shift" at least once in the decade before diagnosis had as much as a 60 percent increased risk of breast cancer compared with those who had not, has implications for the thousands of young women queuing up for jobs in call centers. After working on overnight shift, many shift workers face a serious risk of falling asleep at the wheel. Studies have found that auto accidents increase during the early morning hours. In fact, several studies show that sleepiness and alcohol have very similar effects on the ability to drive.


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NEED FOR UNIONISATION The employees of IT/IT & ITES sector have begun to feel acutely the need for unionisation, perhaps not so much to make or achieve any economic demands but more for pursuing their demands of security of job and better work place environment. Though there is a growing demand for unionisation from the employees of this sector, the same is muted, as any attempt to do so will result in arbitrary dismissal. IT/IT & ITES sector is a by-product of globalisation and the practice of Business Process Outsourcing (BPO), resorted to internationally. Hence, we need to take note of the global practices in this sector. There are trade unions functioning in the IT/IT & ITES sector in


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several developed countries. There is no reason why India should be exception to this global trend. FALSE ARGUMENTS AGAINST UNIONISATION IT/IT & ITES – and more particularly the BPO segment thereof – is showing a frenzied response to the very suggestion for unionisation of the employees. First, the NASSCOM came out with a bald statement that there is no need for trade unions in the IT/IT & ITES sector. Perhaps realising such a stance would not be tenable, the NASSCOM later made a correction in their stance that the employees of the IT/IT & ITES sector did not want trade unions. The threat perception on the part of the employers of the IT/IT & ITES sector is, unfounded. The IT/IT & ITES sector has nothing to fear about unionisation, if the employers can be transparent and are willing to recognise the merit of engaging their employees in dialogue on issues relating to their service conditions and work environment. But, in our country the employers have never taken kindly to the very idea of the employees unionising, as they innately prefer a union-free environment. There is an argument that India will lose its competitive advantage of the BPO segment of the IT/IT & ITES sector, once trade unions become a reality in this sector. But, this has to be viewed from two angles. First, there is no justification of the IT/IT & ITES companies to persist with their race to the bottom both within the country and between countries of the third world aspiring to secure the favour of international companies in the matter of BPO contracts. In this, there is an implied truth that the employers fear that the employees, once unionised, may seek a larger share of the pie, which is presently taken by the former. The foreign companies resorting to BPO attach more value to the skills and efficiency levels - including the fluency of language, areas in which India is definitely having an edge over other developing countries. Second, there is no reason why the employees, even after unionisation, will refuse to cooperate with the employers in the matter of sustaining the work orders, as these employees can very well be expected to have an enlightened vision of their prosperity being intertwined with the prosperity of the very companies that they are serving. So, India can and will continue to be the favourite destination of BPO, notwithstanding unionisation of the IT/IT & ITES sector. At any rate, there is no empirical evidence to suggest the foreign companies awarding BPO contracts are specifying absence of trade unions as a necessary precondition! What is required is a positive thinking and approach on the part of the employers towards recognising the trade unions rights of the employees the IT/IT & ITES sector. Unionisation could lead to a more dignified work place atmosphere and positive response would not be lacking on the part of the employees even after unionisation. It is, therefore, imperative that the present fear driven work environment gives place to a responsible unionised situation in the IT/IT & ITES sector. The right course for the


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employers should be to encourage their employees to form their own unions and deal with them as representative entities ushering in a process of dialogue to resolve the issues and grievances. This should emerge as a reality very soon. Whether these unions should chose to affiliate with any central trade union or not is another question, which must be left to free will and discretion of the employees.

.

THREADS TO BPO SECTOR

Despite the boom and support that BPO sector has fetched, there are certain grass-root level setbacks too. These setbacks are strongly propagated to be threats resulting into backlash to the BPO activity in India. These are as under:

1. Lack of maturity in service line, increasing competition among e-logistics providers and management resistance are the main deterrents to the outsourcing in the logistics Sector.

2. Discretionary cuts in budgets, low growth due to industry maturity and decentralized Nature of facilities management are the main deterrents to the outsourcing in the


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facility & operations management sector.3. Privacy concerns and technical nature of subject matter are the main deterrents to the

Outsourcing of legal services.4. If all above is not enough, the companies which are outsourcing non-core processes

from third party service providers are literally placing their fate in the hands of another company, which appears to be a normal setback of BPO at the outset.5. Some companies which jumped BPO market in India are now looking to sell their assets being unable to scale operations up to the required level. As per the NASSCOM report, recently there were about 200 Indian companies offering BPO and related services looking for buyers.6. Companies rush into BPO market without understanding the kind of operational and

marketing issues they would have to cope with and the kind of gestation periods to be expected before profits can start flowing in consistently. As a result, many facilities that were set up are lying vacant and the failed enterprises have to either close down or get acquired, as they have neither funds nor clients.

7. The rapid growth of India's IT & ITES-BPO industry, has not been taken too well in developed countries from where jobs are coming to India. Recently, in the US, bills have been tabled in five states namely; New Jersey, Maryland, Connecticut, Washington and Missouri that sought to ban the transfer of state data processing contracts to developing nations. In the UK, three of the country’s biggest trade unions have come together to fight the loss of jobs to India.

The complaints from the employees in the IT/IT & ITES sector include the following:

The employees are working around 12 hours a day without getting any overtime payment.

In many call centres/BPO establishments, employees are forced to work only in night shifts, in contravention of ILO convention on frequency of night shift and compensatory allowance for doing night duty.

There is no grievance redressal machinery and the employees working in the industry face summary dismissal if one even tries to raise any complaint about working conditions.

Several undertakings do not give even appointment letters to the employees so that they can be dismissed from service without even giving notice.

Any attempt to form a union or association by the employees is penalised by summary dismissal.

Several cases of sexual harassment and molestation of women employees have occurred but invariably it is the women complainants who are asked not to report for duty from the next day. This creates a situation where women employees are faced with humiliating working conditions, while the culprits are rarely punished. The occurrences are more frequent when women work in the night shift.

There are no rules to govern the working conditions, and occupational hazards have been reported in several cases without any remedy for redressal.

Remunerations are arbitrarily fixed with consolidated wages and there is no social security or job security for the employees.


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Compared to the profits earned by the undertakings, the salary level is extremely low leading to discontentment among the employees but they cannot raise any dispute for fear of losing jobs.

Maternity benefit is denied to women employees. Crèche facilities are absent causing hardships to mothers with young children.

These are only illustrative and not exhaustive. The most common complaint is the practice of the employers impounding the educational certificates and the passport of the employees, in their attempt to tackle the problem of high attrition levels prevalent in this sector. Yet another practice, widely prevalent in this sector, is not to pay the employees their contracted monthly salary upfront, but to defer a substantial part of it to be paid after expiry of a specified period subject to their performance being satisfactory.

SATYAM COMPUTERS AND EFFECT OF GLOBALISATION ON SATYAM

TABLE OF CONTENTS PAGE NO.1. INTRODUCTION -012. HISTORY -043. ARCHIEVES -064. MERGER & ACQUISITION -085. SATYAM PARTNERS -116. AWARDS -12


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7. MILESTONES -158. GLOBALISATION - 219. EFFECT OF GLOBALISATION - 24

10. CUSTOMERS - 27 11. SATYAM COMPETIVE STRENGTH - 29

GRAPH PAGE NO

1. CONSOLIDATED INDIAN GAAP FY 2007 - 04 2. REVENUE AND NET INCOME - 053. NET PROFIT IN FY, 07 Q3 & Q4 AND Q2,07 & Q1,06 - 10,224. NET INCOME - 235. TOTAL ASSETS - 236. REVENUE DERIVED FROM U.S. - 247. REVENUE FROM MANUFACTURING AND BANKING& FINANCE - 258. REVENUE FROM EXISTING CUSTOMER - 279. REVENUE FROM LARGEST CUSTOMER - 2710. REVENUE FROM DIFFERENT SECTOR - 2811. REVENUE FROM SERVICES AND BPO - 2812. REVENUE FROM DIFFERENT COUNTRIES - 29

SATYAM COMPUTERS

INTRODUCTION Satyam Computer Services Ltd. (NYSE: SAY), offering a range of expertise

aimed at helping customers re-engineer and re-invent their businesses. Nearly 45,700* highly-skilled professionals in Satyam work onsite, offsite,

offshore and nearshore, to provide customized IT solutions for companies in several industry sectors.

Satyam's network spans 57* countries, across 6 continents. Nearly 45,700* dedicated and highly skilled IT professionals, work in

development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia


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Serve over 599* global companies, including over 173* Fortune 500 corporations.

Strategic technology and marketing with over 90* top-notch companies that help us provide end-to-end services to our customers.

Developed a unique quality hallmark, called eSCMSM (eSourcing Capability Model), for (IT & ITES), in collaboration with Carnegie Mellon University and Accenture.

Specially developed Business Continuity Model (BCM), which allows us to continue mission critical operations of our customers, even in the most challenging of times.

Established on: June 24, 1987 Board of Directors

Executive Directors: Mr. B. Ramalinga Raju (Founder & Chairman) Mr. B. Rama Raju (Co-Founder & CEO) Mr. Ram Mynampati (Board Member, President – Commercial and Healthcare Businesses, Chairman – Citisoft, Plc.)

Non-Executive Directors: Professor M Rammohan Rao Dr. (Mrs.) Mangalam Srinivasan Prof. Krishna G. Palepu Mr. Vinod K Dham

SERVICES OFFERED

Application Development and Maintenance Business Intelligence and Data Warehousing (BI&DW) Business Process Outsourcing (BPO) Consulting and Enterprise Solutions Embedded Services Engineering Solutions Enterprise Storage Solutions, ERP Infrastructure Management Services Managed IT Services Quality Consulting GIS Technology


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High-Tech Solutions MES and LIMS Silicon Design Services Six Sigma Consulting

Development Centers: Bangalore, Basingstoke, Beijing, Bhubaneswar, Budapest, California, Chennai, Chicago, Dalian, Georgia, Guangzhou, Hartford, Hyderabad, Kaula Lumpur, Melbourne, Munich, Mississauga, New Jersey, Ontario, Pune, Sao Paulo, Shanghai, Singapore, Sydney, Tokyo, Wiesbaden.

Subsidiaries: Nipuna Services Limited Satyam Technologies Inc. Satyam Computer Services (Shanghai) Co Ltd Citisoft Plc.

Joint Ventures: Satyam Venture Engineering Services Pvt. Ltd. CA Satyam ASP Pvt. Ltd.

SATYAM INFOWAY1. India's First Private ISP

Satyam's subsidiary, Satyam Infoway, became the first private Internet Service Provider (ISP) in India, when it started operation in 1998. 2. First Indian Internet firm on NASDAQ

Satyam Infoway was listed on NASDAQ (NASDAQ:SIFY) in November 1999, making it the first Indian Internet firm to trade on the premier US stock market. Infoway was oversubscribed by a factor of over 27, the largest ever for any Indian ADR/ADS offering.

Financial Summary

Consolidated Indian GAAP Highlights for FY 2007:

Revenue: Rs. 6,485 crore; a growth of 35.3% over fiscal 2006 Total income: Rs. 6,668 crore; a growth of 35.8% over fiscal 2006 Net Profit after Tax: Rs. 1,405 crore; a growth of 43.1% over fiscal 2006


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HISTORY

B. Ramalinga Raju is founder and chairman of Satyam Computer Services Ltd. The company was incorporated in 1987, went public in 1992 and has since grown

to become one of India’s preeminent information technology (IT) companies, with a global presence in 56 countries, serving over 150 Fortune 500 and about 400 multinational corporations. It employs more than 25,000 people.

Satyam is on target to achieve the coveted US$1-billion revenue mark by the end of FY2005-06. As per US GAAP, revenue for Q2 was US$267.85 million, a sequential growth of 8.86 percent. Q2 was a landmark quarter, as this was the first time that the company achieved annualised revenue run rate of a billion dollars.

The company has vigorously expanded into new areas such as infrastructure management, enterprise business solutions and software for engineering processes in the automobile and defense industries Its IT consulting practice is also earning significant revenues.

Satyam already has a large US presence and is wooing clients in non-English-speaking countries in Europe, Latin America and northern Asia. It has also set in motion a global merger and acquisition strategy.

Mr. Raju has an MBA from Ohio University. He is also an alumnus of Harvard Business School. He has won several awards and global accolades, which include Dataquest IT.

Man of the Year in 2000 and CNBC’s Asian Business Leader–Corporate Citizen of theYear award in 2002.

INFORMATION ON THE COMPANY Business Overview Satyam are a global IT solutions provider, offering a comprehensive range of IT services to their customers including, application development and maintenance services, consulting and enterprise business solutions, extended engineering solutions and infrastructure management services. They also offer BPO services through our majority-owned subsidiary company, Nipuna. Our headquarters are located in Hyderabad, India.


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They began providing IT services to businesses in 1988 and are currently the fourth largest Indian IT software and services company, based on the amount of export revenues generated during fiscal 2005. Their revenues grew to $1,096.3 million in fiscal 2006 from $459.2 million in fiscal 2003, representing a compound annual growth rate of 33.7%. For the same period, their net income grew from $82.3 million to $249.4 million. The number of their employees, whom they refer to as associates, grew from 9,838 as of March 31, 2003 to 28,624 as of March 31, 2006.

ARCHIEVES: 2001 Satyam's Middle East Solutions Center inaugurated at Dubai Internet City Satyam Computer Services became the first of the Top 5 Indian software services companies to open its facility at the spanking new Dubai Internet City. Satyam's Middle East Solutions Center was inaugurated today by Mr. Mohammad Al Gergawi, Director-General of the Dubai Technology, E-Commerce and Media Free Zone Authority, and Chairman of the Dubai Internet City (DIC). Clients include Emirates Airlines / Mercator, Dubai Duty Free, NMTC, Masafi Mineral Water Company, Mashreq Bank, National Bank of Dubai, Al Futtaim, ARAMCO, Public Warehousing Company, Alba and Kuwait University.


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ERP: SAP Business Transformation for Value Creation Mergers & acquisitions, divestures, increasing globalization, receding organizational boundaries and emerging new technologies are transforming the way businesses are run today. Satyam’s SAP practice is helping customers around the world manage this constant business transformation by delivering business solutions that help them:

Integrate key business processes. Manage value-chain across extended enterprises. Enable collaboration among different organizations. Deploy best-in-class solutions for critical business needs. Improve operational efficiency. Improve information flow & access. Enable interoperability between heterogeneous applications. Reduce costs.

ARCHIEVES: 2004 Satyam to recruit Management Graduates from Singapore, first time outside Satyam Computer Services Ltd. (NYSE: SAY), announced that it would recruit fresh graduates from local universities in its first management graduates hiring programme outside India to spur its fast-growing software and outsourcing activities in South East Asia and China. The Hyderabad-based Company, which has its Asia-Pacific headquarters in Singapore, announced it would hire the first batch of five to six local graduates - Singapore citizens or permanent residents - under Singapore's Ministry of Trade and Industry's Asian Business Fellowship programme. Under the programme, the Singapore government will subsidize training cost for a defined period before being deployed in India, China and Singapore. The graduates will be drawn from the IT, business development and marketing courses. These management graduates will focus less on IT and software and more on marketing-related skills, including pre-sales, marketing, business analysis and client interface. Singaporeans, with their multicultural background and language skills, can play such roles skillfully in South East Asia and China and help Satyam move up the value chain," With the recent launch of operations in Hungary and Brazil, Satyam is preparing to actively engage in Europe and Latin America. Apart from expanding base in US, Canada and Australia, Satyam also strengthened its operations in Bhubaneshwar, Chennai, Bangalore and Hyderabad, in India.

KNOWLEDGE MANAGEMENT Leveraging knowledge involves taking stock of existing knowledge (knowing what the organization knows), disseminating it across the organization and continuously upgrading it to keep pace with the requirements of a rapidly changing business environment. Knowledge Management initiatives at Satyam

K-Window: At the heart of Satyam’s Knowledge Management initiatives is K-Window. This end-to-end KM solution includes a large Knowledge Repository containing


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thousands of documents relating to Projects, Service Offerings, Best Practices, Case studies, Competitors, Customers and Alliance partners. An Expert Locator helps Associates to contact experts in the respective fields. Publishing: This initiative focuses on promoting Thought Leadership by enabling Associates to publish books, working papers, journal articles and case studies.Pathshala: The Patashalas are highly interactive informal Knowledge sharing sessions which typically last for about 90 minutes. These sessions aim at capturing and sharing the Tacit/ Experiential knowledge of experts. Patashalas are facilitated by Subject Matter Experts (SMEs) from within and outside Satyam who volunteer to share their experiences, ideas, best practices and deep insights with Satyam associates. Contemporary topics relevant to Satyam’s businesses are chosen for discussion.

MERGER AND AQUISITION

1. Satyam acquires Knowledge Dynamics

Satyam Computer Services Ltd. (NYSE:SAY) announced that it has acquired Singapore-based Knowledge Dynamics Pte. Ltd., a high-end consulting solutions provider in Business Intelligence. The acquisition is an all-cash deal involving a consideration of US$ 3.3 mn of which US$ 1.8 mn is initial payment and the balance would be paid over two years. An additional sum of US$ 2.2 mn would be made as earn out payments based on certain set revenue and profitability targets over the next three years. Synergies between the two companies will lead to Satyam emerging as a partner of choice for its customers globally, as it now offers the entire Business Intelligence & Data Warehousing (BI & DW) footprint of Intelligence, Insight and Integration. Satyam will


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further leverage this acquisition to offer solutions on Knowledge Process Outsourcing (KPO) through Nipuna, its BPO subsidiary. The deal marks the first acquisition in Asia Pacific by the Indian software giant which recorded revenues of US$793 million in the fiscal year ended 31 March 2005.The merged operations, which will be driven out of Satyam’s headquarters for the Asia Pacific region in Singapore, will enhance its global positioning in the high-end DW-BI consultancy services which is forecast by Gartner to grow at a compounded annual rate of nearly 9% to US$22 billion in 2005. Knowledge Dynamic’s CEO, Mr Venkat Narayanan, will continue to lead the Knowledge Dynamics team following the acquisition.

Key benefits of Satyam’s acquisition of Knowledge Dynamics include:

With this acquisition, Satyam’s strengths in Data Warehousing will be combined with Knowledge Dynamics’ strengths in business intelligence to cover the 3i’s of DWBI ie: Integration, Intelligence, Insight. Coupled with its technical and domain expertise, Knowledge Dynamics’ BI intellectual property – iDecisions – will become a strong differentiator for Satyam in the booming global BI market. Through its BPO subsidiary, Nipuna, Satyam will leverage this acquisition to offer solutions on Knowledge Process Outsourcing. Leverage on integrated high-value and cost-effective solutions that will make Satyam’s customers more competitive. Satyam’s CMMi certified DWBI Global Delivery capability and Knowledge Dynamics’ recognition as a niche high end consulting solutions provider in BI will provide integrated, high value solutions which are also cost effective.

2. Satyam expands footprint in Malaysia

SINGAPORE--Satyam Computer Services unveiled Thursday plans to build the company's large-scale development center in Asia, the first outside its home country. Cyberjaya the new campus--which is expected to be completed by mid-2008--will have an initial 2,000 square-feet facility and is likely to expand up to 5000 square feet over the next few years, People will be added to the current staff strength of 150 over the next six to seven months, with plans to expand up to 2,000 people when the new Cyberjaya facility is built a year and half later. To be built at an initial investment cost of under US$2 million, the Cyberjaya facility will cater not only to the Malaysian market but also meet "software export and global customers' requirements.

3. Satyam Computer Services to collaborate with Cisco


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Satyam Computer Services has announced to collaborate with Cisco to explore a new venture that will optimize, deploy and manage solutions for handling medical distress solutions and health management solutions for global markets. Cisco has announced a $100 venture programme targeting the Indian innovation. Satyam has more than a decade of experience in delivering solutions to the healthcare industry, and will continue to focus directly on this market. Now, working in collaboration with Cisco, the development of a transformational business model reinforces the collective vision of both companies to service healthcare needs by effectively leveraging technology, process and domain expertise. Satyam has customized its software applications with the integration of Cisco unified communication system and Cisco unified contact center which makes the services more citizen-friendly and effective. Taking advantage of the network as a platform for delivering managed services will also help to build a model that can be replicated across even the neediest parts of the world. The elegance of this model lies in its modularity and the scalability that internet protocol (IP) supports, together with a robust process framework which will help enable services to be rolled out in a phased manner globally. The company made this announcement after the trading hours Wednesday, 31 October 2007.

OTHER COLLABORATIONS AND AGREEMENTS

On 23 October 2007, Satyam computer signed an agreement with Fujitsu Services to provide IT services to Reuters as part of a 10-year. Also, the company acquired 100% stake in Nitor Global Solutions (NITOR) of the UK, a niche-consulting firm providing infrastructure management services (IMS).

As per recent reports, Satyam Computer will soon open a software development centre in Madurai. The company has applied for 50 acres of land under Electronics Corporation of Tamilnadu (ELCOT) scheme proposed in the university land on Theni road for this project.

On 27 September 2007, Satyam Computer Services launched a new solution center in Brisbane's central business district. The facility will support Satyam's Queensland-based clients across various IT platforms with an emphasis on enterprise application-based solutions. Hyderabad-based Satyam Computers already has development centres in Melbourne and recently launched a regional solutions hub in North Sydney adding up to over 7,500 square meters.


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On 5 September 2007, the company launched integrated digital media framework (IDMF), a solution accelerator for content producers to increase monetizable opportunities. The launch took place on the sidelines of IFRA Expo 2007 in Chennai.

Satyam Computer Services’ net profit surges 7.19% to Rs 417.15 crore on 10.75% rise in sales to Rs 1948.24 crore in Q2 September 2007 over Q1 June 2006.

SATYAM PARTNERS

Adobe Interactive TKO Inc. Salesforce.com

APRISO Intershop Communication SAP

Ariba Interwoven SAS

Automatos Ipath Savvion

Autonomy JDA Seven Hills Business Solutions Ltd

BEA Jonova Sistran

Brocade Kronos Software AG

Bsafe LeftBrain Solarc


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Business Objects Lombardi Sterling Commerce

CAS Mainstay Partners, LLC. Sybase

COGNOS Managed Objects Symantec

Computer Associates Mark Logic Symbian

COMPUWARE Metastorm Symfact AG

Corticon Technologies Microsoft SumTotal Systems , Inc

Dassault Miebach Logistics Technology Evaluation Centers

eBaoTech MindFlow Telelogic

EMC-Documentum NETAPS TIBCO

EPiServer Network Appliance Tower Technology Inc.

FairIssac Corporation OAT Systems Triple Point Technology India Pvt. Ltd.

FAST TM Oblicore UGS

FatWire Software Oracle UNITED DEVICES

Gigaspaces Pegasystems Inc. VelQuest

Global 360 Pentaho Vitria

Goldratt Consulting Planview Weblayers

i2 Technologies Platform Computing Xerox

IBM Primavera

IDS Scheer Ramco

Informatica Red Hat India

AWARDS 2006

Ranked the 3rd best company to work for in India by BT-Mercer-TNSThe BT-Mercer-TNS Best Employer Survey 2006 has ranked Satyam Computer Services as the third best company to work for in India.

The Asian MAKE AwardSatyam has been recognized as a 2006 Asian Most Admired Knowledge Enterprises (MAKE) Winner.

Ranked the global number two outsourcing vendorSatyam has been ranked by the Brown-Wilson Group as the number two outsourcing vendor globally


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Ranked in the ASTD BEST awardsSatyam has been ranked 15th in the American Society for Training & Development's (ASTD) Fourth BEST (Building talent, Enterprise-wide,

TDWI Best Practices award For the second time, Satyam has received the prestigious award from TDWI (The Data Warehousing Institute) of North America.

The RASBIC awardsSatyam won the RASBIC (Recruiting & Staffing Best in Class) awards for its most innovative recruiting and staffing practices

2005 Recognized for corporate social responsibility

Satyam was honored with the Corporate Social Responsibility (CSR) award by the Businessworld-FICCI-Social and Economic Development Foundation for being Corporate Citizen Number One.

‘Vendor – Client Collaboration Award’ at Gartner’s Global Sourcing SummitSatyam won the Vendor/Client Collaboration Award – a prestigious award for effectiveness in delivering successful consumer alliance – at the Global Sourcing Summit, hosted in San Diego, California from November 1–3, 2005.

The ICWAI AwardSatyam won the ICWAI National Award for Excellence in Cost Management for 2005 under the services category. Instituted in the year 2003 by the Institute of Cost & Works Accountants of India (ICWAI

The ROC AwardSatyam won the Recognition of Commitment Award (ROC) from the Institute of Internal Auditors (IIA), USA.

Outstanding System Integrator Award from OracleSatyam won the ‘Outstanding System Integrator’ award from Oracle Corporation during the Executive Partner Forum 2005.

Indo-Australian Business Excellency AwardThe Government of Australia recognized Satyam as a key Indian company in Australia and presented the Indo-Australian Business Excellency Award.

Pune Center assessed at SEI PCMM Level 5Satyam’s Pune Development Center was certified at Level 5 of People Capability Maturity Model (PCMM) by TUV Rheinland.

Ranked third in Corporate GovernanceSatyam was ranked third in the Corporate Governance Survey by Asset Benchmark Research for 2005. Over 110 global institutional investors voted for Satyam’s exemplary corporate governance.

Among the Top 13 best managed companies in IndiaFor the second year in a row, Satyam was recognized as one of the top 13 companies in India.

2004


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HT Power Jobs AwardSatyam was recognized as an “organization that creates fun and joy at work” by HT Power Jobs awards for HR Excellence 2004.

Gartner AwardsKey IT and business executives voted Satyam as the best in the ‘Risk Management’ and ‘Solution Delivery’ categories, at the Gartner Global Sourcing Summit, held in Bonita Springs (Florida) during November 7-9, 2004.

2002 Ranked in the CNBC-Hewitt Best Employers Survey

Satyam was ranked among the top 10 for the second time in the survey. Taking Satyam into the top 10 were high scores received across parameters such as top management’s belief in people, a friendly and open work culture that promotes entrepreneurship and is process-centric.

Ranked in the Business Today-Mercer–TNS SurveySatyam featured in the top 10 ‘Best Companies to Work for in India’ in a survey conducted by the Business Today-Mercer–TNS.

Satyam bags National Award for bright ideas Satyam has been Selected for a special and singular award (IT Industry) in "Excellence in Suggestion Scheme Contest 2002" for "Suggestion Scheme Performance in Information Technology Industry".

Aberdeen Best Practice September 2002 Satyam's IT Offshore Service Delivery Program cited as 'Industry Best Practice' by Aberdeen Group report.

Excellence in Corporate Governance, 2002 Institute of Directors awards Golden Peacock to Satyam for excellence in corporate governance.

Ranked among Global Top 10 World Bank's Intranet site developed by Satyam ranked among the world 10 Best Intranet Site by Norman Nielsen group.

Security Standards, 2002 Satyam's certified under BS 7799 International Information Security and Management Standards.

TDWI Award 2002The data warehousing engagement executed by the BI&DW practice for GE Power Systems won the TDWI award under the Global Data Warehousing category.

2001


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IMC Bajaj National Quality Trophy for 2001 Satyam won the prestigious "IMC Bajaj National Quality Trophy" for 2001, one of the highest Business Excellence awards in India.

First ISO 9001:2000 Certified Organization in the World Satyam became the first organization in the world assessed by BVQI and found to be in accordance with the requirements of the new ISO 9001:2000 International Standards, under the Tick IT scheme.

SEI CMM ® Level 5 Assessment Satyam achieved this most sought after Quality standard in the world – the Level 5 of the Capability Maturity Model (CMM®) of the Software Engineering Institute (SEI) instituted by the Carnegie Mellon University - in the first attempt.

1999-2000 World Economic Forum's Pioneering Technology Company

In 1999, the World Economic Forum identified Satyam as one of "100 Leading Pioneering Technology Companies" at the forefront of the knowledge economy.

Satyam bags Golden Peacock Award for Innovation Satyam bagged the coveted Golden Peacock award – 1999, chartered by the Institute of Directors, Ministry of Human Resources, Government of India, for innovative products/ services in the Infotech-Telecom category.

World Economic Forum's Global Growth Company In 1997, Satyam was selected by the Switzerland-based World Economic Forum and the World Link magazine as one of India's "most remarkable and rapidly growing entrepreneurial companies

Best Software Exporter Award Satyam was ranked the Top Software Exporter in the State of Andhra Pradesh among STP units, during 1997-98 by the Software Technology Parks of India (STPI).

Awards to the Founder and Chairman ABLA Award, 2002: CNBC's Asian Business Leaders Award for "Corporate

Citizen" for 2002. Dataquest IT Man of the Year Award 2000

Dataquest, a major information technology magazine, named Satyam Chairman B. Ramalinga Raju their IT Man of the Year, for his contributions to the growth of IT in India.

Ernst & Young Entrepreneur of the Year (Services) Award 1999The Award celebrates the indomitable spirit of the Indian entrepreneur and seeks to recognize the dreamers and visionaries who have driven their enterprises to exceptional heights of success against all odds.


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MILESTONES OF SATYAM

Milestones: 1987 - 1992 Satyam's growth has been an eventful and highly charged journey toward excellence, a journey marked by pioneering achievements and global awards. Satyam has made significant contributions to the industry in India and overseas. Some of our important milestones are listed below.

May 1992 Initial Public Offering oversubscribed by a factor of 17.

January 1992Installation of 64 kbps satellite link, which paves the way for online access to global clients.

August 1991 Recognized as a Public Limited Company.

June 1991Deere & Co., Satyam's first Fortune 500 Client, initiates an offshore software project.

June 1987 Satyam incorporated as a private limited company.


December 14, 1998 Announcement of Satyam GE Joint Venture.

November 22, 1998 Launch of Satyam Infoway's ISP Service.

September 1997Satyam Spark Solutions launches SearchPad, an intelligent search agent for the Internet.

May 1997 First Indian IT Company to get ITAA Certification for Year


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2000 Solutions.

September 1996Formal inauguration of Satyam Technology Center outside Hyderabad city.

April 1996 Satyam Spark Solutions set up.

April 1996 Satyam Enterprise Solutions comes into being.

December 1995 Satyam Infoway incorporated.

November 1995 Satyam Renaissance founded.

July 1995 Rights Issue offered.

March 1995 Awarded ISO 9001 Certification.

July 1993 Joint Venture with Dun & Bradstreet.


February 9, 2004Satyam opens new development center in Mississauga, Canada

January 30, 2004 Satyam Computers plans to set up base in Kolkata

December 23, 2003Satyam awarded IBM Lotus Award in Knowledge & Content Management Solutions category in the 10th Annual IBM Lotus Awards

November 13, 2003The Chairman of Satyam, Mr. B Ramalinga Raju given the closing bell honor at the New York Stock Exchange

May 13, 2003 Satyam's first customer summit a big success

April 28, 2003Satyam and Microsoft sign MOU to provide world-class IT outsourcing services to Asia-Pacific region

April 28, 2003Indian Software Giant Satyam Computer Services Launches Global Solutions Centre in Malaysia

April 04, 2003Satyam partners Hummingbird to set up South Asia's first Hummingbird's ETL/BI Competency Center

March 17, 2003Satyam signs new multi-year service agreements with TRW Automotive and Northrop Grumman

February 27, 2003 Satyam announces business continuity center in Singapore,


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the first of its kind outside India

December 30, 2002Satyam stated as " Top choice for SAP support" by Giga Research group

November 19, 2002Satyam ranked 3rd in top 10 US revenue growth for software maintenance & support provider by Gartner Inc.

October 28, 2002Satyam Computer Services and PeopleSoft India form Strategic Alliance

October 17, 2002AP Chief Minister inaugurates Nipuna's BPO facility at Hyderabad

October 11, 2002B. Ramalinga Raju, wins Corporate Citizen of the Year Award

October 11, 2002Satyam to Provide Extended Support Services to Inktomi Content Networking Customers

October 09, 2002Satyam's Support To World Bank Intranet Wins World-Wide Recognition

October 08, 2002Satyam Computer Services Announces Support For Microsoft Solution for UNIX Migration

October 04, 2002SOFTBANK ASIA INFRASTRUCTURE FUND and VentureTech to invest $20 Million in Sify

September 27, 2002Satyam wins Golden Peacock Award for Excellence in Corporate Governance

September 25, 2002 Satyam and Commerce One Establish Strategic Partnership

September 05, 2002Satyam's IT Offshore Service Delivery Program Cited as'Industry Best Practice' by Aberdeen Group Report

September 04, 2002Satyam and ETI Establish Strategic Alliance to ProvideData Integration Services to Fortune 500 Customers

August 30, 2002Satyam campus at Hyderabad welcomes Intel CEO Craig Barrett

August 26, 2002 Satyam and Iona enter into strategic partnership

August 08, 2002 Satyam Signs Agreement with Saint-Gobain Abrasives

May 31, 2002Healthaxis and Satyam Team to Deliver Web-enabled Benefits Administration System for Washington State Health Care Authority


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March 28, 2002Satyam nominated for eOscar 2002 in the Best B2B solutions category

March 22, 2002Satyam is first company to implement Oracle CRM Applications in Thailand

March 20, 2002Satyam gets certified under BS 7799 International Information Security Standards

February 20, 2002Satyam and Hummingbird Announce Global Strategic Alliance

January 29, 2002Indian Software Leader Satyam Launches Operation in China.

December 13, 2001Satyam wins the IMC Ramkrishna Bajaj National Quality Award Trophy.

November 22, 2001 Satyam announces IT Services Partnership with CSC

November 20, 2001Satyam and Carnegie Mellon launch world's first IT- enabled Services Quality Model

November 1, 2001 Satyam opens Offsite Development Center in Sydney.

October 30, 2001 Satyam Europe wins software contract from Reuters.

October 29, 2001Satyam Allies Itself with New Services Company Focused on XML-based Communities for Healthcare: MedBiquitous Services.

October 5, 2001Satyam launches State-of-Art Solutions to Enhance Mobile Connectivity using the Microsoft Windows-Powered Pocket PC 2002.

October 3, 2001Satyam declared a finalist in Microsoft MEC Awards 2001 for innovative business solutions.

May 15, 2001 Satyam listed on New York Stock Exchange.

April 20, 2001Satyam bags Frost & Sullivan Award for Competitive Strategy in ASP.

April 16, 2001 Satyam sets up Asia-Pac Headquarters at Singapore.

April 3, 2001Satyam's Middle East Solutions Center inaugurated at Dubai Internet City.

March 29, 2001 Satyam and Ford sign MoU for Software Services.

March 22, 2001Review 200 Survey rates Satyam one of the 10 Most Well-Regarded Companies in India.

March 22, 2001 Satyam becomes first ISO 9001:2000 Company in the world


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as certified by BVQI.

February 12, 2001Satyam Europe Launches Enterprise Application Integration (EAI) Initiative.

January 20, 2001 Satyam, i2 Technologies announce partnership.

January 20, 2001Satyam and CCMB partner for global foray into Bioinformatics.

December 22, 2000Satyam Chairman Ramalinga Raju named "IT Man of the Year" by Dataquest.

December 20, 2000 Satyam TRW JV awarded $ 200 m contract from TRW.

November 22, 2000 Satyam, Ariba forge alliance.

November 22, 2000 Satyam Quality head wins Qimpro award.

August 19, 2000Satyam receives National HRD Award from Government of India.

July 1, 2000SatyamWorld, Satyam's Organization-wide Intranet, bags CIO Magazine's World's Best 50/50 Intranet SIT & ITES award.

July 1, 2000Satyam establishes dedicated Offshore Development Center for the Emirates Group.

June 8, 2000Satyam, TRW form strategic alliance to service the Automobile Sector.

June 7, 2000Satyam, Microsoft join hands to speed Web/E-Commerce Applications.

June 5, 2000Satyam and Exterprise, USA, form global alliance to speed deployment of software solutions for Net Market Makers.

May 15, 2000Satyam forms Joint Venture with Computer Associates to enable SMEs.

May 8, 2000Satyam becomes the first organization in the world to launch Customer-Oriented Global Organization training.

March 29 ,2000Satyam Subsidiary VisionCompass, Inc. globally launches VisionCompass software.

March 24, 2000Satyam Chairman B. Ramalinga Raju invited to share the dais with US President William Jefferson Clinton at a CII Function at HiTec City, Hyderabad.

February 10, 2000Satyam-GE receives ISO 9001 Certification within one year of operations.


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February 2, 2000Satyam declared one of '100 Most Pioneering Technology Companies' by World Economic Forum, Davos.

January 2000Satyam's Joint Venture with Venture Engineering Services Ltd. goes on stream.

November 20, 1999Satyam Infoway crosses the one-hundred thousandth customer mark for ISP services.

October 19, 1999Satyam Infoway becomes the first Indian Internet company to be listed on NASDAQ.

September 17, 1999Satyam Chairman B. Ramalinga Raju receives Ernst & Young Entrepreneurship (Services) Award.

August 1999Satyam Spark Solutions Ltd., Satyam Enterprise Solutions Ltd. and Satyam Renaissance Ltd. formally merged with Satyam Computer Services Ltd.

June 11, 1999Satyam launches Dr. Millennium, the most comprehensive solution for Y2K problems.

March 19, 1999 Satyam assessed at SEI CMM® Level 5.

Milestones: 2005 - Till date Satyam's growth has been an eventful and highly charged journey toward excellence, a journey marked by pioneering achievements and global awards. Satyam has made significant contributions to the industry in India and overseas. Some of our important milestones are listed below.

July 21, 2005Satyam acquired 100% stake in Singapore based Knowledge Dynamics, a leading Data Warehousing and Business Intelligence solutions provider

April 21, 2005

Satyam acquired 75% stake in London based Citisoft Plc, a highly specialized business and systems consulting firm, focused exclusively on the Investment Management industry. The balance 25% stake will be acquired partly in April 2007 and the balance in April 2008

FACTS Commitment to transform lives with IT Social outreach program Satyam Foundation launched in October 2000 Voluntary effort of Satyam Associates for Social Responsibility Preferred SAP Partner with one of the most mature practices in the world Backed by deep domain expertise, rich experience, a comprehensive portfolio

& strong SAP alliance Significant investments in the latest technologies Over 599* global companies, including 173* Fortune 500 corporations


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Alliances with over 90* business and technology leaders Presence in 90* countries across six continents Strategic alliances with over 80 leading technology vendors & System integrators Presence in 57* countries across six continents Satyam globally certified to ISO 27001, ISO 20000 and ISO 9001 standards Satyam is a CMMI Level 5 company Satyam simulated a first-of-its-kind, cross-border country outage and business

continuity operation in Singapore

GLOBALISATION

Globalisation is the removal of barriers of all kinds to the flow of trade. It is about the best offerings of enterprises being made available to the rest of the world rather than being confined to a region or geography.

The impact of globalisation would be a reduction in the number of players for any kind of value-creation activity. Only those providing the best value to customers will survive.

Satyam delivering services to a large number of companies who also want to establish their operations in India. If Satyam define their future relationship with them, Satyam priorities would be to expand Satyam’s global operations.

Most of Satyam revenue today comes from global operations. satyam would like to continue that by offering cost-effective and high-quality integrated services.

As nearly 98 percent of revenues come from worldwide operations, Satyam have had to compete with them to get this business.

Satyam is one of the pioneers of the virtual delivery of services. This is a new learning that the larger global companies have to adapt.

The other competency Satyam have built up over the years is flexibility to adapt to a fast-changing business environment. In the process, They have an organisational structure that is entrepreneurial and relatively flat and that allows for faster decision making..

BENEFITS OF GLOBALISATION In the beginning of the last century, world GDP was something like $1.5 trillion.

That grew to about 32 or 33 trillion dollars towards the end of the century. This was driven by the inventions and innovations of the industrial era.

Apart from IT, biotechnology and nanotechnology will be contributing in large measure to making the world a better and a wealthier place.

Increased wealth and sharing of technology, knowledge and best practices across geographical boundaries will allow us to address the issue of global poverty. Technology will help bring more people into the mainstream of the economy. That in turn will help companies expand and grow their markets.

The biggest beneficiaries of technology breakthroughs in a globalised world are the developing nations. These nations are witnessing impressive growth that was hitherto thought to be impossible.


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The developed nations created the mobile phone, which was commoditised in India and China, ushering in an exciting growth phase. We had earlier thought that it would take decades to drive out illiteracy from our villages.

Satyam’s own experiment in using information technology to spread literacy in about 150 of its adopted villages has shown that it can be achieved in a few years.These villages will be fully literate by the middle of 2006.

Challenges related to recruiting facing fresh talent Satyam is constantly looking at leveraging global advantages in talent and

technology. India may not be good at everything, so they tap talent and technology wherever they are available around the world.

Satyam workforce today has more people from different parts of the globe than ever before. The past hierarchical structures are not able to cope with our global growth ambitions, so newer structures with more-empowered people at all levels are coming into play.

Their leadership today is distributed all over the globe, and decision making is faster to help the organisation respond quickly to changes in the environment they operate in. They also see mergers and acquisitions as an integral part of our global growth strategy.

Indian software major Satyam Computer Services reported a net profit of Rs. 394 crores in the Q4, 2007 quarter ended March 2007 compared to Rs. 337 crores in the previous quarter (Q3, 2007) ended December 2006. This implies a sequential growth of almost 17%, despite the rupee appreciation and the hedging cost. Satyam Computers revenues increased by over 7% to Rs. 1779 crores from Rs 1,661.12 crores.


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.

PROBLEMS IN RETAINING THE TALENT

The supply-demand issue will pose a major challenge for the industry, particularly for experienced professionals.

Retaining the best talent will also be equally important. We can’t retain professionals only by paying higher salaries and offering attractive perks; that is the not the best way. We need to create enthusiasm in their role, their work and the organisation. Satyam focusses on internal and external training programmes

On periodical basis; there is also job rotation. Every 18-24 months, professionals are placed on different processes of their choice.

EFFECT OF GLOBALISATION


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1. The current economic environment, pricing pressure and rising wages in India have negatively impacted our revenues and operating results. Spending on IT in most parts of the world has recently increased after a two-year decreasing trend due to a challenging global economic environment.

2. Our business will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and the industries on which we focus. Our future success will depend on our ability to anticipate these advances and develop new product and service offerings to meet customer needs and complement our offerings of end-to-end IT services

3. Our revenues are highly dependent on customers primarily located in the United States and customers concentrated in certain industries, and economic slowdowns or factors that affect the economic health of the United States and our customers’ industries may affect our business. In fiscal 2006, 2005 and 2004, approximately 64.9%, 68.3% and 73.3%, respectively, of our total revenues were derived from the United States.

For the same periods, we earned 28.6%, 29.2% and 32.0% of our IT revenues from the manufacturing industry and 18.5%, 17.8% and 18.3%, of our IT revenues from the banking and finance industry respectively.


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4. We face intense competition in the IT services and BPO markets which could prevent us from attracting and retaining customers and could reduce our revenues. We face competition in India and elsewhere from a number of companies, including:

Consulting firms such as Accenture, BearingPoint, Capgemini and Deloitte Consulting;

Divisions of large multinational technology firms such as Hewlett-Packard and IBM;

IT outsourcing firms such as Computer Sciences Corporation, Electronic Data Systems and IBM Global Services; and

Offshore IT services firms such as Infosys Technologies Limited, Tata Consultancy Services Limited and Wipro Limited

5. Our revenues are highly dependent upon a small number of customers. We derive a significant portion of our revenues from a limited number of corporate customers. In fiscal 2006, 2005 and 2004, our largest customer together with its affiliates, accounted for 8.8%, 10.8% and 14.3%, respectively, of our total revenues. In fiscal 2006, 2005 and 2004, our second largest customer accounted for 5.1%, 7.4% and 9.9%, respectively, of our total revenues. In fiscal 2006, 2005 and 2004, our five largest customers accounted for 24.2%, 29.2% and 36.4%

6. Our fixed-price contracts expose us to additional risks, many of which are beyond our control, which may reduce the profitability of these contracts.

7. Our customers may terminate projects before completion or choose not to renew contracts, many of which are terminable at will, which could adversely affect our profitability.

8. A number of our customer contracts are conditioned upon our performance, which, if unsatisfactory, could result in less revenues than previously anticipated.

9. We dedicate significant resources to develop international operations which may be more difficult to manage and operate. we have established IT centers in Australia, Canada, China, Hungary, Japan, Malaysia, Singapore, United Arab Emirates, United Kingdom and United States and plan to open additional international facilities. Because of our limited experience in managing and operating facilities outside of India, we are subject to additional risks


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related to our international expansion strategy, including risks related to complying with a wide variety of national and local laws, restrictions on the import and export of certain technologies and multiple and possibly overlapping tax structures.

10. Restrictions on immigration may affect our ability to compete for and provide services to customers in the United States and in other countries, which could hamper our growth and cause our revenues to decline. The vast majority of our employees are Indian nationals. The ability of our associates to work in the United States, Europe and in other countries outside India depends on the ability to obtain the necessary visas and work permits

11. Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance. Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new U.S. Securities and Exchange Commission, or SEC, regulations, the NYSE, rules, Securities and Exchange Board of India, or SEBI, rules, and Indian stock market listing regulations are creating uncertainty for companies like ours.

12. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic issuer, which may, among other things, limit the information available to holders of our securities. As a foreign private issuer, we are subject to requirements under the Securities Act of 1933, as amended, or Securities Act, and the Securities Exchange Act of 1934, as amended, or Exchange Act, which are different from the requirements applicable to domestic U.S. issuers.

13. Regional conflicts or natural disasters in South Asia and elsewhere could adversely affect the Indian economy, disrupt our operations and cause our business to suffer. South Asia has from time to time experienced instances of civil unrest and hostilities among neighboring countries, including between India and Pakistan.

14. Political instability could seriously harm business and economic conditions in India generally and our business in particular. During the past decade, the Government of India has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant.

15. Currency exchange rate fluctuations may affect the value of our ADSs and our financial condition. Our functional currency is the Indian rupee, although we transact a major portion of our business in U.S. dollars and several other currencies and accordingly face foreign currency exposure through our sales in the United States and elsewhere and purchases from overseas suppliers in U.S. dollars and other currencies. Accordingly, changes in exchange rates may have a material adverse effect on our revenues, other income, cost of services sold, gross margin and net income, which may in turn have a negative impact on our business, operating results and financial condition.


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16. Our ability to acquire companies organized outside India as part of our growth strategy depends on the approval of the Government of India and/or the RBI and failure to obtain this approval could negatively impact our business.

CUSTOMERS Satyam market their services primarily to companies in the North America, Europe, the Middle East and the Asia-Pacific region. They have a global customer base which, as of March 31, 2006, consisted of 506 customers including 156 Fortune Global 500 and Fortune U.S. 500 companies. The strength of their relationships has resulted in significant recurring revenue from existing customers. Their business from existing customers in fiscal 2006, 2005 and 2004 accounted for 90.6%, 92.1% and 90.7% of IT services revenues, respectively. In fiscal 2006, 2005 and 2004, their largest customer, together with its affiliates, accounted for 8.8%, 10.8% and 14.3%, respectively, of our total revenues. In fiscal 2006, 2005 and 2004, their second largest customer accounted for 5.1%, 7.4% and 9.9% respectively, of our total revenues. Their top five customers accounted for 24.2%, 29.2% and 36.5% of our total revenues in fiscal 2006, 2005 and 2004 respectively.


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The following is a distribution of our IT revenues across our industry segments for the three most recent fiscal years:

Revenues They generate revenues through fees for professional services rendered in our two segments, namely, IT services and BPO services. The following table sets forth the total revenues (excluding inter-segment revenues) for our business segments for fiscal 2006, 2005 and 2004:

Graph

Revenues based on customer location They have experienced increasing volumes of business from customers located in North America and Europe, attributable to both new customers and additional business from existing customers. We expect that most of our revenues will be generated in North America followed by Europe in fiscal 2007. The following table gives the composition of our IT services revenues (excluding inter-segment revenues) based on the location of our customers for the years indicated:


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Satyam Competitive Strengths They believe that we are strongly placed to consolidate our market position as a leading IT service provider due to our competitive strengths which include:

1. Comprehensive range of services combined with specialized industry expertise. Their comprehensive range of end-to-end technology-based services encompasses application development and maintenance services, consulting and enterprise business solutions, extended engineering solutions, infrastructure management services and BPO services. Their comprehensive range of services enables us to broaden our dialogue with potential customers, deepen our relationships with existing customers and diversify our revenue base. Their services are built on a foundation of a rich understanding of the industries in which our customers operate and the underlying technologies that drive those industries. Their industry- focused business units such as manufacturing, banking and financial services, insurance, TIMES, healthcare, retail and transportation, allow us to understand the strategic issues facing our customers. 2. Flexible, highly evolved delivery model. They provide our services through 20 centers located in Australia, Canada, China, Hungary, India, Japan, Malaysia, Singapore, United Arab Emirates, United Kingdom and United States and our onsite teams operating at our customers’ premises. Over the past decade, we have made substantial investments in our infrastructure, processes and systems allowing us to evolve our global delivery model to effectively integrate offshore, offsite, nearshore and onsite services and perform a greater volume of work at our offshore development centers. 3. Established leadership position in consulting and enterprise business solutions. Their solutions are enhanced by our strategic alliances with more than 60 leading technology providers such as SAP and Oracle. Over the past few years, they have made strategic investments to augment our capabilities in this area which is reflected in the growing revenues from this business. During fiscal 2006 and fiscal 2005, 39.2% and 34.3% respectively, of our revenues, was generated from consulting and enterprise business solutions.


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4. Strong relationships with blue chip customers. They have long-standing relationships with large multinational corporations built on our successful execution of prior engagements. They believe we have significantly more Fortune Global 500 or Fortune U.S. 500 corporations as customers, relative to scale of revenue, as compared to other leading Indian IT services companies. As of March 31, 2006, 156 of their 506 customers were Fortune Global 500 or Fortune U.S. 500 corporations. We have a history of high customer retention and derive a significant proportion of our revenue from repeat business. During fiscal 2006 and fiscal 2005, 90.6% and 92.1% respectively, of their revenues, was generated from existing customers.5. Track record of high quality execution. They are committed to achieving operational excellence in our processes, people and infrastructure. Their quality assurance programs form an integral part of our project management methodology and seek to ensure that we consistently deliver high quality services to our customers. For instance, They have a company-wide quality management system, which satisfies the ISO 9001:2000 TickIT standard. They have been assessed at CMMI Level 5, the highest level possible, and have implemented the Six Sigma processes for application development and maintenance. They have also achieved domain specific certifications like AS9100/EN9100 for ES group – Aerospace domain, PCMM Level 5 Assessment for Pune Location, S15000/ISO20000 certification for N&S across India and BS15000 Global Certification for IMS business.

6. Culture of innovation. They have a history of innovation that is facilitated by our entrepreneurial culture and our management’s willingness to make strategic investments in growth markets. They believe we were one of the pioneers in the delivery of India-based IT services. Our technology laboratories continue to develop and bring to market new solutions based on new technologies. For instance, they are one of the few companies in India to offer utility and grid computing services to customers.

Growth Strategy of Satyam Computers

Satyam goal is to be a leading global provider of comprehensive IT solutions and services. They intend to accomplish our goal by:

1. Building on our long-standing customer relationships to cross-sell our comprehensive range of services. Satyam goal is to build long-term sustainable business relationships with our customers to generate consistent revenues.

2. Continuing to focus on enterprise-wide business solutions and high quality value-added services. To better serve our customers in key industry segments, Satyam intend to continue to focus on providing end-to-end enterprise-wide business solutions and increasing our share of value-added services, such as data warehousing and business intelligence, application portfolio management, process and quality consulting, business performance management, industry and regulatory specific solutions and grid computing solutions.

3. Expanding our presence in existing markets and penetrating new geographic markets. Satyam plan to expand their presence in our existing markets and establish a presence in new geographic markets throughout North America,


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Europe, Latin America, and the Asia-Pacific region. They intend to accomplish this by increasing our brand visibility and leveraging our global development centers to extend our services to customers located in these geographies. They also plan to continue to hire local associates to staff and manage our global development centers and to strengthen our sales and marketing functions to facilitate building strong relationships

4. Continuing to enhance our industry expertise. Satyam aim to have an in-depth understanding of targeted industries including manufacturing, banking and financial services, insurance, TIMES, healthcare, retail and transportation, which will help them identify and understand customer needs and proactively design and offer customized IT solutions to address those needs.

5. Attracting and retaining quality technical associates and augmenting their training. To attract, retain and motivate our technical associates, Satyam plan to continue to provide an environment that rewards entrepreneurial initiative and performance, including competitive salaries and benefits as well as performance-linked incentives.

6. Enhancing their capabilities through technology alliances and acquisitions. Satyam intend to continue to explore the formation of new alliances as well as strengthen existing partnerships with key technology vendors to enable us to leverage our partners’ strengths. They will also consider acquisitions to gain access to specific technologies and exploit synergies with our existing business.

Sales and Marketing Our sales operations comprise a Sales team, Account management team, Pre-Sales support team, and our Strategic Deals Group. Sales associates work solely on acquiring new customers. The second group consists of relationship managers who cross-sell services to existing customers and are responsible for building long-term relationships with such customers. The Pre-Sales group supports the business development efforts for prospects and existing accounts. Satyam has also invested in a strategic deals group, which focuses on acquiring large strategic deals.

Government Regulation Regulation of business by the Indian government affects Satyam business in several ways.

Satyam benefit from certain tax incentives promulgated by the Government of India, including a ten-year tax holiday from Indian corporate income taxes for the operation of most of their Indian facilities and a partial taxable income deduction for profits derived from exported IT services under Indian tax laws.

As a result of these incentives, their operations have been subject to relatively insignificant Indian tax liabilities.

Satyam have also benefited from the liberalization and deregulation of the Indian economy by the successive Indian governments since 1991.

Further, there are restrictive parts of Indian law that effect their business, including the fact that they are generally required to obtain approval from the Reserve Bank of India and/or the Ministry of Finance of the Government of India to acquire companies organized outside India, and they are generally required,


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subject to some exceptions, to obtain approval from relevant government authorities in India in order to raise capital outside India.

Finally, the conversion of their equity shares into ADSs is governed by guidelines issued by the Reserve Bank of India.

RECOMMENDATION

1. Government should emphasize more on set up of SEZ for IT & ITES sector


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2. Level of education should be improved for IT & ITES sectors because most of the

employees are just 12th pass; at least minimum qualification should be

graduation.

3. IT education should be mandatory for all Government and private organization

and for this special training should be conducted to aware them about IT.

4. More emphasis is given on export of IT products & services so that more revenue

should be generated.

5. Government should give tax benefit for establishing new IT Company.

6. Working hour should be more flexible and timing should be such that female

employees feel comfortable.

7. Due to globalization more new companies are coming in India, so government

should keep watch on them that they should not exploit their employees and give

better salary and other benefits.

8. In case merger and acquisition it should be always keep in mind that Indian

company should acquire foreign companies not acquire by foreign companies.

9. Female employees should provide better facility and no night shift for them.

10. IT should be used in each and every field like agriculture and other allied services

and in government organization so that people get information on time for their

business.

11. Due to globalization latest technology are used in IT & ITES sector for this more

qualified people are required, so more emphasis is given on technical education.

12. Mostly IT companies are located in metros and big cities so people of small cities

are unaware of IT. To aware those about IT companies should open their branch

in small cities also.

13. Overtime should be provided to employees.

14. Labor law and union should be implemented in IT & ITES sector also.


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15. Sexual harassment and molestation of female employee should and controlled and

strict punishment should be given to culprits

16. Government should provide more infrastructure to these IT companies like land,

power, road and tax benefit so that they can set up their business easily.

17. New entrant should employ more and more Indian people so that unemployment

can be reduced.

BIBLIOGRAPHY


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i) www.tn.gov.in

ii) www.gelnet.com

iii) www.sciencedirect.com

iv) www.hindu.com

v) www.consultoras.org

vi) www.indiasource.org

vii) www.flonnet.com

viii) www.india.gov.in

ix) www.expressitpeople.com

x) www.hinduonnet.com

xi) www.webmsi.free.com

xii) www.ibef.org

xiii) www.cmie.com

xiv) www.indlawnews.com

xv) www.indianbusiness.nic

xvi) www.satyam.com

xvii) www.businessworld.com

xviii) www.bullishindia.com

xix) www.seas.upenn.edu

MAGAZINES

1. Business & economy

2. Rotman Magzine

3. Price water house cooper

Newspaper

1. The Times of India

2. Hindu

3. Economics times

4. Hindu business line

QUESTIONNAIRE


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1. What is your rating about working environment?

Excellent

Very good

Good

Satisfactory

poor

2. Are you satisfied with salary structure?

Very less

Less

Satisfied

Very satisfied

Extremely satisfied

4. Are women suitable for night job

25% - Yes

67% - No

Rest – Can’t say

5. Are employees are qualified or under qualified for job

55%- Yes

35% - No

Rest – Can’t say

6. Level of education in IT & ITES sector


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Very High

High

Medium

Low

Very Low

7. Government support to IT & ITES sector

Very High

High

Medium

Low

Very Low

8. Impact on health in night shift

Good

Average

Bad

Very bad

9. Number of Female of candidate

40%

10. Average age group

18-25 years – 40%

25-40 years – 35%

Above 40 years- 25%

11. At what level customers are satisfied


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Very much satisfied

Satisfied

Less satisfied

Not satisfied

12. Is IT & ITES sector has positive effect on economy

60%- Yes

30%- No

Rest- Can’t say

13. Are employees are satisfied with benefits which companies provided

Very less

Less

Satisfied

Very satisfied

Extremely satisfied


my final thesis

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