Indian IT-BPM Industry
FY16 Performance and FY17 Outlook
February 2016
Agenda
• Global IT-BPM industry- Key highlights
• The Indian IT-BPM industry: Growth sectors
and changing landscape
• Outlook for FY2017
• Challenges
3 Source: NASSCOM
Highest relative share in national GDP >9.3%
Indian IT-BPM industry: Unparalleled contribution to
India CONTRIBUTION TO INDIA
Largest share in total services exports >45%
USD >7 billion
EMPLOYER OF CHOICE
Largest private sector employer
Ardent promoter of diversity
3.7 mn
~1.3 mn Women
3X Indirect employment >10 mn
TECHNOLOGY, SERVICES & START-UP HUB
56%
4,200+
Leading global sourcing
destination
3rd Largest startup hub in the
world; 9 unicorns
2nd largest base of internet users
Highest FDI investment sector (includes USD 5 bn startup investments)
>350 mn*
* mobile+fixed
Source: NASSCOM
ECONOMY POLITICAL
Uncertain macro-economic environment impacting
global tech spending
SOCIAL TECHNOLOGY
• Political instabilities in Europe, Middle
East
• Upcoming elections in major
geographic markets
• Protectionist stances in developed
economies
• World economic growth slowed down
to 2.4 per cent in 2015
• Volatility in equity & investment
markets, inflation, currency,
unemployment
• 2016 GDP forecast at 2.9 per cent
• Ageing populations in developed
economies
• Younger, connected demographics in
Asia and Africa
• Opportunity for tech enabled
solutions
• Technology adoption increasing,
though implementation models
changing
• Currency movement negating tech
spending growth
• Digital tech business outpacing
traditional business growth
Source: World Bank, IMF, ILO, NASSCOM
4
5
Worldwide IT-BPM spend
Source: IDC, Everest, Strategy&, NASSCOM
Global sourcing market size
234-239
88-91
60-62
~9%
• Global IT-BPM spend grew 0.4 per cent in reported USD in 2015
• Currency volatility impacting growth; tech spending grew 4 per cent in constant USD in 2015
• India continues to gain market share, accounts for 56 per cent of global sourcing sector
USD billion
652
181
385
1,440
1,008
650
186
386
1,498
1,075
2014 2015
USD billion
IT Services BPM Software
products
USD 1.2
Trillion
2015
ER&D
215-221
Growth
0.4%
[VALUE]-91
97-99
60-62 65-67
67-68
2014 2015
IT Services BPM ER&D
72-73
Hardware
Tech spending trend flat in 2015; India continues to
gain market share
Trends that defined the year
6
Indian tech players helping create smart enterprises
through confluence of Digital technologies- Cloud,
Mobility, IOT, Social, Big Data
Industry players adopting multiple business models
(partnerships/collaboration/ M&A) to address the
digital opportunity
Rapidly growing start-up ecosystem redefining
innovation
Indian service providers going bimodal- growth in both
traditional and digital markets
India’s consumer economy, Government’ initiatives for
digitisation of India - driving activity in the domestic
market Source: NASSCOM
Indian IT-BPM industry: Growth and Diversification
Source: NASSCOM
IT-BPM revenue break-up1
• Industry revenues (excluding eCommerce)
total at USD 143 billion; growth reflects
variable impact of currency
• Exports cross USD 100 billion, doubled
over last 6 years
• IT services ~USD 75 billion
• Global hub for high value added
services- ER&D and Product Development
revenues ~USD 26 billion
• World’s biggest BPM destination-
Revenues of USD 28 billion
• ~USD 17 billion eCommerce industry,
growing at 20 per cent boosting digital
consumption
• Diverse industry structure-
>16,000 firms; 1,000+ GIC/MNCs; 4,200+
tech startups
7
1 NASSCOM has begun to report eCommerce market as part of domestic IT-BPM; historical numbers have been changed to reflect addition of this segment E: Estimate, includes hardware
87 98
108
20
21 22
Exports Domestic e-Comm
USD billion
143 132
14 17
FY2015 FY2016E FY2014
11
119 35
Hardware
13 13
12 34
32
• Industry employee base reaches 3.7
million, addition of 2 lakh in FY2016
• eCommerce industry - 40,000 employees
• 1.1 million jobs added in last 5 years
• Annual talent output: 6.2 million
• >1 million technical graduate pool
• ~36-38 per cent share of global
employable talent pool for IT
• Indian IT industry a Global talent
powerhouse – representative of
millennials, showcasing diversity, and
leadership in digital skills
• Talent hunt shifting from ‘Qualification’ to
‘skill based’; hiring ‘knowledge and
expertise’
Source: NASSCOM
Direct employment *
6%
1730 1,840
1,040 1,090
720 760
FY2015 FY2016E
IT exports** BPM exports IT-BPM Domestic***
3,490
3,690
* Excluding Hardware ** includes IT services, Software products, ER&D and product development *** excludes eCommerce
Industry hiring levels steady; specialized skill sets in
demand
(‘000)
IT-BPM exports cross USD 100 billion milestone
IT-BPM export revenues
55.2 61
22.5 24.4
20 22.4
FY2015 FY2016E
IT Services BPM S/W prod and ER&D
97.7
107.8
• Robust Industry growth meets
NASSCOM guidance
• Fastest growing export sector; Added
~USD 50 billion in 5 years
• Digital business growing 1.5X
traditional business
• Segmented exports growth-
o IT services : 10.3 per cent;
o BPM : 8.8 per cent;
o ER&D and product development
highest, at 12.6 per cent
o Software products : 10.3 per cent
• Outperforming Segments:
o ER&D and product development,
IS outsourcing, software testing,
F&A
o Digital solutions
o US, manufacturing and emerging
verticals
FY2016E* Y-o-Y Growth
INR 17%
Constant currency USD 12.3%
Reported currency USD 10.3%
10.3%
(USD billion)
Source: NASSCOM E: Estimate, excludes hardware
Domestic IT-BPM: Ecommerce boosting growth
IT-BPM domestic revenues
• Increased consumer adoption of digital
tech coupled with a technology focused
Government growth agenda
• Aadhar enrolment crossing 950 million
• Large projects like GSTN awarded
• Electronic transactions related to eGov
doubled in 2015 – 7 billion
• Segmented domestic revenue growth in
INR terms
o IT Services : 10.2 per cent
o BPM : 10 per cent
o Software products : 11 per cent
o eCommerce : 27 per cent
• BFSI, Retail and Government verticals
driving uptake
• Ecommerce and startups helping drive
domestic tech adoption
FY2016E1 Y-o-Y Growth
INR 10%
INR – including eCommerce 16.5%
INR billion
E: Estimate, 1 excludes hardware
815 895
215 235
255 280
860 1,084
800 870
IT Services BPM S/W products Ecommerce Hardware
FY2015 FY2016E
1,285
10% 1,410
Source: NASSCOM, IAMAI, MAIT, IMRB
Source: BMR, NASSCOM
Digitally skilled employees
83
2010 2015
2,400
Digital M&A deal value
11
FY2010 FY2016E
30
250
USD mn
28X
8X
FY2010 FY2016E
4
11-14
3X
Digital revenues*
% of industry export revenues
India racing ahead to become the Digital Solutions
partner
• Key digital skill sets Big data, IoT/M2M,
Cloud/Platforms, Social Media, Mobility
• Top vertical adopters - BFSI, Retail, Travel,
Healthcare, Government
• Digital M&A deals spike in volume and
value crossing USD 2 billion, 3X growth
over last year
• Infosys (USD 390 mn) – Panaya, Skava,
Noah Consulting
• Wipro (USD 303 mn) – Designit, Cellent,
Viteos
• Automation platforms and Digital Business
Units
• Increased emphasis on design, creativity,
agility, customer experience
• Partnership with startups in India, US, Israel
and EU
* for top 15 IT firms in India
‘000 nos
India 3rd largest technology start up base
Start-ups created every year
Funding; 125 per cent Y-o-Y growth
Active VC/PEs in 2015
Incubators & Accelerators
4,200+
$4.9
bn
1200+
Start-ups in India….
110+
156+
Startups are boosting India’s next wave of tech
growth ….emerging in high impact areas
Industry pursuing multifaceted startup collaboration strategy
$500M for investing in technology start-ups
'5/50 initiative' to promote in-house disruptive
ideas
31 academic alliances and 21 R&D partners
820+
200+
400+
120+
100+
75+
eCommerce1
Analytics
Edu-tech
Health-Tech
Consumer Services
IoT
$100M initial corpus for venture fund
'Value-portal' and 'MAD Jam' to foster
employee-led ideas
100 Big Data and Internet of Things startups tie-
ups
Illustrative
Source: NASSCOM McKinsey Perspective 2025
Aspiration to reach USD 350 billion by 2025;
digital revenues to spearhead growth
Traditional tech
Digital tech
India technology and services revenue pool
USD billion
77%
23%
2014
119
2020E
225 ~11% p.a.
2025P
350
62%
38%
• Global enterprise tech spend will rise to
USD 4 trillion by 2025, 80 per cent of
incremental tech spending will be digital
• Indian technology services revenues
projected to reach USD 350 billion by
2020, CAGR of 11 per cent
• Successful Indian companies will have to
fundamentally transform their business
models, solution offerings, organization
and capabilities to establish leadership
• Revenue growth not the only indicator of
India’s tech leadership; factors such as
investment, valuations etc may need to
be considered
FY2017 Outlook: Double digit growth story set to
continue
Worldwide IT-BPM services spending growth
4.0%
2.9%
-0.2%
3.0%
5.2%
3.0%
ER&D
BPM
IT
2016P 2015
• Global technology spending expected to regain growth in
2H2016
• FY2017P: Exports** growth:10-12 per cent
• FY2017P: Domestic* growth:11-13 per cent
• Expected Net Employment* addition ~2 lakh
Source: Forrester, Gartner, IDC, Strategy&, NASSCOM
IT-BPM export revenues**
Growth of 10-12%
IT-BPM domestic revenues*
Growth of 11-13%
108
119-121
FY2016E FY2017P
1,410
FY2016E FY2017P
1,560-1,590
USD billion
INR billion
* excludes hardware and eCommerce
**constant currency figures
Industry working to mitigate key issues
Protectionist policies
by different countries-
restrictions on data
and skilled talent
Cyber security-
mitigating internal
threats and building
cybersecurity as a
business segment
Need for speedy
implementation of
policies and initiatives
announced
1 2 3
4 5 6
15
Changing face of
provider landscape and
new business models
Global Headwinds
(Economic slowdown,
currency volatility,
inflation, terrorism etc)
Rapid changes in skill
demand; Re-skilling
current workforce
Source: NASSCOM
To Summarize
Amid sluggish growth in global tech spending, Indian IT-BPM industry
continues to grow in double digits
India continues to gain market share in the global sourcing arena
India becoming a global digital hub- rapid building of capabilities and
offerings
Start-ups redefining India’ innovation capabilities
Domestic market growth is steady, accelerated implementation of
announced initiatives will fast track growth
Indian IT-BPM industry is well on track to achieve its 2025 aspirations
Multiple indices (direct and indirect) may needed in future to reflect growth,
diversity and impact of Indian IT industry
16
THANK YOU