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Siddharth Gupta Yugnesh Rathore Arpita Mandal Ratnesh Tripathi Deepti Sharma
1/2/2014
1. Mobile Devices --The basic tools that businesses and consumers use to interact with each other are currently undergoing a major behavioral shift. More than one-third of the conventional PC market is on the verge of being replaced by smartphones and tablet computers in the coming year and this trend shows no signs of slowing. By 2014, it is predicted that mobile Internet usage will overtake traditional desktop usage. 2. Cloud Computing --As businesses look for new ways to scale back on overhead and infrastructure costs, they are turning increasingly to Software-asa-Service (SaaS) and other cloud-based computing solutions. Spurred in no small part by growing consumer confidence in this new technology, more and more businesses are discovering the advantages of moving their software applications to remote private cloud networks. As the economy recovers and growth resumes, these solutions allow for low-cost, on-demand scalability. 3. Virtualization --Just as cloud computing and SaaS have revolutionized the way companies access their software applications, recent trends in virtualization are allowing businesses to eliminate entire server farms and slash the associated operating costs. In addition to streamlining and making IT infrastructure more economical and flexible, server virtualization has laid the groundwork for more strategic IT initiatives going forward. As a result, Infrastructure-as-a-Service (in which companies rely on equipment owned by service providers) and Platformas-a-Service (IaaS with a software development framework) are also growing in popularity . 4. Telework/Virtual Offices --With cloud computing capabilities and other advances in office connectivity growing by leaps and bounds, companies worldwide are realizing the cost-saving benefits of virtual office environments. By moving away from traditional physical office-based business models toward remote network structures, more and more businesses are taking advantage of this new technology to increase productivity and reduce overhead.
5. Alternative Productivity Applications -- Influenced by the recent economic
downturn, companies are looking for new methods of improving productivity, increasing employee efficiency and optimizing their overall business processes. In this pursuit, new solutions in videoconferencing, unified communications and business intelligence applications will continue to grow and develop, since they help employees to work collaboratively in remote office environments. In addition to improvements in these already established areas, there is considerable demand and room for growth in the productivity software sector,
with more and more businesses adopting new programs designed to improve efficiency, lower operating costs and streamline business processes.
Changes in pricing
Indian software companies are searching for answers to the conundrum of how to price their services as the market shifts irrevocably from a time-tested model which has served them well for several decades. More exacting clients and technological changes have meant that the traditional model of charging for labour is giving way but no single replacement has been found yet. The popularity of cloud-based delivery of services over the Internet is reshaping the pricing landscape along with what is being called an "outcome-based model" of paying for predetermined business results. "Clients are looking at their IT partners being responsible for delivering on business or process outcomes beyond managing specific technology mandates," said Chandrashekhar Kakal, senior vice-president and head of business IT services at Infosys, India's second-largest software exporter. Buyers are increasingly looking to link payments to business outcomes, which indirectly also transfers some of their risks to service providers, who for years have been charging clients based on number of hours worked by engineers on a project. But, given the shaky macroeconomic environment and shrinking technology budgets, corporations are insisting that service providers deliver tangible, measurable value and not merely technology. The push to revisit outsourcing industry pricing models comes at a time India's $108 billion ( Rs 6.4 lakh crore) IT industry is facing fundamental shifts in the way technology services are bought. Once known for growing at a double-digit pace year after year and generating employment for hundreds of thousands of engineers, the sector has now slowed down considerably and may even see shrinkage in employment.
Use of new and emerging technologies such as cloud computing. SEZ as growth drivers; as more of SEZs are now being set up in Tier II cities and about 43 new tier II/III cities are emerging as IT delivery locations.
Milestone year for Indian IT-BPO industry-aggregate revenues cross the USD 100 billion mark, exports at USD 69 billion Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011, highlighting Indias continued competitiveness and the effectiveness of India-based providers delivering transformational benefits Export revenues (including Hardware) estimated to reach USD 69.1 billion in FY2012 growing by over 16 per cent; Domestic revenues (including Hardware) at about USD 31.7 billion, growing by over 9 per cent. Software and services revenues (excluding Hardware), comprising nearly 87 per cent of the total industry revenues, expected to post USD 87.6 billion in FY2012; estimated growth of about 14.9 per cent over FY2011 Within Software and services exports, IT services accounts for 58 per cent, BPO is nearly 23 per cent and ER&D and Software Products account for 19 per cent. The industry continues to be a net employment generator - expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 7.5 per cent in FY2012. The industrys share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to about 25 per cent in FY2012. While the global macroeconomic scenario remained uncertain, the industry exhibited resilience and adaptability in continually reinventing itself to retain its appeal to clients. Embracing emerging technologies, increased customer-centricity, deepening focus on new markets, adopting new business models are some successful growth strategies followed by the industry
IT services IT enabled services Software products Hardware IT services IT services constitute a major part of the IT industry of India. IT services include client, server and web based services. Opportunities in the IT services sector exist in the areas of consulting services, management services, internet services and application maintenance. The major users of IT services are Government Banking Financial services Retail and distribution Manufacturing IT enabled services The services which make extensive use of information and telecommunication technologies are categorized as IT enabled services. The IT enabled services is the most important contributor to the growth of the IT industry of India. Some of the important services covered by the ITES sector in India are Customer-interaction services including call-centers Back-office services Revenue accounting Data entry and data conversion HR services Transcription and translation services
Content development and animation Remote education, Data search GIS Market research Network consultancy Software products Software products are among the most highly exported products from India. The software industry in India originated in the 1970s and grew at a significant pace in the last ten years. Between 1996-1997 and 2002-2003, the Indian software industry grew more than five times from 2630 crores to 13200 crores. During the same period software and service exports from India grew by almost twelve times.
Hardware The hardware sector of the It industry focuses on the manufacturing and assembling of computer hardware. The consumption of computer hardware is high in the domestic market. Due to the rise in the number of IT companies, sales of desktops, laptops, servers, routers, etc have been on the rise in recent years. Many domestic and multinational; companies have invested in the computer hardware market in India. Another categorization in the structure of India's IT industry is related to the market. There are two major market classifications - the domestic market and the export market. The export market, dominates the IT industry accounting for 75% of the revenue.
However, it added that recent weakening of the rupee against the US dollar is likely to provide some relief to the margins. "The depreciating Indian rupee, which lost around 15 per cent of its value against the US dollar in 2011, is likely to provide some relief to the margins over the short-term as about 60 per cent of Indian IT export contracts are US dollar-denominated. However, over the medium-term, some of the advantage may erode due to the increasing competition," Fitch said. Regarding the liquidity situation of the Indian IT services companies, Fitch said it would remain comfortable in 2012, backed by their high cash balances, low debt levels and positive free cash flows from the recurring and critical nature of IT services.
Downfall of Infosys
The company has seen "ramp down" in orders from various accounts and especially in the financial services sector, Chief Executive S.D. Shibulal said. The banking and financial service industry vertical contributed Rs. 3,037crore (out of a total revenue of Rs. 8,852 crore) to the companys revenues in the fourth quarter. The company expects profit margin in the quarter to end-June to be 200 basis points lower than in the quarter to end-March, its chief financial officer said. Margins would be hit by staff hiring charges and visa-related costs, V. Balakrishnan said. Infosys reported an EBIT margin of 29.9% in the fourth quarter against 31.18% in the third quarter. Contrary to speculation, Infosys gave a guidance for the current fiscal (FY13) but there was disappointment over the fact that growth is expected to be lower than most conservative estimate. Infosys has guided for 8-10% growth in dollar revenue terms against expectations of 12-15%. The company expects FY13 dollar revenues at $7553-7692 million. The FY13 earnings per share guidance is expected at Rs. 158.76-161.4 (at assumed currency rate of INR50.88/USD). The company's guidance is taken as a benchmark for the IT industry as a whole. The guidance for the full year is even below IT lobby Nasscom's forecast of 1114%. The company also missed its revenue guidance for the March quarter. Q4 sales were 5.7% lower than the guidance of Rs. 9,391-9,412 crore. The earnings per share stood at Rs. 40.54 per share against a guidance of Rs. 42.12 per share. The management sees headwinds from the US and Europe, which accounts for nearly 75% of revenue for Indian IT firms, going ahead. "The year ahead looks challenging for the IT services industry, with slow recovery in the global markets, said S. D. Shibulal, CEO and Managing Director. Major brokerages have turned negative on the stock. Barclays said the stock can have at least a 10% downside. Worldwide IT spending is forecast to increase 2.5 percent in 2012 from a year ago, research firm Gartner said on April 5, lower than its January forecast of 3.7 percent growth. The forecast cut is due to a strong U.S. dollar