Mumbai: Trade body and 'voice' of the IT – BPO industry in India NASSCOM has announced

key findings from the Strategic Review 2008.

Findings indicate software and services exports are expected to cross $40 billion, and the
domestic market is expected to touch $23 billion in FY08.

Positive market indicators and a strong track record strongly support the optimism of the
industry in achieving its aspired target of $60 billion in software and services exports, and $73-
75 billion in overall software and services revenues, by FY2010.

The Strategic Review 2008 will be formally released at the NASSCOM's upcoming conference
- India Leadership Forum, scheduled to be held from 13 to 15 February, 2008, in Mumbai.

Commenting on the key findings of the Strategic Review 2007, Lakshmi Narayanan, chairman
NASSCOM and vice-Chairman, Cognizant, said ''The robust growth of the Indian IT-BPO
industry by over 33 per cent in the current fiscal year reinforces the confidence of global
corporations in India. As we move towards 2010, trends indicate that the industry is firmly
poised for broad-based growth across industries and service lines, thereby strengthening India's
leadership position as the primary sourcing location for software, IT infrastructure and business
process- related services.''

Som Mittal, president, NASSCOM said, ''The Indian IT industry has been rapidly evolving;
growth is on track to achieve, if not exceed the targets for 2010. The trends are interesting and
findings indicate that the domestic market is poised for growth with IT spends trending
upwards, particularly by the Government. We also see an increasing level of specialisation
within the industry both in IT services and BPO, exhibiting signs of a rapidly maturing industry.
However, there are global macro economic challenges; talent, manpower and infrastructure
issues will need to be addressed and resolved, collectively. The industry has shown resilience
and has taken several steps to mitigate the impact.''

In addition to the direct positive impacts on national income growth, foreign exchange reserve
accumulation and employment generation, the sector has also spawned several ancillary
industries, triggered a rise in direct-tax collections and propelled an increase in consumer
spending, attributed to the significantly higher disposable incomes. It is estimated that every
rupee earned in the Indian IT-BPO sector induces nearly another rupee of economic spending in
the rest of the economy and every job created in the sector induces the creation of 4 more jobs
in the economy.

The Strategic Review 2008 looks at various aspects relating to the Indian IT-BPO sector's
performance in 2007. The report estimates the growth expected in the current fiscal FY2008,
detailing the service line trends observed across the various industry segments over the past
year and assessing India's competitiveness as a sourcing destination. It analyses the
sustainability of each individual factor contributing to India's leadership position and provides a
view of the outlook projected for the global and Indian IT-BPO industries – outlining the
opportunities, challenges and agenda for key stakeholders to further extend India's leadership in
this space.

Key Highlights of the IT-ITES sector performance in FY 2007-08

IT Industry-Sector-wise break-up
$ (billion) FY2004 FY2005 FY2006 FY2007 FY2008 E
IT Services 10.4 13.5 17.8 23.5 31.0
-Exports 7.3 10.0 13.3 18.0 23.1
-Domestic 3.1 3.5 4.5 5.5 7.9
ITES-BPO 3.4 5.2 7.2 9.5 12.5
-Exports 3.1 4.6 6.3 8.4 10.9
-Domestic 0.3 0.6 0.9 1.1 1.6
Engineering Services 2.9 3.8 5.3 6.5 8.5
and R&D,
Software Products
-Exports 2.5 3.1 4.0 4.9 6.3
-Domestic 0.4 0.7 1.3 1.6 2.2
Total Software and 16.7 22.5 30.3 39.5 52.0
Services Revenues 12.9 17.7 23.6 31.3 40.3
Of which, exports are
Hardware 5.0 5.6 7.1 8.5 12.0
-Exports n.a. 0.5 0.6 0.5 0.5
-Domestic n.a. 5.1 6.5 8.0 11.5
Total IT Industry 21.6 28.2 37.4 48.0 64.0
(including Hardware)
N.A.: Not available
Note: Figures may not add up due to rounding off.
Source: NASSCOM

Global Sourcing Trends in 2007

• Worldwide technology products and related services sector spends are estimated to
have grown at 7.3 per cent to nearly reach $1.7 trillion in 2007
• IT-BPO services, growing at an above-sector-average rate of nearly 8 per cent, remain
the largest category, accounting for an increasing share of the worldwide technology
sector revenue aggregate.
• Outsourcing continues to be the primary growth driver, sustained by gradual shifts in
regional spending patterns – with increasing traction in Europe and Asia Pacific
offsetting a marginal decline in share of the Americas.
• Underlying this steady growth in services spends is the increasing adoption and
continued evolution of the global sourcing supply-chain. Global sourcing of technology
related services is estimated to have grown by about 30 per cent to reach $70-76 billion
in 2007.
• Increasing emphasis on innovation-led growth added to the secular trend in technology
related spending, with IT-enablement.
• Global delivery now being recognized as complementary means of effectively
increasing productivity, reducing time-to-market and thereby increasing the returns on
innovation investment.

Indian IT-BPO Performance in FY2008

• The Indian IT-BPO revenue aggregate is expected to grow by over 33 per cent and
reach $64 billion by the end of FY2008.
o IT exports (including hardware exports) are expected to cross $40.8 billion in FY2008
 as against $31.9 billion in FY2007, a growth of 28 per cent.
o Domestic IT market (including hardware) is estimated to reach 23.2 billion in
FY2008 as against $16.2 billion in FY2007, a growth of 43 per cent
• The direct employment in the sector is expected to reach nearly 2 million, an increase
of about 375,000 professionals over FY2007.
o IT services exports, BPO exports and Domestic IT industry provides direct
employment to 865,000, 704,000 and
427,000 professionals respectively.
• As a proportion of national GDP, the
Indian technology sector revenue has
grown from 1.2 per cent in FY1998
to an estimated 5.5 per cent in
FY2008.

Software and Services Exports FY2008:

• Exports remain the mainstay of the

sector and are estimated to reach
$40.3 billion in FY2008, contributing Split by service offerings in IT Services
nearly 64 per cent to the overall revenue aggregate
• IT services (excluding BPO, product development and engineering services),
contributing to 57 per cent of the total software and services exports, remains the
dominant segment and is expected to cross $23 billion, a growth of 28
per cent in FY2008.
• BPO services, accounting for
over 27 per cent of the export
aggregate, is the fastest
growing segment across
software and services exports
driven by scale as well as
scope. Export revenues for
this segment are expected to
cross $10.9 billion, a growth
of 30 per cent in FY2008.
Split by service offerings
 • Export revenues from relatively high-
value-added services such as engineering
and R&D, offshore product development
and made-in-India software products is
estimated to be growing at over 27 per
cent, and are forecast to reach $6.3
billion in FY2008.

Split by service offerings in S/w

products & Eng. Services
• While US & UK remained the largest export markets
(accounting for about 61 per cent and 18 per cent
respectively, in FY2007), the industry is steadily
increasing its exposure to other geographies. Exports
to Continental Europe in particular have witnessed
notable gains, growing at a CAGR of more than 55
per cent over FY2004-2007.
Geographic market
exposure of IT-BPO Exports
 • Banking, Financial
Services and Insurance
(BFSI) remains the
largest vertical market
for Indian IT-BPO
exports, followed by
High-technology and
Telecom accounting
for nearly 60 per cent
in FY2007.
Manufacturing and
Retail followed,
contributing 23 per
cent to the aggregate.
Vertical Split for Indian IT-BPO Exports
Other key segments
include Media, Healthcare, Airlines and Transportation, and Utilities.

Domestic IT Market in FY2008

• Technology adoption in the domestic market also reported steady gains in 2007. This
segment is expected to cross $23 billion in FY2008, reporting healthy growth across all
key segments.
o Hardware remains the largest segment of the domestic market, and is expected to
grow at 44 per cent in FY2008.
o Domestic IT services spends are estimated to be growing at about 43 per cent in
FY2008.
• Software and services and BPO spending growth in the domestic market is being
supported by increasing adoption, and is expected to grow by over 42 per cent and 45
per cent, respectively.
• Growing levels of technology adoption are now accompanied by a steady appreciation
of the rupee, is also making India more attractive as a market – even for players that
had earlier maintained a stricter focus on exports.