India: Why the West Should Pay
Attention to India
India's
s Growing IT
Market
Bhavish Sood
Research Director
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India's IT Landscape Today
Domestic IT
Industry Demand
• IT spending is a relatively
small percentage of the
economy
• A skilled IT labor shortage
is due to IT services export
industry
• IT services and outsourcing
are
a
e relatively
e at e y e
expensive
pe s e to
obtain
• Piracy and IP protection
issues persist; early stages
of domestic
IP generation
• Digital chasm between rich
and poor, and urban and
rural regions
Domestic IT
Industry Supply
• Almost exclusive focus
on offshore IT services
industry
• Foreign vendors dominate
OS, software infrastructure
and business applications
• Foreign IT services vendors
dominate
do
ate domestic
do est c market
a et
• Liberalization of FDI limits
is boosting domestic
telecom services and
g availability
y
networking
International Branding
and Innovation
• Highly successful
international brand
recognition by IT services
and outsourcing companies
• Strong understanding of
international marketing and
capital requirements among
large and midsize exporters
• Emerging links between
academia and industry
• Outsourcing is a key source
pp
of innovation in applications
and process management
for "Type A" enterprises
Drivers and Inhibitors to Continued IT
Progress
g
in India
Drivers
•
•
•
•
•
•
•
•
•
Inhibitors
Rapid growth of economy
Primary Education revamp
Reverse brain drain
"High quality" labor pool
Improved IP protection
ecosystem
More than 25 Indian
companies in F500
Physical infrastructure improves
IT-friendly government policies
FDI-friendly policies, especially
in the infrastructure structure
• Cost advantage
declines/disappears
• Widening digital and economic
di id
divide
• Geopolitical/terrorism concerns
• IP rights decline
• Political instability
• Oil spikes
• Shortage of qualified/trained
people
• Competition from
emerging economies
2
Key Issues
1. What is the state of IT technology adoption and
how big are IT opportunities in India?
2. What are the biggest business and IT priorities
for Indian CIOs?
3. What are the most-promising technologies and
vertical segments in India?
4. How do we exploit the best growth opportunities
in the Indian IT market in the next five years?
IT Software Market
India Enterprise Software Markets
Forecast (2008-2015)
US$Billions
5.0
4.5
40
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
CAGR = 13.6%
Opportunities
• The Indian market is still growing and is the fourthlargest software market in Asia
Asia, after China,
China
Australia and South Korea.
• Government policies promote and support opensource solutions in e-governance.
• Operating
p
g systems,
y
, middleware,, ERP,, database
management system (DBMS) and application
development (AD) tools are gaining most of the
attention from buyers.
• High-tech parks and SEZs support the software
industry's
industry
s development.
development
• The availability of venture capital is growing.
Threats
Infrastructure
Infrastr
ct re Soft
Software
are
Enterprise Applications Software
• Software p
piracy
y is still a very
y serious issue in India,
especially in the consumer and SMB markets.
• The price-sensitive culture elongates the sales
cycles and, in some cases, leads to selection of
products not suitable for requirements.
• Poor infrastructure exists across the country
(although government focus is increasing).
IT Services Market
India's IT Services Market
Millions of Dollars
1,000,000
900,000
Market Opportunity and Observations
• Government initiatives under NePG,, and
APDRP.
• The average size of deals in IT services
now ranges from $25 million to $30 million.
800,000
700,000
• Very large deals (more than $100 million)
that originate mostly from the government
and public sector undertakings (PSUs).
600,000
500,000
400,000
• MNC IT services vendors have increased
focus on India
300,000
200,000
• Growing demand for shift to cloud
computing delivery model
100,000
0
2008 2009 2010 2011 2012 2013 2014 2015
Product Support Total
Hardware Maintenance and Support Total
Process Management Total
IT Management Total
Development and Integration Total
Consulting Total
• Top talent still with outsourcing industry
• Industrial houses setting up captives/own
IT services firms
• Declining staff augmentation opportunities
and growing demand for solutions
IT Hardware Market
Market Situation:
• Servers: In the next few years, x86-based servers will be biggest driver for the server market in India. Blade adoption will be
a key enabler of this growth. Virtualization will be another driver of growth in the x86 market in India.
• Printer market: Almost 96% of the market is monochrome. There's limited uptake of color printing due to costs.
Remanufacturers are penetrating the high growth SMB market with cost savings of 30% to 70% on official supplies.
• Storage markets: The Indian market will benefit from a limited burden of legacy storage platforms, which will enable it to
adopt newer disk-based technologies.
• Client computing: The PC market is expected to grow faster in the consumer segments
segments. Increasing awareness of alternate
PC technologies, such as hosted virtual desktops, server-based computing and blade PCs in the enterprise segment.
Market Opportunity:
• Server vendors: Invest in your virtualization ecosystem and channels that can help drive midmarket adoption. Public
cloud computing providers are an emerging market
market.
• Printer market: Managing print services is growing due to awareness of green IT and large outsourcing deals.
• Storage: Demand is increasing due to growing penetration of storage in newer verticals, especially government and
manufacturing, and replacement buying from the traditional buyers of storage.
• Client computing: PC market to grow more in Tier 2 and Tier 3 cities. Media tablets are beginning to see demand.
• Cross Segments:
• Infrastructure upgrade and expansion
• Data center consolidation and transformation
• Managed print service (MPS) and commercial printing
• Cloud computing
The Top 10 CIO Technology Priorities For Indian
CIOs in 2011
Country= India
CIO Technology Priorities
Please indicate your top three priorities for 2011
Cloud Computing
1
Mobile Technologies
2
Virtualization
3
Enterprise Resource Planning (ERP)
4
Enterprise Applications
5
B i
Business
P
Process M
Managementt (BPM)
6
IT Management
7
Networking, Voice and Data Communications
8
B i
Business
IIntelligence
t lli
(BI)
9
Analytics
10
Note: In the survey, respondents identified their top three issues (not in any order). These priorities are ordered based on
the
h percentage off respondents
d
that
h iincluded
l d d the
h iissue iin their
h i top three.
h
7
Top Technologies and Adoption Status
BPMS
Cloud Computing
Open-Source Development Tools in India
Solar Photovoltaic Technology
Managed Print Services
Knowledge Process Outsourcing
Unified Communications
F&A BPO
Video Telepresence
x86 Server Virtualization
IT Outsourcing for Infrastructure Services
Mobile OTA Payment
Navigation Solutions
KPO-Market Analytics
Fabric-Based Computing
Cloud-Driven Business and
IT Services
IEEE 802.3at
Thi P
Thin
Provisioning
i i i
Data Deduplication
SOA
Entity Resolution
and Analysis
SaaS in India
Mini-notebooks
ERP In India
Blade Servers
SCM in India
IP Telephony
WAN Optimization Controllers
Business Intelligence Platforms
Data Center Bridging
As of July 2010
Technology
T
h l
Trigger
Peak of
Inflated
Expectations
T
Trough
h off
Disillusionment
Years to mainstream adoption:
less than 2
2 to 5
years
years
"Hyper Cycle for ICT in India, 2010" (July 2010)
Slope of Enlightenment
time
5 to 10 years
more than 10
years
Pl t
Plateau
off
Productivity
obsolete
before
plateau
The Appeal of Cloud Computing Will Increase
Over The Next Five Years
When do you estimate your organization will support: (1) More than half of your
transactions on a cloud infrastructure, and (2) more than half of your transactions by
pp
leased using
g a software as a service ((SaaS)) model?
applications
Percentage of Respondents
80
69
70
67
60
50
40
30
19
20
10
19
11
6
6
3
0
2010
2011-2015
2011
2015
2016 2020
2016-2020
Cloud Infrastructure
SaaS
9
N
Never
BRIC
B
2010
Brazil
2010
China
2010
Russia Indiia
The Appeal of SaaS Is Increasing in India
2010
2011
2011
2011
2011
2010
2011
0
10
20
30
40
50
60
70
Percentage of Respondents
O P
On-Premises
i
H t d
Hosted
10
S S/ASP
SaaS/ASP
80
90
100
We Expect Communications, Financial Services
and Government to Lead IT Spending
g in 2011
End-User IT Spending for 2011 in Millions of Dollars
1 007
1,461 1,007
2,059
6,562
1,392
7 159
7,159
8,302
1,678
1,022
1,043
Banking & Securities
Communications, Media & Services
Ed ti
Education
Government
Healthcare Providers
Insurance
Manufacturing & Natural Resources
Retail
Transportation
Utilities
Wholesale Trade
5,459
The $37.1 billion total is expected to grow more than 14% in 2011.
11
"Thrust Areas" of India's 11th Five-Year Plan
(
(2007-2011)
)
Box 3.2
Thrust Areas of the Eleventh Plan
Sectors
Thrust Areas
Ed
Education
ti
Q lit upgradation
Quality
d ti iin P
Primary
i
Ed
Education,
ti
E
Expansion
i off S
Secondary
d
Ed
Education,
ti
major
j emphasis
h i on upgradation
d ti off
Higher Education including Technical Education, ICT throughout education system.
Health, Nutrition, Drinking
Major upgradation of rural health infrastructure, Medical education, Nutritional support to children and pregnant
Water, and Sanitation
and lactating women through ICDS, health insurance based urban health facilities, health care for elderly,
achieving sustainability, improvement in service levels and moving towards universal access to safe and clean
drinking water.
Agriculture and Irrigation
Ensuring Food Security, Supporting State-specific agriculture strategy and programmes, Better seed production,
F
Focused
d agriculture
i lt
research,
h E
Extension,
t
i
D
Development
l
t off modern
d
markets.
k t
Rural Development, Land
Universalization and improvement in programme delivery of NREGP, Integrated Watershed management
Resources and Panchayati Raj
including management of underground water level.
Social Justice and Empowerment Special attention to the needs of SCs, STs and minorities and other excluded groups through pre and post-metric
scholarship, Hostels for boys/girls, Income and employment generation opportunities, Multi-sectoral development
programmes for minorities in minority concentration districts.
y
Infrastructure
Emphasis
p
on the p
public-private
p
partnership
p
p in investment,, Initiate p
policies to ensure time-bound creation of worldPhysical
class infrastructure, especially in remote and inaccessible rural areas and NE, Hinterland connectivity through
improved rail and road infrastructure.
Energy
Electrification of all villages and extending free household connections to all 2.3 core BPL households through
RGGVY, Nuclear power development.
Scientific Departments
Development of satellite launch capabilities to SGLV-Mk-III, Development of new energy systems, viz. advance
heavy water reactor and nanotechnology.
S
Source:
Pl
Planning
i C
Commission
i i G
Governmentt off IIndia
di
Sectoral Growth in Recent Plans
(% per annum)
Sector
1. Agriculture
2. Industry
2
I d t
3. Services
4. Total
Eight Plan
(1992-96)
Ninth Plan
(1997-2001)
Tenth Plan
(2002-06)
Eleventh Plan
(2007-11)
4.72
7.29
7
29
7.28
6.54
2.44
4.29
4
29
7.87
5.52
2.30
9.17
9
17
9.30
7.74
4.0
10-11
10
11
9-11
9.0
12
Government Creates Policy Initiatives and Is a
Large
g Market in Itself
•
Government infrastructure projects will drive IT strongly, in
conjunction with the expansion of the financial services and
manufacturing subsectors.
•
India's National e-Governance Plan (NeGP)
1 Common Services Centers (CSCs)
1.
(CSCs).
2. State Wide-Area Networks (SWANs).
3. State Data Centers (SDCs).
4. E-Districts.
•
Restructured Accelerated Power Development and Reforms
Programme (R-APDRP)
•
Crime and Criminal Network
•
NatGrid
•
TRAI' Proposal
TRAI's
P
l for
f India's
I di ' N
National
ti
lB
Broadband
db d N
Network
t
k
13
Emerging New Focus — FSI
Industry Development Trends
IT Opportunity
1 Business intelligence and data warehousing due to the
1.
Central Bank’s ADP notification and 18 month
deadline
2. CRM, customer segmentation and data quality for KYC
norms
3. Business process management (both banks and
insurance companies) to improve efficiencies in a
hypercompetitive market
4. Risk management and migration from legacy claims
and policy management solution
5. Mobile banking
Banking
• Financial inclusion a big priority for government
banks, and private banks have started to focus on
it.
•
No-frills banking accounts and Kissan credit
cards. Financial Inclusion Technology Fund
cards
Fund.
• Accelerate developing online business and new
business (e.g., trust services, high-end banking
services, mobile payment, etc.).
• Rise and fall of microfinance.
Securities:
600,000
• Expand domestic finance market and upgrade the
capacity of futures and stocks exchanges.
500,000
• Commodity exchanges are becoming popular.
300,000
Insurance
200 000
200,000
•
100,000
400,000
Still a state-controlled market, but bancassurance
is gaining popularity.
0
2006
• Microinsurance products are gaining visibility in the
market.
• H
Health
lth care iinsurance major
j ffocus area off IRDA
and government.
2007
2008
2009
Total Earnings
Total Expenses
Provisions and Contingencies
Profit / Loss
Profitability of commercial banks in India from 2005 to 2009
Source: RBI
14
2010
Emerging New Focus — Telecom
Industry Development Trends
IT Opportunity
• 811
811.6
6 million mobile phone subscribers as
of March 2011.
TOMS: Upgrade to 3G and auctioning of broadband
licensing will lead to a wave of OSS and BSS
investments.
• Mobile number portability introduced in
2011.
Infrastructure: Huge investment in infrastructure and
lots of DCs being planned by Telcos.
• Auction of 3G and broadband licenses took
place in 2011.
Software: CRM,
CRM customer segmentation and churn
analysis
• National Optical Fibre Agency (NOFA) to
build a 13 billion, 2.5-million kilometer
national fiber network as a vehicle to
advance broadband networking in India
India.
Broadband Revenue
Millions of Dollars
2.5
• Expanding network coverage into rural
areas.
2.0
• TRAI thinking of a public cloud computing
regulatory framework.
framework
1.5
• Entry-level mobile devices will continue to
drive sales. Smartphone growth will
outpace overall market growth.
1.0
0.5
00
0.0
2008 2009 2010 2011 2012 2013 2014 2015
15
Emerging Focus — Manufacturing
Industry Development Trends
IT Opportunity
• New industrial parks propel growth but are
caught in land acquisition issues.
Technologies on the radar of manufacturing CIOs
BI/BA/CPM software, quality management systems,
MES, SCM, CRM
Supplier relationship/dealer management/sales force
automation
Warranty analytics
Cloud computing, unified communications, green IT,
security, virtualization
• Slowly becoming a hub for small-car
exports for manufacturers, such as Hyundai
and Maruti Suzuki.
• Nokia's Chennai Manufacturing Facility is
50% export-oriented.
• Well-developed, globally competitive auto
ancillary industry. World's second-largest
manufacturer of two wheelers.
wheelers
Chart I.3: Growth in Index of Industrial
Production (Y-o-Y)
(Y o Y)
10.6
8.3
5.4
6.4
6.0
25
2.5
1.7
1.0
0.1
1.1
10.3
7.2
21
2.1
Nov
Oct
Sep
Jul
Aug
Jun
May
2009-10 Apr
Mar
Jan
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Source: Reserve Bank of India
16
0.2 0.3
11.7
9.6
-0.2
Jun
200
08-09 April
• Already one of the world's largest
manufacturers of generic pharmaceuticals.
May
Percent
14
12
10
8 6.2
4.4
6
4
2
0
-2
• Indian biotech industry is expected to
touch $15 billion by 2015.
Look for Innovations Outside Your Core
Industry
y While Building
g Your GTM
PNB ATM on Wheels
Source dare.co.in
Tata Nano Source:
Kyodo
Maharaja Mac
Mac Aloo Tikki
17
Parting Thought: Do Not Underestimate Cultural
Differences While Building
g Your India GTM Plans
18
Recommendations
9 Define specific target markets, allocate needed resources,
and exploit the phenomenal growth of IT in the market
market.
9 Extend your reach in consumer markets by improving your
profiling of them, paying special attention to the large
"
"emerging"
i " middle
iddl classes.
l
9 Focus sales attention on identifying large opportunities in
government financial services and manufacturing
government,
manufacturing.
9 Invest more with your channel partners. Convert them from
"generalists" to "specific industry product specialists" with
advanced
d
d capabilities.
biliti
9 Engage with the Indian Big 4’s (TCS, Infosys, WIPRO and
HCL)