Royal Danish Embassy, New Delhi,

Trade Commission of Denmark, Bangalore, India

Danish Trade Council

The Software Industry in India

Table of contents
1 Introduction................................................................................................. 3
2 Market size indicators ................................................................................. 3
3 Indian software clusteres............................................................................. 4
4 Market trends .............................................................................................. 4
5 Market opportunities................................................................................... 6
1 Introduction
The economic outlook for India is positive. A growth rate of above 8% was achieved
by the Indian economy during the year 2003-04 and it reached 6,9% in 2004-05.
Growth in the Indian economy has steadily increased since 1979. In fact, the Indian
economy has posted an excellent average GDP growth of 6.8% since 1994. Many
factors are behind this robust performance of the Indian economy in 2004-05. High
growth rates in industry & service sector and a benign world economic environment
provided a backdrop conducive to growth of the Indian economy. Another positive
feature is that prices have been relatively stable.

2 Market size indicators

India has during the 1990ies and until today built a reputation as being one of the
world’s strongest software nations.
The indian IT market

120.00 109.87

100.00 88.65

76.78
80.00 69.50

Billion Danish Kroner 60.00

46.82

40.00

20.00

0.00
1999-00 2000-01 2001-02 2002-03 2003-04
Year

Figure 1 Source: NASSCOM “Strategic Review 2004”

As can be observed from the figure the Indian IT software market has significantly
grown over the last years. Looking solely at the growth from 2003-2004 it was 17%
and almost touched 110 billion DKR.

The primary focus of the Indian software industry has been export – sometimes in
corporation with foreign companies who are established in India as a subsidiary. The
main reason for the foreign companies to establish themselves in India is still the low
cost of labor coupled with a highly educated workforce with excellent English
language competencies.

The Indian IT industry spans from huge world-renowned Indian companies like
Infosys, Tata Consulting Services (TCS), Wipro etc. who are almost in the same
league as international companies such as IBM, Sun Microsystems, Oracle,
Microsoft, Dell etc. who are also present in India, to a host of small startups.
 Hence, within most IT areas and disciplines the world’s highest competence levels
can be found in India. This can be seen, by looking at the IT quality certification
“SEI-CMM Level 5”, which is the hardest certification to obtain in the IT industry.
Worldwide there are only 52 companies, which have that certification – 43 of these
have an entity in India. All in all the Indian software industry is only second to that
of the US.

The largest of the IT companies such as e.g. Infosys has its own campus with more
than 45 buildings most of them 3-5 stories high, workout facilities for the employees
and its own golf course – all located in the same campus area.

3 Indian software clusters

Even though the Indian software industry is present in most parts of the country
there are some important geographical clusters, which are worthwhile noticing.

Bangalore has the country’s largest concentrations of both national and foreign
software companies and is often compared to Silicon Valley. The city has a world-
class information technology infrastructure, a skilled workforce, pleasant climatic
conditions, a cosmopolitan environment and high quality research and educational
institutions.

Initially the Indian software Industry, however, took of in Mumbai, which therefore
is home to many indigenous software companies. For instance, the largest Indian
software company, Tata Consultancy Company, is based in Mumbai. The early
success was partly due to the fact that Mumbai was the city, which pioneered the
concept of software technology parks that has played an important role in the Indian
software success story. The formation of software technology parks proved to be
catalyst in providing high-speed data with sufficient bandwidth, and excellent
educational and research institutions in the different region. The power supply in
Mumbai is one the most reliable in India, and the city has some of the best
international phone and data connections in the country. Mumbai has also become
the financial capital of India as most of the major Indian and foreign banks have
headquarters in Mumbai.

In the latter year New Delhi has become a cluster of software production, which is
almost as important as Bangalore and Mumbai. After a rather slow start the capital
city has the later years been catching up in the software industry, and today the
Indian capital houses same the number of Software Company headquarters as
Bangalore.

Other important locations include Chennai (Madras), Hydrabad, Calcutta and Pune.

4 Market trends
Naturally the demand and the investment level vary from one sector to the other
within the Indian software industry. The largest proportion of the Indian export of is
with 39% in the financial sector. The breakdown of the Indian export of software
can be observed from the pie chart.

Indian software export

Others
21%

Financial
39%

Healthcare
5%

Teleservices
4%
Production
12%
Transport
1%
Telecommunication
Auxiliary 9%
Detail Government
3% 5% 1%

Financial Production Telecommunication Government Detail Auxiliary Transport Teleservices Healthcare Others

Figure 2 Source: NASSCOM “Strategic Review 2004”

5 Market opportunities
Amble opportunities exists in the areas of:

Web-page creation and management

Application and Software development
BPO – Business process outsourcing
 Royal Danish Embassy, India

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Fax : +91 11 23792019
E-mail : delamb@um.dk
www.ambnewdelhi.um.dk

Trade Commission of Denmark,

Bangalore

16/1, Vittal Mallya Road

Bangalore-560 001 India
Tel +91 80 2227 7174/75
Fax +91 80 2227 7176
E-mail info@dtcbangalore.com
www.dtcbangalore.com

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