The IT-BPM

Sector in India
Strategic Review 2015

The IT-BPM
Sector in India
Strategic Review 2015

International Youth Centre, Teen Murti Marg,

Chanakyapuri, New Delhi - 110 021, India
Phone: 91-11-23010199, Fax: 91-11-23015452,
Email: research@nasscom.in
Website: www.nasscom.in

Copyright 2015

International Youth Centre, Teen Murti Marg, Chanakyapuri

New Delhi - 110 021, India
Phone: 91-11-23010199, Fax: 91-11-23015452
Email: research@nasscom.in
First Print: February 2015
Published by
NASSCOM
Designed & Produced by
Creative Inc.
Phone: 91-11-41634301
NASSCOM is the premier trade body for the IT-BPM sector in India. It is a not-for-profit organisation
and has emerged as the authentic voice of this industry in India. It is also the single reference
point for all information on IT industry in India. NASSCOM publishes an annual edition of its
Strategic Review to disseminate the latest status of the industry performance.
Disclaimer
The information contained herein has been obtained from sources believed to be reliable.
NASSCOM disclaims all warranties as to the accuracy, completeness or adequacy of such
information. NASSCOM shall have no liability for errors, omissions or inadequacies in the
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The material in this publication is copyrighted. No part of this report can be reproduced either on
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The IT-BPM Sector in India: Strategic Review 2015

Foreword

R Chandrashekhar
President

ver the last few years, we have all come to agree that VUCA- volatility,
uncertainty, complexity and ambiguity is the new normal. Economic
and political upheavals, disruptive technologies, expanding competition
and rapidly evolving customer requirements presents both- new challenges,
and new opportunities for the global technology industry, which now
has to serve two distinct requirements simultaneously- drive operational
excellence and create enterprise digital transformation which can enable
organisations to improve customer reach and engagement, make faster
decisions, improve time to market of solutions and help clients grow their
businesses. While operational excellence currently garners major share of IT
investments, enterprise digital transformation will increasingly drive future
growth of the technology industry, and success of individual industry players
will rest upon their ability to create sound business strategies that address
both opportunities.
While worldwide IT-BPM spend was USD 2.3 trillion, growing at 4.6 per
cent over 2013, global sourcing of services grew by 10 per cent, and India
continued to hold on to its leadership position with a 55 per cent market
share. In FY2015, the Indian IT-BPM industry is estimated to account for
revenues of USD 146 billion, growing by 13 per cent over last year. Industry
exports are over USD 98 billion growing at 12.3 per cent, while the domestic
segment, which has benefited from the inclusion of ecommerce and mobile
app industry, is estimated to touch USD 48 billion.The industry today is Indias
largest and most diverse private sector employer, with a direct workforce

The IT-BPM Sector in India: Strategic Review 2015

nearing 3.5 million, and effecting over 10 million indirect jobs. At the same
time the industrys relative share in Indias GDP has swelled to 9.5 per cent,
it offsets more than 70 per cent of Indias oil import bill, attracts a major
share of PE/VC investments into the country, has effected balanced regional
growth and empowered diverse sections of the society, and is the face of
the Indian MNC story.
The Indian industry continues to develop capabilities around traditional
and emerging markets, verticals and customer segments, expand global
delivery presence, and increase focus on high value services including
product development. With over 150,000 digitally skilled IT-BPM employees,
the industry is exponentially growing capabilities that help clients go digital.
India is also home to the fourth largest and fastest growing digital startup
ecosystem in the worldthat is engaged in developing innovative solutions,
and actively collaborating with larger technology companies to take these
solutions to market. The new governments technology reliant economic
growth agenda has significantly boosted domestic IT-BPM market growth
prospects and overall business confidence.
There is a buzz about India, and NASSCOM is indeed fortunate to be at the
right place, at the right time. NASSCOM reinforces its vision to help the Indian
IT-BPM industry to be trustworthy, respected, innovative and society friendly.
This report is a culmination of all our research experience, a repository of
facts, figures, trends and messages that highlight current state the Indian
IT-BPM industry, and provides a peek into its future direction. We trust you
will find the report useful and we welcome your feedback and comments.
4

The IT-BPM Sector in India: Strategic Review 2015

ITSR 2015: Executive Summary

As the saying goes All great changes are preceded by chaos. And this could not be truer
for the global economy today. Beginning with economic turmoil, the ripple effects of
which are still being felt today, to the ongoing political upheavals across the world. From
the erratic movements in global commodity prices, inflation and unemployment and
the constantly shifting business and technology landscape, volatility is now an ongoing
reality than an exception. At the same time, businesses all over the world now face the
digital, connected customer- one who is informed, decisive and influential. Organizations
have no choice but to use technology to undergo a digital transformation themselves.
Digitization can extend reach of organizations, enhance management decisions, and
accelerate development of new growth engines.
Thus unpredictable economic conditions and rapidly evolving customer requirements
is influencing how and where each dollar is spent; as firms not only look to get more
with less, but also get new, yet unrealized benefits. Customers today expect technology
not only to enable efficient operations, but also creating new avenues of growth. This
scenario is both challenging and exciting, and is ensuring a dual role for technology,
which will be used for both traditional applications that are anchored around stability
and efficiency, and modern systems that focuses on agility, rapid application evolution,
and tighter alignment with business units. This is likely to dictate global technology
spend with an increased need for enterprise digital transformation as the new way to
engage and serve customers.

Global IT-BPM industry:

These trends have immensely impacted the IT-BPM sector along with the overall effect
of changing customer expectation, digitisation and regulatory changes across the globe.
In such a scenario, the worldwide IT-BPM spend was nearly USD 2.3 trillion, a growth
of 4.6 per cent over 2013. Software products, IT and BPM services continued to lead,
accounting for over USD 1.25 trillion55 per cent of total spend. Hardware spend at USD
1 trillion, accounted for balance 45 per cent. While Americas remained the largest market,
APAC recorded highest growth of 5.1 per cent, driven by faster growth in BPM services.

The IT-BPM Sector in India: Strategic Review 2015

E merging ver ticals like Global IT-BPM industry spend

healthcare, communication
USD billion
2013
and media, government were
Worldwide
key growth drivers for the IT
635
Services
segment during 2014.
2014 saw renewed demand
for overall global sourcing,
which grew by 9-10 per cent
over 2013, nearly twice the
global technology spend
growth. India maintained its
leadership position in the
sourcing arena with a share
of 55 per cent. New global
delivery centres added in
2014 recorded an impressive
growth of 49 per cent with
over 27 per cent additions
being in India.

Worldwide
BPM

2014
657

167

177

Worldwide
Software

395

420

Worldwide
Hardware

979

1022

2,176

2,275

Total

Worldwide
Engineering
Spend

1,400

1,440

Indian IT-BPM industry: A nearly USD 150 billion industry

The Indian IT-BPM industry is relentlessly continuing its growth path. The industry
demonstrated flexibility and resolve to adjust to turbulent economic conditions and
experience double digit growth. Overall revenue (exports + domestic) for FY2015 is
expected at USD 146 billion, a growth of ~13 per cent over last year, an overall y-o-y
addition of ~USD 17 billion. Industry contribution relative to Indias GDP is set to touch
an estimated 9.5 per cent and share in total services exports >38 per cent.
Exports (incl. hardware) are likely to record a 12.3 per cent growth to reach over USD
98 billion, up by ~USD 11 billion last year. Domestic IT-BPM market at USD 48 billion is
set to grow faster than exports market at 14 per cent, driven largely by the addition of
eCommerce into the picture. IT services is the largest segment, with a share of ~47 per
cent followed by BPM with share of ~18 per cent. Software products, ER&D and product

The IT-BPM Sector in India: Strategic Review 2015

development segments together have >16 per share followed by eCommerce (9.5 per
cent) and hardware (~9 per cent).
The industry currently employs >3.5 million Indias largest private sector employer. It
is also playing a key role in promoting diversity within the industry women employees
(>34 per cent share), 170,000 foreign nationals and a greater share of employees from
non-Tier I Indian cities.

Exports market:
FY2015 is expected to see the exports market at over USD 98 billion, recording a 12.3
per cent growth over last year. ER&D and product development segment is the fastest
growing at 13.2 per cent, driven by higher value-added services from existing players
and an increased business from GICs. IT services exports are to grow at industry rate of
12.6 per cent. Value-added services around SMAC upgrading legacy systems to be
SMAC enabled, greater demand for ERP, CRM, mobility from manufacturing segment
and user experience technologies in retail segment is driving growth in IT services. BPM
is being driven by greater automation, expanding omni-channel presence, application
of analytics across entire value chain, etc.
Exports to USA, the largest market grew above industry average, aided by an economic
revival and higher technology adoption. Demand from Europe remained strong during
the first half of the year, but softened during the second half due to currency movements
and economic challenges. Manufacturing, utilities and retail growth remained strong
as clients increase discretionary spend on customer experience, digital, analytics, ERP
updates and improving overall efficiency. BFSI, the most mature market experienced
cost pressures affecting growth.
The industry is attempting to shift from a linear to a non-linear growth model and has
therefore been following a differentiated growth path. These strategies include both
inward- and outward-looking initiatives. One of the primary strategies focuses on
product/IP development; this is further being supported by their verticalised offerings.
Expertise developed in specific verticals is enabling IT-BPM firms to deliver innovative
products and services to customers that in turn facilitates entry into new markets/
geographies, access to customers, etc. Rapid upscaling of capabilities around SMAC and

The IT-BPM Sector in India: Strategic Review 2015

other emerging technologies is enabling it to expand services to existing customers

and also attract new customers.

Domestic market:
The need for Indian firms to effectively compete in a globalized world presents an
immense. untapped opportunity for the supply side. As an economy, India is beginning
to stabilise post elections. Overall business confidence is picking up with the new
government in place and its clear policies and economic growth agendas particularly
Digital India and Make in India, have helped drive a vision of a technology enabled
India.
India is jumping the technology maturity curve and is already a well-established digital
economy a trend driven largely by consumers. >75 per cent of the population is mobileenabled, 278 million internet users (overtaking the US) and a rapidly multiplying online
population, and a USD 14 billion eCommerce market, which is growing at an average
of >30 per cent.
A further push in this direction is coming from the governments Digital India campaign
which envisages a USD 20 billion investment covering mobile connectivity throughout
the country, re-engineering of government process via technology and enabling
e-delivery of citizen services.
The domestic IT-BPM market is rapidly approaching the USD 50 billion mark. In FY2015,
the market is expected to be a little over USD 48 billion, an annual growth of 14 per
cent. This is faster-than-industry growth that is largely being driven by the growth in
eCommerce segment.
IT services (>USD 13 billion) and software products (>USD 4 billion) segments are the
next fast growing segment at 10 per cent and 12 per cent respectively. IT services is being
driven by SMAC-cloud enablement, custom developing application for mobile; with the
return of focus on infrastructure projects (largely in later half of 2014), there is an uptick
in demand for SI and IT consulting. SMEs are also increasingly opting for managed and
datacentre services as a cost saving measure. Software products is growing on the back

The IT-BPM Sector in India: Strategic Review 2015

of demand for mobile app development, security software, system software, customer
analytics products, etc.
BPM segment is likely to grow 8 per cent to USD 3.5 billion; although there is growing
demand for knowledge services, particularly analytics, it remains a CIS dominated
segment. BPM is seeing continuous demand for outsourcing from home-bred firms in
the BFSI, telecom, healthcare, retail, etc.

Indian IT-BPM (Domestic+Export) Revenues

FY2015E

USD
billion

Exports
Domestic
Total

Packaged
software,
ER&D
and
product
development

Hardware

eCommerce

TOTAL

IT
services

BPM

55
13

23
4

20
4

0.4
13

14

98
48

69

26

24

14

14

146

The IT-BPM Sector in India: Strategic Review 2015

The India Value Proposition

4 fundamental growth pillars
India-The world's
most attractive market
Improving economic growth
Connected economy-digital
ready market
Growing spending power of
1.2 billion people
Positive investment climate
Unmet needs

India-A hub
for digital skills
Enabling environment for
skill-set development,
focussed trainings
>7,000 firms in India focusing on
digital solutions
~1.5 lakh digitally skilled employees
>2,000 digitally focused start-ups
~30 per cent start-ups working
on innovative solutions

India-Excellence in
business delivery
Optimum costs
Highest volume of diverse,
employable talent
Strong network of GDCs,
multi-shore presence
Quality infrastructure
Mature ecosystem
Effective collaboration/
partnerships

India-Leading innovator
in global IT-BPM industry
Large firms fostering innovation
collaboration, building scale,
co-creating best solutions
Strengthening entrepreneurial
environment, rise in investments
Rise in technology & digital
start-ups - making innovation
and IP available across
the world

India continues to reinforce its position as the only country in the world from where
one can do anything and everything. India has continued to maintain its first mover
advantage and retained its leadership position in the global sourcing arena with a share
of 55 per cent in FY2015. At the foundation of this value proposition are four robust
growth pillars, which defines its attractiveness as a key destination.
A highly connected and a digital ready economy- India remains a high potential
market worldwide, offering multiple opportunities for unmet needs. With the worlds
10

The IT-BPM Sector in India: Strategic Review 2015

second largest population (~1.2 billion), India also presents a large, burgeoning end-user
market. Additionally, with 937 million mobile subscribers, 278 million internet users, an
USD 14 billion eCommerce market, and an economic growth rate that is soon expected
to surpass that of China, India is set to leapfrog into the digital world. The Governments
Digital India and Make in India initiatives are only expected to accelerate Indias plunge
into the connected digital world.
India, remains an excellent business delivery center for the IT-BPM industryCurrency movements and increased operational efficiencies have ensured that Indias
position as the worlds most cost competitive sourcing destination has only become
stronger in the past year. Even Tier I cities in India like Bengaluru continue to be between
8-10 times cheaper than source countries and significantly cheaper than other low-cost
destinations. Additional cost benefits have been passed on to customers through astute
internal initiatives including moderate wage inflation, adopting automation and nonlinear models to control salary expenses, introducing newer career bands, flattening
organisational pyramid, etc.
India is home to the highest volume of diverse, employable talent in the world. India is
expected to churn out nearly 5.8 million graduates and postgraduates in FY2015, out
of which 1.5 million people form an industry suitable, ready to hire pool. At the same
time, the IT-BPM industry has been growing in size, scale, maturity and domain expertise
and focused in addressing what customer businesses demand. The industry has been
catalyzing business transformation for global clients through its established global
delivery chain ~640 ODCs across >78 countries, acquiring local talent for language
skills and cultural compatibility with clients.
The variety and scale on offer in India again allows for multiple collaborative models
to exist. This unique diversity gives ample opportunities to providers to choose their
organisation size, business models to adopt, and what kind of partnerships to create. The
agile start-up ecosystem (3,100+ start-ups) in the country has impacted large enterprises
too the need to be nimble has prompted larger firms to re-organise their structure
with advanced decision-making capabilities, while the need to offer innovative, unmet
needs has led them to build partnerships with smaller firms.
The Indian technology industry is today a global Digital Skills Hub-Today, the
country hosts ~7,000 digital focused firms with start-ups fueling innovation by investing
11

The IT-BPM Sector in India: Strategic Review 2015

further in futuristic technologies. India has been creating a future-ready digital workforce,
with more than 1, 50,000 employees with SMAC skills. ~50,000 employees are skilled in
analytics,30,000 people in enterprise mobility and >50,000 in cloud and social media
& collaboration.
A strong innovation backed ecosystemOrganisations in India are consistently
innovating around products, processes and business models to deliver enhanced value
propositions to the clients. While start-ups are increasingly driving innovation around
emerging tech-dependent areas like edu-tech, health-tech, ad-tech etc., large firms are
looking to benefit by investing, co-creating and partnering with innovative startups.
The above initiatives are ensuring consistently high CSAT scores from clients, with over
85 per cent agreeing that transformative work can be delivered out of India, and further
reinforces Indias leadership position in the global sourcing market.

Future outlook:
The future of the global technology industry will be shaped by economic forces, and
adoption of new technologies. To survive in a globally connected, and increasingly
competitive world, IT enabled enterprise digital transformation will be a must. With
rapidly-evolving technologies, changing consumer preferences and oftentimes
competing channels, many organizations struggle with how to transform internally to
meet the challenges of this new, always connected digital world. Organizations therefore
need to carefully walk the path towards a comprehensive digital transformation with
a concrete strategy to utilize its strengths and alleviate its challenges. As the global
economy improves, and consumer confidence increases, investing in new technologies
such smart computing products, internet of things, products and platforms, cloud
computing, mobility and analytics will enable vendors to gain efficiency, agility, access
to consumers, and innovation which when properly leveraged will provide tremendous
opportunity for the delivery of real competitive value to clients.
The Indian IT-BPM industry is expected to continue to partner and handhold clients to
enable business success in the digital era, and is well set on its goal to reach revenues
of USD 300 billion by 2020. At the same time, challenges around economic volatility,
protectionism, competition and customer understanding will need to be addressed by
concerned stakeholders.
12

The IT-BPM Sector in India: Strategic Review 2015

Contents

13

1. Acknowledgements

14

2. IT-BPM industry segmentation

15

3. IT-BPM Performance overview

16

a. IT services

37

b. Business Process Management (BPM)

59

c. ER&D and product development

81

d. Software products

107

e. eCommerce

129

4. Indias Value Proposition The Leadership Story

144

5. Appendix

159

a. Tables

161

b. Glossary

165

c. Abbreviations

170

The IT-BPM Sector in India: Strategic Review 2015