Sector structure/Market size

The Indian information technology (IT) industry has played a key role in putting India on the global map. Thanks to the success of the IT industry, India is now a power to reckon with. According to the annual report 2009-10, prepared by the Department of Information Technology (DIT), the IT-BPO industry is expected to garner a revenue aggregate of US$ 73.1 billion in 2009-10 as compared to US$ 69.4 billion in 2008-09, growing at a rate of over 5 per cent. The report predicts that the Indian IT-BPO revenues may reach US$ 225 billion in 2020.

According to DIT, the Indian software and services exports is expected to reach US$ 49.7 billion in 2009-10 as compared to US$ 47.1 billion in 2008-09, registering an increase of 5.5 per cent in dollar terms. Further, the IT services exports is estimated to grow from US$ 25.8 billion in 2008-09 to US$ 27.3 billion in 2009-10, showing a growth of 5.8 per cent.

Moreover, according to a study by Springboard Research published in February 2010, the Indian information technology (IT) market is expected to grow at around 15.5 per cent in 2010, on the back of growing investor confidence and favourable initiatives taken by the government.

The data centre services market in the country is forecast to grow at a compound annual growth rate (CAGR) of 22.7 per cent between 2009 and 2011, to touch close to US$ 2.2 billion by the end of 2011, according to research firm IDC India's report published in March 2010. The IDC India report stated that the overall India data centre services market in 2009 was estimated at US$ 1.39 billion.

As per a report by the Internet and Mobile Association of India (IAMAI) and market research firm IMRB, the total number of Internet users in India reached 71 million in 2009. The number of active users increased to 52 million in September 2009 from 42 million in September 2008, registering a growth of 19 per cent year-on-year, stated the report.

According to IDC India, during January-March 2010, total PC sales in India reached 2,240,000 units registering a year-on-year increase of 33 per cent over the same period in 2009. Desktop PC sales witnessed a year-on-year increase of 18 per cent during January-March 2010, over the corresponding period last year to reach 1,436,000 units. The sales of Notebook computers also increased by 72 per cent year-on-year, clocking 803,000 shipments.

Outsourcing

India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people.

Some big deals in the outsourcing space include:

• Wipro Ltd, an IT services company, has entered into a strategic collaboration with Hitachi Data Systems, to offer co-branded products and services on Hitachi Technology in India.
• Software company, Tata Consultancy Services (TCS) has won a multi-year outsourcing contract from Norway-based telecom company, Telenor Norway to provide application maintenance and development services.
• HCL Technologies has entered into a five-year IT infrastructure outsourcing deal with Singapore Exchange (SGX) for US$ 110 million. The company has also won a US$ 500 million strategic IT outsourcing contract from US-based drug manufacturer, Merck Sharp and Dohme (MSD).
• Computer services firm, Mahindra Satyam has signed a four-year offshore contract with Denmark-based IT company, KMD for US$ 48 million.
• Software exporter Patni Computer Systems won a five-year IT and back-office contract potentially worth around US$ 200 million from US-based health insurance provider Universal American.