G R O U P 7

T E A M M E M B E R S :

• A J A Y R A J S I N G H

• M A N I S H A G R A W A L

• M I L I N D G O K H A L E

• S W A P N I L P U R A N I K

Do Indian IT companies need to move up the value chain to remain in dominant

position in world markets?

Indian IT – History

Growth story so far

Where does the Indian IT Industry stand?

Challenges for future growth

Is moving up the value chain a solution?

What does moving up the value chain mean?

Advantages

What do we need to up the value chain?

Challenges in moving up the value chain

Factors in favor

Some examples

Agenda

How it started? -

1. Start by TCS in late 1960s

2. Tata Burroughs formation – Start of Bodyshopping

3. Indian Engineers flood over US and Europe by 1970s

Types of Projects –

1. Body shopping of low cost resources

2. Outsourced application development/migration work

Revenue Model –

1. Time and Material based cost

2. Off shoring of the work in order to reduce the cost

Indian IT Industry - History

Indian IT Industry – History contd.

Average 30% annual growth

through out the last decade

Growth Story So far

But it is tightly proportional to the

growth in head count

Company CAGR from 2005 – 2011 for Revenue

CAGR from 2005 – 2011for Head Count

Infosys 24.9 23.6

TCS 22.4 27.7

Wipro 25.2 19.6

HCL 29.2 20.8

Where does the Indian IT Industry stand?

Developing software asked by client at offshore at a cheaper cost

Solving the business problems

of the client

1. Foreign companies have entered in India to set up their offshore centers

2. Other low cost countries developing skills

3. Rising Employee Costs in India

4. Fluctuating Exchange Rates

5. Pressure on Margins

6. Poor Infrastructure

7. Dependence on US and European economy

Challenges for future growth

Is moving up the value chain a solution?

What does moving up

the value chain mean?

Moving up the value chain means -

Adding more value by providing the business solutions to the client

Getting into strategic partnerships

Leveraging intellectual property, not head count

Using Business processes and resources to produce highly profitable products also known as “higher-margin” products / Making Specialized products

1. Higher Margins

2. Higher Revenue productivity

3. Downstream Revenue generation

4. A way to sustain for a long term

Advantages of move up the value chain

Do Indian IT companies need to move up the value

chain to remain in dominant position in world

markets?

Yes

1. Building up domain knowledge

2. Knowledge Management

3. Investing in R&D

4. Scaling up quickly

5. Inorganic Growth

6. Managing Existing Accounts

7. Building Brand Recognition

What do we need to do to move up the value chain?

1. Indian IT industry’s image as a low cost software

development destination

2. Lack of required talent in terms of domain knowledge and

skill set

3. Breeding the Innovation Culture

4. Consulting is a small fraction of overall IT Pie with multiple

established competitors

5. Lower growth rate of IT Consulting industry

Challenges inmoving up the value chain

1. Favorable policies by the government

2. Existing Clients and Relationships

3. Large talent pool

4. NASSCOM

5. Telecom Infrastructure

6. Fragmented Market

7. Favorable Macroeconomic Factors

Favorable position to move up the chain

1. Infosys � -

1. Infosys Technologies started Infosys consulting in 2004 in USA with an investment of US $ 20 million

to focus on delivering high value business/technology consulting.

2. Moved to Transaction based pricing

3. Infosys has nine platforms like the Infosys Edge (Brand Edge, Social Edge etc) series of platforms, and

some are in the incubation stage

4. Banking software product Finacle

5. Flypp - a ready to launch application software for mobile operators that allows monetization through

ready to use experiential applications across devices.

2. Wipro �

1. Wipro bought out the American Management Systems� energy practice for US $ 26 million

(November 2002) and NerveWire for US $ 17 million (May 2003), which shows its focus on building

high end consulting expertise.

Examples of Companies moving up the value chain

3. iGATE

1. Moving towards an outcome-based pricing structure

2. Makes upfront investment in building the technology and process platforms, the client pays only for

using the infrastructure

4. HCL Technologies

1. In 2008, it launched AEGIS, a home automation solution empowering users to control multiple

appliances, manage media, optimise energy consumption and enable secured homes.

2. In 2009, it unveiled ITS ecall (intelligent transportation system emergency call), a vehicle installed

system that sends automated text to emergency services when a car meets with an accident.

3. Acquired UK-based SAP consulting company Axon

Examples of Companies moving up the value chain contd.

5. TCS

1. The company launched iON, a fully integrated cloud based solution for small and medium

businesses

2. Acquired UK-based platform Diligenta in 2005

3. BaNCS, similar to Finacle, is a banking software developed by TCS, which contributes 4 per cent to

the company’s turnover

Examples of Companies moving up the value chain contd.

www.ibef.org

http://nasscom.org/

http://bcognizance.iiita.ac.in/jul-sep06/brainwave1.html

http://www.indianmba.com/Occasional_Papers/OP92/op92.html

http://www.iveybusinessjournal.com/topics/global-business/what-we-can-learn-from-high-value-indian-outsourcers

References

THANK YOU