ITES and BPO Services

The ITITeS industry has shown remarkable resilience in the year 2007-08. Continuing on its established track record, the overall IT-ITeS revenue aggregate is estimated to have grown by over 33 per cent to reach US$ 64 billion in fiscal year [FY] 2007-08 as compared to US$ 48.1 billion in FY 2006-07. Industry performance was marked by sustained double-digit revenue growth, steady expansion into newer service-lines and increased geographic penetration, and an unprecedented rise in investments by MNCs - in spite of lingering concerns about gaps in talent and infrastructure impacting India's cost competitiveness.

The Indian software and services export including ITES-BPO is estimated at US$ 40.3 billion in 2007-08, as compared to US$ 31.4 billion in 2006-07, an increase of 28.3 per cent. The IT services exports is estimated to be US$ 23.1 billion in 2007-08 as compared to US$ 18.0 billion in 2006-07, showing a growth of 28.7 per cent in 2007-08. ITES-BPO exports are estimated to grow from US$ 8.4 billion in 2006-07 to US$ 10.9 billion in 2007-08, a year-on-year growth of over a 29.8 per cent.

High offshore component of delivery and superior execution in multi-location delivery continue to be key differentiators. As of December 2007, over 498 India based Centres (both Indian firms as well as MNC-owned captives) had acquired quality certifications with 85 companies certified at Software Engineering Institute, Carnegie Mellon (SEI) CMM Level 5-higher than any other country.

The US and the UK remain the key markets for Indian IT-BPO exports (excluding hardware), accounting for nearly 80 per cent of the total. This comes as no surprise as these two markets account for the largest share of worldwide technology spends. However markets across Continental Europe and the Asia Pacific are also witnessing significant year-on-year growth. This trend towards a broader geographic market exposure is positive for the industry, not only as de-risking measure but also as a means of accelerating growth by tapping new markets.

With the BPO going for the past few years, the Knowledge Process Outsourcing KPO - which may be called the highest level of the BPO - is still at a nascent stage of development in the country. This evolution of the market to the KPO will drive trends that will ensure very high-value services in offshoring. These opportunities in the KPO will help the Indian market climb the global value and knowledge chain.

Though the IT-BPO sector is export driven, the domestic market is also significant. The revenue from the domestic market (IT Services and ITES-BPO) is estimated to be US$ 11.7 billion in 2007-08 as compared to US$ 8.2 billion in 2006-07 a growth of about 42.7 per cent. The total size of the domestic market is estimated to cross US$ 23.2 billion in 2007-08, as against US$ 16.2 billion in 2006-07, a growth of 43 per cent year-on-year (YoY). BPO demand in the domestic market has witnessed noticeable growth over the past few years.

The total IT Software and Services employment is estimated to touch 2.0 million marks in 2007-08 as against 1.63 million in 2006-07, a growth of 22.7 per cent YoY. This represents a net addition of 375,000 professionals to the industry employee base in 2007-08. The indirect employment attributed by the sector is estimated to about 8.0 million in 2007-08. This translates to the creation of about 10 million job opportunities attributed to the growth of this sector.

As a proportion of national GDP, the IT-BPO sector revenues are estimated to have grown from 5.2 per cent in 2006-07 to an estimated 5.5 per cent in 2007-08. Net value-added by this sector to the economy is estimated at 3.3-3.9 per cent for FY 2007-08.

The outlook for Indian IT-BPO industry remains bright. This sector is well on track to achieve its aspired target of US$ 60 billion in export revenues and US$ 73 - 75 billion in overall software and service revenues by 2010. Key factors underlying this optimism include sufficient demand, strong fundamentals and a favourable policy environment.

Source: National Portal Content Management Team, Reviewed on: 24-03-2009