IT Enabled Services

Submitted By:Anurag Dua

MBA (G) – 2008 A0101906052

“The growth of IT enabled Services (ITES) has opened windows for job opportunities, service offerings and foreign investments in India. Nasscom says that India is well positioned to derive benefits from the ITES market and become a key hub for these services.”

- NASSCOM

“India’s sunshine sector — IT-ITES — continues to maintain its pace of growth with a dogged determination. It continues to chart double-digit growth and will exceed US$ 36 billion in annual revenues in FY06. Out of this, software and services exports are estimated to grow by 32 per cent, to reach US$ 36 billion in FY07.”

- Strategic Review

Outsourcing of such processes that can be enabled with information technology and covers areas as diverse as finance, HR , administration, healthcare, telecommunication, manufacturing etc.

Form of outsourced service which has emerged due to involvement of IT in various fields such as banking & finance, telecommunications, insurance etc.

Examples of ITeS: Medical Transcription, Back-office accounting, Insurance claim, Credit & Processing etc.

The idea of OUTSOURCING has its roots in the “Competitive Advantage Theory” propagated by Adam Smith in his book “The Wealth of Nations” which was published in 1776.

The IT industry in India has existed since the early 1980s, it was the early and mid 1990s that saw the emergence of outsourcing. One of the first outsourced services was medical transcription, but outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries which catered to the process off-shoring requirements of their parent companies. Some of the earliest players in the Indian market were American Express, GE Capital and British Airways.

First Phase: In this phase, many MNC’s established captive units in India for customer support and transaction processing. Genpact was the first MNC to pioneer the ITES in India when it opened an Indian-based international call centre in 1997 to perform tasks such as money collection, credit-card servicing and data management.

Second phase: In this phase, third-party units were set-up in India by MNC’s for outsourcing activities, NRIs, Indian independents and Indian IT companies established software services such as Infosys, Wipro and Satyam ventured into the ITES business in 2002 by establishing subsidiaries. More developed IT outsourcing firms tended to move towards higher value-added products competing to a great extent on specialized talent.

Third phase: Third phase is characterized by the increasing trend towards geographical dispersion of activities, mergers & acquisitions have also taken place within the industry in this phase. With this process, many smaller ITES companies found it difficult to survive and these activities has continued. Going forward, competing small and medium-sized industries with complementary skills are likely to merge their operations to compete with larger global firms.

Fourth phase: In the current and fourth phase of evolution, there is an increasing trend towards Indian companies acquiring small to medium-sized businesses in overseas locations. These foreign acquisitions mark a contrast to the practice of foreign MNCs setting up ITES units in India to take advantage of their lower costs here. There is also a growing trend of niche players in industries to set ITES units

Customer Interaction services including call centers.

Back office operations/revenue accounting, data entry, data conversion including finance and accounting and HR services.

Transcription/Translation services.Content

development/animation/engineering/design and GIS.

Other services including remote education, data search, market research, network consultancy and management as IT enabled services.

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U S D b n

F Y 2 0 0 4 F Y 2 0 0 5 F Y 2 0 0 6

I T E S i n d u s t r y i n I n d i a

Year Market Size (US mn $)

2000 565

2001 930

2002 1495

2003 2300

2004 5400

2005 8350

2006 12000

Revenue (US mn $)

Growth Employment Growth

FY 06 % FY 06 %

Customer care

1010 102.5 75000 116.7

Finance 710 70 34000 60

HR 145 50 3600 40

Payment Services

360 90.9 21000 57.1

Administration

550 67.6 35000 78.6

Content Development

665 4.3 59000 12.8

Huge market potential globally:

12 bn

USD 120-150 bn

Current Size

PotentialMarket

In bn USD, 2006

Sufficie

nt ro

om fo

r gro

wth

Large pool of talent:

Attractive cost savings:Typical cost savings for illustrative processes:Transaction Processing 25-40%

Accounting 30-40%

ERP/Analytics 40-60%

Infrastructure:

a)SEZ, IT Parksb)Expansion of road networkc)Lower land costsd)Internet facility easily availablee)Bandwidth sharing among multiple entities.f) Broadband, Fixed and Wireless users on the

increase

Proactive Regulatory bodies:

a)Presence of fair and well established judiciary system.

b)Measures to protect the IPR – IT Act 2000, IPR Laws, India Copyright Act.

c)Review of IT Act in 2005.d)Preparation of guidebook on Information

security in 2005.e)Launch of National Skill Registry to improve the

recruitment practices in the country.f) Expansion of the Cyber Lab to multiple

locations to assist the Police Force with relevant IT training.

Top Sector attracting FDI:

Sector No. of deals Value (bn Rs.)

IT-ITeS 42 23.9

Manufacturing

23 17.4

Healthcare 13 10.3

Textiles 12 7.5

Several new areas are emerging:Legal: Worldwide spending on legal services

amounts to about $250 million a year. As yet, only a tiny proportion gets offshore.

IT AuditPatient diagnosisRemote Networking SupportAnimation and Gaming: The Indian market

(from developer’s perspective) is expected to be about $1 billion for animation and $300 million for gaming in 2009.

Thank You.