Opportunities in Indian information technology and enabled ...missp.ch/docs/1591880699Opportunities in Indian... · services exports. Banking and financial institutions were the .

Opportunities in Indian information technology and enabled services sector

June 2020

E-commerceUSD 54 billion

Indian technology market size: USD 191 billion

IT Services

BPM

Hardware

USD 97 billion

USD 40 billion

USD 38 billion

USD 16 billion

7%

8%

11%

7%

26%

34 35 37 38 41 44

99 108 117 126 136 147

0

50

100

150

200

250

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020(E)

Domestic Export

Snapshot

USD 84 billion is the estimated

incremental growth the sector will witness in 2020-

2024

The market growth will accelerate at a CAGR of

~ 8%The year-on-year growth

rate for the sector is

estimated at 7%The sector contributes

more than 45% share to services exports

Banking and financial institutions were the major contributor, 41%, for the IT services

market in 2019.

The sector has a total of 4.36 mn digitally skilled professionals with a 20-25% hike in

learning and development budget.

Major Contributor

Workforce

Exports

Source: Make in India, and Technavio report; IT-BPO services market in India

USA: 62% Europe (excluding UK):11%

UK: 16% Asia: 8%

IT Industry in India – in USD bn

ER&D, Products

Source: Make in India, CARE Ratings, and Times of India

Indiaaccounts for

56% of the global outsourcing

market.

Knowledge services

Fast

est G

row

ing

Segm

ents

Data analytics

Legal services

Business process as a service (BPaaS)

Cloud-based services

SMAC (social, mobility, analytics, cloud)

India

Business Process Management - Key segments

Exports revenue: CAGR (FY14-19)IT services : 8% ITeS- BPO : 9% Software products, ER&D: 19%

India’s overall IT-ITeS export revenueshas grown at a CAGR of 10% in thepast 5 years. Software products,engineering services, and R&D(ER&D) is the fastest growingsegment.

Business Process Management

• 87% of revenue comes from exports.• Market size to reach USD 54 billion by FY2025.• BPM segment has an estimated 19% share in

Indian IT sector revenues in FY18.• BPM sector has over 1.3 million employees,• representing ~30% of IT-BPM workforce.• Leading five BPM firms employ about 20% of

total BPM workforce in India.

USD 38 billion worth revenue was generated by the BPM industry in FY2019-20

The share in exports grew at

8.3%

The revenue grew at 8.2%

41%

18%

17%

10%

5%

3% 2% 2% 2%

BFSI Hi-tech/Telecom Manufacturing

Retail Healthcare Travel & Transportation

Construction & Utilities MPE Others

Manufacturing, healthcare, and travel &

tourism - fastest growing verticals

Telecom sector expected to gain traction on the

back of 5G implementation

Key investments in IT/ITeS sector

Source: Grant Thornton, Nasscom

Industry trendWhat will drive Indian ITeS sector?

IT services

BPM

ER&D

Niche verticals to gain traction - grocery, pharmacy, food and cosmetics

IT services being driven by cloud services

Digital engineering share to increase driven by IoT and Ind 4.0

Ecommerce

Higher implementations of chatbots, RPA, AI-based automation

A leader indigital skills, India has 75% share of

global digital talent pool

Women employeesaccount for 35%+ (1.4

million) share inindustry employee base

Top 5 Indian firmstogether have

over 50,000 localemployees in USA

33%

Digital technologies such as AI, ML and

RPA are core to BPM firms’ operations;

accounts forabout one-third of

their revenue

RPA adoption in BPM

growing at a CAGR of over

~60-70%

60-70%

Key investments in IT/ITeS sector

Source: Grant Thornton, Nasscom

Recent Activity

• Since 2018, MNCs such as OnePlus, Oppo, Mondelez and Intel have opened new R&D centers in India. Microsoft “Kaizala”, a made in India product, is exported globally post India testing

• GCCs are now increasingly driving digital change initiatives from India, for example, Tesco’s center driving global RPA adoption

21% 20+Indian start-

ups arefocusing on

global markets

Global unicorns have

R&Dcentre in India

50% 1,000GCCs driving

digitalchange initiatives

from India

Engineering/ R&D centres

in India

Made in India for the worldIT Startups in India

9,000+

12-15%

24

Patents were filed by Indian IT firms in 2019-20 by over 150 innovation centres of excellence

More than 9,000 IT startup have been incepted during 2014-19

India has 24 unicorns at present with over 50 soon to be unicorn in the industry

6,550+

Y-o-Y growth in the number of unicorns and startups in India in 2019-20

150+The number of CoEs in India focusing on IoT, AI, cognitive, mobility

>1,400GCCs in India

USD 23.5billion GCC revenues

750GCCs focused on IT services

59%Share of

ER&D/SPDGCCs

14%GCCs with

>1,000employees

Analytics drove BPM industry growth because of an increased demand for cloud-based (SaaS) and predictive

analytics solutions and rapid advances in adoption of IoT, AI, deep learning. Startup firms created new focused revenue streams and business models and were a key

contributor in this segment

9.7%

Key segmentsEngineering R&D industry

ER&D has created new revenue growth possibilities by providing a “connected eco-system” with the intent of monetizing data, base services, and value-added services

Paradigm shift in consumption pattern as consumers want to consume an experience ‘as a service’

Engineering R&D products generated a revenue of USD

3.5 billion in 2018-2019

Engineering R&D services & products constituted USD

40 billion in 2020

USD 18 billion of the ER&D revenue came from the 1,567 MNC captive centres and USD 14 billion from Indian service

providersAccounts for 16% of the

IT-BPM sector and growing at a CAGR of 13%

Engineering R&D market to grow to USD 48 billion

by 2022Engineering companies are expected to witness higher demand fueled by 5G deployment, IoT, analytics for product development and increased spending in digital engineering

Source: Money Control, Economics Times, and Times of India

Automotive

Consumer electronics

Healthcare

Top sectors using ER&D Services

Focused on electronics software and autonomous vehicles

Focused on connecting smart devices

Focused on personalised medicines and AI in drug discovery

Geographical hotspots

Source: Kearney GSLI Index 2019

2.82

2.84

2.6

1.88

2.82

1.17

1.26

1.15

2.25

2.23

1.33

1.27

1.64

1.38

1.14

0.56

0.65

0.76

0.97

0.87

0 1 2 3 4 5 6 7 8

Vietnam

Indonesia

Malaysia

China

India

Global Services Location Index (GSLI) report

Financial Attractiveness People Skill and Availability

Business Environment Digital Resonance

Rank

1

2

3

4

5

7.06

6.49

6.15

6.02

5.88

Parameters India China

Labour Pool Medium High

Infrastructure Medium Medium

Quality of output Low High

Business and political environment Low High

Government support Medium High

Educational Support High High

Cost advantage High High

English proficiency Low High

Delhi NCR Cluster for IT, ITeS, ER&D and SPD

MumbaiIT, ITeS, GCCs

Bangalore:IT, ITeS and ER&D, GCCs

ChennaiIT, ITeS

KolkataSPD

IT ServicesHas a strong presencein operates through six major states, including Karnataka, Andhra Pradesh,Maharashtra, Tamil Nadu, Haryana and Uttar Pradesh

ITes companies are gradually shifting their focus towards tier 2 and 3 cities such as Ahmedabad (Gujrat), Jaipur (Rajasthan), Nagpur (Maharashtra), Bhubaneshwar (Odisha), Mangalore (Karnataka), Guwahati (Assam) and Chandigarh

Tier I cities

Tier II cities

PuneIT and ITeS

Top 4 India cities house 1400+ GCCs in India

Opportunity: Government created

0% custom duty on imports and excise duty exempted on indigenous procurement

At present, more than

5,000 units are registered with STPI

100% FDI permitted through automatic route

A total of 60 STPIcentres/subcentres are operational, out of which 51 centres are in Tier II and Tier III

Sales in the DTA up to

50% of the FOB value of exports permissible

Software Technology Parks (STPs) Special Economic Zones (SEZ) Scheme

Single window clearance for Central and State level approvals

Duty free import/domestic procurement of goods for development and operation of SEZ units

100% income tax exemption on export income for SEZ units for first 5 years; 50% for subsequent 5 years

0% central sales tax, service tax and state sales tax as these have now subsumed into GST

Other levies are imposed by the respective State Governments

Source: Ministry of Electronics and Information Technology

India BPO Promotion Scheme (IBPS)

50% expenditure incurred on BPO/ITeS will be incentivized; upper ceiling of USD 1320.

Special incentive for units providing employment to women and persons with disability

Special incentive for units providing employment beyond employment target

Incentive for wider dispersal within state including rural areas

Special Package for Hilly Region (Himachal Pradesh, Uttarakhand and Jammu & Kashmir)

Opportunities

USD 84 mn USD 3 mn USD 1.32 mn USD 3.31 mnEquity

funding for smart data

centre in J&K

Equity funding for innovation

centre in AP

Equity funding for a BPO

centre in Assam

Equity funding for a rural BPO in

Assam

FDI

FDI Policy

FDI Inflow-bn

100%

USD 43.58

In the electronics and IT sector, 100% FDI is permitted under the automatic route

Computer software and hardware sector attracted cumulative FDI inflows during April 2000-Dec 2019

India has made substantial investment in R&D over the years. The overall spending on R&D has tripled in the last 15 years

Availability of highly qualified talent pool at lower rates helps cut cost by about 60-70% to source countries and has enabled IT firms to help clients save USD 200 billion in the last 5 years

Significant investment in infrastructure, and in IT in emerging verticals (retail, healthcare, utilities) are driving growth

Fueled by the adoption of next-gen technologies such as machine learning, AI, IoT, social media, mobility, analytics and cloud (SMAC), and embedded systems

Why Invest in India?

The sector in FY2020 saw 205,000 new hires and a 20-25% growth in learning & development budget of IT-BPM firms.

Specific opportunity

Source: MEITY, Nasscom, IIG

Partnerships with global firms for expertise in:

� Design Thinking � Experience Design � UX� Domains & verticals

Shifting to augmented CX offering delivering ‘Exponential Value’

• 50-55%+ firms focusing on digital CX,building omni-channel experiences

Record demand for Content moderation services:Cognizant’s exit from the business hasopened USD 250+ mn a year opportunity forother BPM players

Opportunity: Industry created

Source: Media Releases

Industry need amid remote work culturePublic cloud services grew at a CAGR

of 24% in 2019

Tele-health

Tele-Medicine: fast emerging sector

in India, expected to reach USD 32 bn by 2020

Vital tool for rural India to bridge gap

Start-ups are looking for innovative delivery models

Presence of largest number of SMBs

Large scale adoption of Flock and Slack

Increase in usage of Zoom, Microsoft, Google

Collaboration tools

Robotics and automation

Robot installations growing at a CAGR of 20%

Automotive industry; largest adopter

Collaborative approach-Partnership with universities, industry

leading companies and startups

63,000 robots in Accenture’soperation division

Cyberattacks surged by 117% in 2019 over 2018

70% Indian companies planning to increase their cybersecurity

budgetsIncreasing demand for cybersecurity products and services from industrial,

BFSI, IT, and retail sectors

Cybersecurity

Cloud computing Companies investing heavily in IT and

cloud resources

India Set-up: Case Studies

PIT Solutions

The company has primary offices in Switzerland, India as well as subsidiaries in the USA and Dubai

Switzerland and India-based PIT Solutions is a leading IT and IT enabled services company

The firm specializes in developing individual software, web and mobile application- flexible online shopping solutions, custom made websites,

custom software, iOS and android apps for its clients

Source: www.pitsolutions.in

Novartis

Novartis will also provide sandbox infrastructure to promote collaboration and innovation in the healthcare sector

Switzerland-headquartered pharma firm Novartis launched a digital innovation hub, Novartis Biome, India in Hyderabad in February 2020

The digital lab bring together and empower technology companies and people through data and digital technologies

The firm will combine its scientific know-how with the expertise of tech players in India to create digital solutions for patients

Source: www.Novartis.in

PIT Solution has solution development office in Kerala

India Set-up: Case Studies

Swiss Re

Headquartered in Zurich, Swiss Re is one of the world's leading providers of reinsurance and insurance provider

Swiss Re has a global capability centre in Bangalore, which also works like a transformation and innovation hubs for its clients

The company has set up an insurtech accelerator in Bengaluru with focus on AI, data analytics and IoT to disrupt insurance practices

Source: www.swissre.com

Swiss Re has also invested in six Indian Tech start-ups Arya.ai, Niki.ai, eKincare, Touchkin, Datasigns and GOQii

TOKEN DEVELOP

Token Develop is a leading blockchain development company based in Switzerland

The firm offers cryptocurrency exchange software development, decentralized crypto exchange software, STO development, ICO

development, cryptocurrency trading app, master card white label solutions and fintech license provides

Token Develop has presence in Spain, Panama, Turkey, India and Singapore

Source: www.tokendevelop.com

Indian IT industry

THANK YOU