Table of Content

• Motivation for this topic

• A brief intro to Indian IT service industry
• Part I, Industry’s growth
• Part II, Growth drivers
• Results
• Conclusion
• Recommendation for IT service providers
• Things that could have been better

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 Motivation for this topic

• I have background in Mechanical Engineering.

• After MBA and E I am likely to work in in Indian IT service industry.

Focus is mainly on :-
- Industry’s growth
- Competitive landscape with focus on IT service provider (In the light of Driver’s of growth
which are macroscopic factors)

• Till date there has been very little research focus on Indian IT Service industry. Always the focus of
research has Entire IT industry or Indian Business Process Outsourcing industry.

IT Service -Indian IT service industry : Situation and Perceptive 3

 A brief intro to Indian IT service industry

Services offered by Indian IT Service industry

IT Consulting Systems Integration Infrastructure Application Customer application

management services maintenance and development and
support training
Figure 1 Services offered by Indian IT service industry

Figure 2 Size of Indian IT service industry in 2014 and 2015 Figure 3 Major export market of Indian IT sector
along with export and domestic consumption of IT services IT Service -Indian IT service industry : Situation and Perceptive 4
Part I Industry’s growth
Post-financial crisis phase,
Pre-Financial recession phase 2009-14, CAGR – 11.62%
2005 to 2008, CAGR – 31.93%

2014-15, CAGR – 13.11%

Financial crisis phase, 2008-09, CAGR – 13.55%

Fig 4 Predicted growth of Indian IT service industry

Year CAGR % of Indian IT

service industry
2008-2009 13.55%
2009-2014 11.62%
2014-2015 13.11%
2009 -2015 11.87%

Table 1 Year on year growth of Indian IT service industry

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Part -II Growth drivers

• Make in India (FDI) • Economic growth of India’s economy • Legal framework for Cloud
• Demographics • Digital India initiative Computing in India
• Internet users • Economic growth of Export markets • STPI (Software technology park of
• Cloud computing • Capital availability India) scheme
• Employment law • Government availability • Big data analytics
• Demographics • Bureaucracy and Corruption • Research and development
• Literacy and Education • English speaking population • Tax policy
• Intellectual property rights • Low interest rates

Competitive Landscape of Indian IT service industry

?????
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Step 1 Social, Political, Economic, Political and Technological factors
Growth drivers

Economies of scale
Product Differentiation
SLEPT analysis Capital Requirements
Step 2 (Macroscopic forces) Sunk cost • No. of competitors
Government Policy • Growth of industry
Switching costs • Fixed cost
Porter five forces of Assigned a number to each force Growth of industry • Product differentiation
Step 3 competition
• Exit barriers
(A tool byMichael E.
Porter) to analyze • Competitive advantage through
competitive intensity Innovation or Technology
of an industry • Availability of work force
Threat of
New
entrants

Intensity of
Bargaining rivalry Bargaining
• Number and type of suppliers power of among power of
• Power of Labour union suppliers existing buyers
competitors

• Buyer’s purchase volume

Threat of • Product differentiation
• Availability of close substitute substitute • Buyer’s switching cost relative to
• Relative price-performance of substitute product or supplier’s switching cost
• Buyer switching costs service • Threat of backward integration
• Available substitutes
7
Fig 5 Porter five forces of competition model
 Results
High Moderate Low
Govt. policy (FDI) Skilled labor is available Switching cost is high
Growth of Industry Capital is available Economies of scale
exists
Digital India initiative Lack of product Sunk cost exists
differentiation
Table 2 Threat of New entrant (Each force impact)

High Moderate Low

High number of Size of competitors Customer switching cost
competitors exists
Exit barrier are high Growth of Industry
Lack of product Fixed cost
differentiation

Table 3 Strength of each force among existing competitors (Each force impact)

IT Service -Indian IT service industry : Situation and Perceptive 8

1-Very Low, 2- Low, 3 - Moderate, 4-High, 5- Very
 Results cont.

High Moderate Low

Price-performance ratio
Buyer switching cost
Buyer propensity to substitute

Table 4 Threat of substitute product

High Moderate Low

Power of software Power of hardware providers
providers
Power of cloud hosting companies
Power of labor union

Table 5 Bargaining power of suppliers

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 Results cont.

High Moderate Low

Buyer have high Buyer are Threat of backward integration
purchase volume concentration in fixed
geographies
Lack of product No substitute product
differentiation
Buyer have switching
cost

Table 6 Bargaining power of buyer

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 Conclusion
Overall industry competition is moderate hence industry is attractive
• Indian IT service industry will become a $ 120 billion industry by 2020

• Threat of new entrants is moderate to high so they will try to snatch the market share and
resources from existing IT service providers.

• New competitors will also put pressure on reducing pressure and increasing their
performance.

• Rivalry of competition among existing IT service providers is moderate to high.

• Bargaining power of buyers is low to moderate.

• Bargaining power of supplier is low.

Fig. 6 collective strength of each force in
Porter five forces model of competition • There is no feasible substitute product available.

“Getting ahead in terms of technology is the root of overall competitiveness in Indian IT

1-Very Low, 2- Low, 3 - Moderate, 4-High, 5- Very service industry”.
high

IT Service -Indian IT service industry : Situation and Perceptive 11

 Recommendation for IT Service providers
• Employer branding
- Talent driven industry. So Employer branding will attract new talent and also will retain talent.
- Indian IT companies are worst paymasters (ET,2015).
• New delivery and development centres beyond the Indian shores.
- Very few Indian IT companies have production centre beyond India.
• One stop shop using backward integration.
- Cloud hosting (will neutralize supplier power and more lock-ins)
• New Geographies
- Use Internet through cloud computing to penetrate in Europe, next-eleven countries and world-wide.
- Building language capabilities is necessary.
• Product differentiation
- Through investment in technology such as Cloud computing, Big data etc
• Intellectual property (IP) creation
- Government of India is having a initiative to get Patent offices online and more transparent. IT service provider must build
on this opportunities.
• New delivery model and pricing
- Easy to customize if algorithms and API is known, software are easy to maintain
- Pay per use pricing model + using in-house cloud hosting capabilities 12
 Things that could have been better

• Needed insider’s prospective – Primary data

• Some spelling mistakes could have avoided and grammar could have been better.

• Some info is interpreted to support the argument which could be confusing.

IT Service -Indian IT service industry : Situation and Perceptive 13

Discussion !!!

IT Service -Indian IT service industry : Situation and Perceptive 14

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