India is going to be software superpower in the coming years

- Bill Gates

Indian Software Industry 1996 - 2001 (Figures in Rs. Crores)

Source:NASSCOM

Indian Software Industry 1996 - 2001 (Figures in US $ Million)

Source:NASSCOM

Indian Software Exports as a Percentage of Total Indian Exports

Source:NASSCOM

INDIA ADVANTAGE

Cost and Time Savings

Presence of enormous pool of highly skilled English speaking professionals

High quality

Reliability Global Presence

Government Support

Top Twenty Exporters (2000-2001) value in crores Rs.

Source:NASSCOM

Software Export Destinations

Source:NASSCOM

Offshore Software Development

Source:NASSCOM

Break up of Indian Software exports

Cost Breakdown Charge Element Onsite Work at Client Site (US$) 1,900 1,700 300 Offshore Work Done in India (US$) n.a. n.a. n.a. n.a. n.a. 550 900 400 650 300 200 400 1,200 4,600

Overseas allowance Overseas rent Overseas local travel Overseas travel, insurance 450 and visas Overseas tax Variable Local hardware use n.a. Basic Indian salary 900 Indian salary extras 400 Administrative and 650 financial overheads Training overheads 300 Building and utilities 200 overheads Additional offshore n.a. overheads Profit 1,200 Total 8,000 + tax Source: Interviews and company literature

Source: NASSCOM

TOTAL INDIAN IT MARKET 16% 2% 28% 2% 5% 13% 7% 12%

banking and finance retail telecom petrochemicals transportation education manufacturing soho

2%

3%

government others

Source:NASSCOM

For achieving this velocity of business, both the industry and Government of India are currently taking some bold and purposeful steps.
Some of these are: Path-breaking measures by the government to further liberate the economy Simplification of procedures Deployment of additional resources for technical manpower development Providing new marketing channels Enhancing global brand equity Providing state of the art infrastructure for software development

BANKING SECTOR

RETAIL BANKING

CORPORATE BANKING

INVESTMENT BANKING

Emerging technologies in the Banking Industry

Web based

Client Server

Main Frame

LATEST STATUS OF BANKING INDUSTRY IN INDIA

Total no. of branches in India No. of branches partially computerised No. of fully computerised branches No. of PCs/Nodes at banks Total ATMs installed at corporate customer sites installed

65,837 13,802 5,514 95,090 1,202

Source: RBI REPORT

Public Sector Banks

22% 10% 68% Fully computerized Partially computerized Non computerized

ECONOMICS TIMES APRIL2000

Major stages in Bank Automation

Entry into the E-POWERED WORLD

L5 Centralized with CRM

L4 Centralized solution
L3 Interconnected branch automation L2 Part / Full branch automation L1 Manual

Maturity of Automation

Major Players ; worldwide

Company
Temenos Midas Kapiti International

Products
Globus Equation

Kindle
Infosys I-flex

Bankmaster
Bancs 2000 Flexcuble

Categories of Packages :
The IT Packages and services available in India can be broadly classified into the following 6 types:
Stand-alone branch-level packages Multi-branch solutions Foreign Packages Packages for specialized niche areas Service Branch / high-volume transaction processing packages IT Services

Banking Software Companies

Infosys Technologies Limited

I flex Solutions Ltd Kale Consultancy

Polaris Software Labs

Tata Consultancy Services [TCS] CCK Financial Solutions Ltd

MAJOR PRODUCTS OF INDIAN CO.

COMPANY PRODUCTS I-FLEX FLEXCUBE,MICROBANKER KALE CONSULTANTS PLUTUS -BAS,PLUTUS-FXS INFOSYS FINACLE,BANKAWAY,BANCS2000 TCS ISBS, ETREASURY CCK FINANCIAL SOLUTIONS GUAVA,GUAVA RISK POLARIS BANKNOW,BANKWISE

I- flex solutions (financial snapshot)

19992000 Sales (Rs cr) Growth rate (%) PBDIT (Rs cr) PAT (Rs cr) Reserves (Rs cr) 197.12 41.79 84.33 69.27 203.75

1998-99 1997-98 1996-97

139.02 78.87 59.25 50.44 125.70

77.72 45.68 34.21 30.79 76.39

53.35 49.86 23.32 19.31 35.63

What caused growth?

More banks using its software products like MicroBanker Growing global usage of financial services software Smart use of domain expertise

What will sustain growth?

Entry into high-growth areas like biotech Fast growing datawarehousing business Alliance in the financial services sector such as JV with timesofmoney.com

Infosys snapshot
ALL VALUES IN Rs. Crores
toal revenue export pat 1999 512.74 500.25 132.95 2000 921.46 869.7 283.95 2001 1959.9 1874 623.32
2000 23% 15% 15.10% 15.40% 10.60% 3.00% 2.80% 15.10%

sector wise revenue

2001 manufacturing 17.80% insurance 14.20% banking 19.50% telecom 18.40% retail 9.10% utilities 1.40% transport and logistics 2.20% others 17.40%

OUTSOURCING : THE NEW WAVE

Companies are going global Brain drain From vertical integration to independent organization

outsourcing market growing at 20-25%

Market research says 22% companies want to outsource Entry of many global players

SOUTH AFRICA

Area: total: 1,219,912 sq km land: 1,219,912 sq km water: 0 sq km note: includes Prince Edward Islands (Marion Island and Prince Edward Island)
Climate: mostly semiarid; subtropical along east coast; sunny days, cool nights Population: 43,421,021 Population growth rate: 0.5% (2000 est.) Ethnic groups: black 75.2%, white 13.6%, Colored 8.6%, Indian 2.6%

Literacy: total population: 81.8% male: 81.9% female: 81.7% (1995 est.) GDP: purchasing power parity - $296.1 billion (1999 est.)
GDP - real growth rate: 0.6% (1999 est.) GDP - per capita: purchasing power parity - $6,900 (1999 est.)

GDP - composition by sector: agriculture: 5% industry: 35% services: 60% (1999 est.)
Inflation rate (consumer prices): 5.5% (1999 est.) Labor force - by occupation: agriculture 30%, industry 25%, services 45% (1999 est.)

Exports: $28 billion (f.o.b., 1999 est.)

Exports - commodities: gold, diamonds, other metals and minerals, machinery and equipment Exports - partners: UK, Italy, Japan, US, Germany (1997) Imports: $26 billion (f.o.b., 1999 est.) Imports - commodities: machinery, foodstuffs and equipment, chemicals, petroleum products, scientific instruments

Imports - partners: Germany, US, UK, Japan

Currency: 1 rand (R) = 100 cents

Statistical Data
MARKET SIZE TABLE FORMAT (US DOLLARS MILLIONS)

Software Market. Year

total market local production total exports total imports 1998 454.9 22 7 363.8 1999 545.7 25.5 8.8 436.6 2000 682.2 28.6 12.2 545.7

FOREIGN BANKS IN SOUTH AFRICA

Bank of Baroda Bank of China Johannesburg Branch Bank of Taiwan South Africa Branch Barclays Bank Plc, South Africa Branch China Construction Bank - Johannesburg Branch Citibank Commerz bank Aktiengesellschaft Credit Agricole Indo suez Deutsche Bank AG ING Bank N.V. South Africa Branch Merrill Lynch Capital Markets Bank Limited Morgan Guaranty Trust Company of New York State Bank of India

LOCAL BANKS
ABSA Bank Limited African Bank Limited African Merchant Bank Limited BOE Bank Limited Brait Merchant Bank Limited Cadiz Investment Bank Limited Cape of Good Hope Bank Limited Capitec Bank Limited CASHBANK Limited CORPCAPITAL Bank Limited FBC Fidelity Bank Limited First National Bank of Southern Africa Limited FirstRand Bank Limited

Parameters for selecting the right banking solution

Flexibility

Reliability and Availability

Scalability and Stability Interoperability and Compatibility Delivery channels Speed of development

Stability

Economics of Product
Extremely price competitive
Reasons : Cheap man power Abundance of IT labour Stress IT on outsourcing

What's the best distribution channel for you? Your own branch office or subsidiary Sales partner joint venture

"virtual subsidiary"
Downloading from the Internet. More than one of the above

Promotion
Advertising in banking journal
Participation in conferences Road shows Trade fair / exhibition in respective countries Demonstration to consultancies

Software Production Stages

Inception - Product Type
Functionality-Identification of needs Design - Adaptability , Scalability Coding - Platform Testing

Release
Development Time

Implementation
Installation Training

Buying Decision

Long process Usually a centrally based decision (Head office) of the major banks The Chief Information Officer ( incharge of Decision making)

Ways of charging a service project

Fixed Cost Project (time may vary from 1-2 months)

Fixed time project

No. of man hrs. worked on by the software professionals (charged by months)

Product Pricing

Licensing Fee
Implementation Fee Other Expenses Annual Maintenance Fee

Payment Terms

25% of the contract value in advance and will be payable along purchase order.
65 % of the contract value will be bailed on monthly basis at the end of each calendar year. 10% of the contract value will be taken upon the implementation of the project .

SOFTWARE BUSINESS
SERVICES PACKAGES

EXPORT

DOMESTIC

E
India

Ireland

Cost Comparison (US$)

Switzerland Project Leader Business Analyst Systems Analyst Systems Designe r Develop ment Program mer Support Program mer Network Analyst/ Designe r USA Canada UK Ireland Greece India

$74,000 $54,000 $39,000 $39,000 $43,000 $24,000 $23,000 $74,000 $38,000 $36,000 $37,000 $36,000 $28,000 $21,000 $74,000 $48,000 $32,000 $34,000 $36,000 $15,000 $14,000 $67,000 $55,000 $36,000 $34,000 $31,000 $15,000 $11,000

$56,000 $41,000 $29,000 $29,000 $21,000 $13,000 $8,000

$56,000 $37,000 $26,000 $25,000 $21,000 $15,000 $8,000

$67,000 $49,000 $32,000 $31,000 $26,000 $15,000 $14,000

Quality Assurance $71,000 Specialist Database $67,000 Data Analyst Metrics/Pr $74,000 ocess Specialist Documenta tion/Traini $59,000 ng Staff Test $59,000 Engineer

$50,000 $28,000 $33,000 $29,000 $15,000 $14,000

$50,000 $32,000 $22,000 $29,000 $24,000 $17,000

$48,000 $29,000 $31,000

$15,000 $17,000

$36,000 $26,000 $21,000 $47,000 $25,000 $24,000

$15,000 $13,000

$8,000 $8,000

Source: adapted from H.A. Rubin et al. Worldwide Benchmark Project, Rubin Systems: Pound Ridge, NY. Note: Figures are averages for 1998. They are likely to rise c.510% per annum, with rates being slightly higher in lower-wage economies.

Project leakage
Bangalore's strained, overcrowded infrastructure where travel delays and power cuts were common A relatively large number of public holidays

A view of home/work balance that incorporated the execution of family responsibilities (paying bills, taking family members to the doctor, etc.) during working hours

SOURCE :HARVARD BUSINESS REPORT

SOURCE :NASSCOM

SWOT Analysis Strength Capability of continuously upgrading software( highly flexible) Large pool of skilled labour Cost an upper edge than developed countries Strong perception of Indian software services Weakness Uneven Output: Services not Packages Uneven Export Destination: US Domination Uneven Divisions of Labour: Body Shopping Prison Uneven Location Divisions: Onsite and Offshore Work

Opportunity Very low level of automation Emergence of banking product as commodity Banking sector highly customer oriented Support of internet Easiest way for the banks for reducing costs Threat Unavailability of skilled people having experience in banking and software development Temenos and other major world players expanding their business Business may shift to lower labour cost countries

The China threat

Becoming popular as an outsourcing base
Steps to organize English teaching programs Have better skills in open source code such as linux This will strengthen product development

COMPETITOR ANALYSIS: IRELAND

Irelands fastest growing sector

15% growth per year

90% exports

$ 4.5 bn export in 2000

Sophisticated telecom network Skilled, highly educated workforce Excellent supply infrastructure Supply infrastructure

Potential Software Strategy Development Path

Export of Labour (onsite services)

Export of Services (offshore work)

Export of Products (package export)

Bankswatch out
The industry is assuming huge importance Offers huge potential for earnings

Shift from tangibles to intangibles

Building of India as a brand

What Banks should do

Need for expertise Risk assessment becomes very important Organisation type Regions of Export Focus on products and consultancy services rather than only outsourcing services Understanding the revenue model The issue of Margins

Bibliography NASSCOM Report-Indian it industry-2000 www.banknetindia.com www.google.com www.nasscom.org Business India (feb 14 march 4, 2001) Computers-today (1-15 Jan, 2001) www.itspace.com