Tata Consultancy Services (TCS) remained the top IT firm in the country last year while HP did the most business in the Indian market, according to the 2th annual Dataquest survey of the Indian IT industry.
While India’s IT services exports went back to their high-growth ways in the last year, the BPO numbers provided further proof that India’s eminence in this segment may not last much longer.
IT Services exports relates to services such as software development, remote management etc. done by India-based operations of Indian and foreign firms for which payment is made by overseas companies.
They were up 21% in the year ended March 2011, compared to 6% in the year before. 2009-10 was considered an exceptionally poor year in terms of growth due to the recession.
However, BPO exports — which includes non IT services exports (such as customer-support call-centres, marketing support etc.) — grew just 7% in the last year, even slower than the 13% growth that was seen in the year before.
The decline is in line with expectations by an industry that has found it harder and harder to compete in non-technical outsourcing services due to rising salaries and the emergence of new centres such as Africa and the Philippines.
As a result of the dragging effect of the BPO segment, the overall IT-BPO exports were up only 17%, hitting $64 billion during the last year.
The figure is also possibly not truly representative of the real value of India’s services exports, particularly in IT, as the value of the contributions made by the India-based units of foreign firms cannot be easily ascertained, as they are not sold or shown separately.
Besides, the Indian government is examining whether foreign firms are under-declaring the value of the contribution made by their India-based employees to save tax in India. In many cases, the government believes, the revenue generated per employee is half of the corresponding figure for their Indian competitors like TCS and Infosys.
Nevertheless, at $64 billion, the IT-BPO exports are twice the size of the domestic IT market (including software, hardware, services etc.).
The domestic IT market has been estimated by Dataquest at $32 billion last year. However, unlike the exports — which grew 17% — the domestic IT market grew 23%.
It must be noted that whereas India’s IT exports are almost entirely comprised of services, the a large part of the domestic IT market is comprised of hardware sales.
For example, out of the total $32 billion, $6.4 billion (Rs 29,151 crore) was made up of computer sales and another $1.93 billion (Rs 8,796 crore) was contributed by smart-phone sales. Smart-phones were perhaps the fastest growing IT category during the year, jumping 97%.
The $6.4 billion computer market comprised of $0.6 billion (Rs 2,709 crore) of servers and the remaining roughly equally divided between desktop and laptop sales (Rs 13,300 crore each).
Not surprisingly, all the top five domestic market IT firms were hardware players, starting with HP at the top, followed by HCL and all the way down to Cisco. At number 6 was IBM, followed by Dell at no. 7. The only software-oriented player was SAP, at number 10. (see chart.)
HCL Info, a PC brand that used to dominate the Indian hardware market, saw its revenue decline marginally during the year, hit by consumer preference for “foreign brands” such as HP and Dell.
The other parts of the Indian domestic IT market, software and services, both grew at 19% each.
“..certain segments within software, such as business intelligence (BI), did particularly well. BI grew at 38%. The segment, which had grown by 44% in FY 10, is the new focus for investment, among large enterprise CIOs, as top executives are now relying more and more on analytics to take business decisions,” Dataquest noted.
There were not many surprises in the export rankings, except for the displacement of Wipro Technologies by Cognizant Technology Solutions as India’s third biggest IT exporter.
TCS led the pack with total exports of around $6.5 billion (compared to its total revenues of $8.2 billion) last year. It was followed by Infosys Technologies, Cognizant, Wipro and HCL Technologies — export oriented sibling of HCL Infosystems.
In fact, IBM, which is estimated to be employing well north of 100,000 people in India (more than HCL Technologies), exported only $1.33 billion worth, while HCL Technologies’s exports were worth $3 billion.
IBM is followed by Accenture India and Mahindra Satyam (see chart.)
Dataquest is the flagship magazine of the Cyber Media group.