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Industry Analysis COMPUTER SOFTWARE INDUSTRY IN INDIA A PRESENTATION BY Dr. Rana Singh

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Presentation on theme: "Industry Analysis COMPUTER SOFTWARE INDUSTRY IN INDIA A PRESENTATION BY Dr. Rana Singh"— Presentation transcript:

1 Industry Analysis COMPUTER SOFTWARE INDUSTRY IN INDIA A PRESENTATION BY Dr. Rana Singh www.ranasingh.org 9811828987Singh_rana@yahoo.com

2 OBJECTIVE n To analyze Indian Software Industry n To Compare our software export industry with some of our competitors n To identify key issues of Govts IT Policy

3 STRUCTURE OF INDIAN SOFTWARE INDUSTRY

4 SOFTWARE COMPANIES TURNKEY COMPANIES WIPROINFOSYSSATYAM PRODUCT DEVELOPMENT SUBEXRAMCO ADITI TALISMA INFOSYS USHA COMMUNICATIONS LTD CONSULTING & TRAINING HUGHES SOFTWARE TCSANDERSONNIIT PRODUCT SERVICES ADITITCSINFOSYS

5 TOP 20 SOFTWARE COMPANIES IN INDIA

6 TOP TWENTY EXPORTERS NASSCOM'S RANKINGS AS PER EXPORT REVENUES (2000-2001)

7 DISTRIBUTION OF EXPORTS

8 DOMESTIC IT SOFTWARE AND SERVICES MARKET (1995-2000)

9 INDIAN SOFTWARE INDUSTRY AS A PERCENTAGE OF INDIA'S GDP

10 DEVELOPMENT FOCUS SOFTWARE EXPORTS

11 CHARACTERISTICS OF INDIAN SOFTWARE EXPORTS n Export of Services and not packages –Lack of familiarity with the markets –Indian domestic market is a poor guide –High costs of sales and marketing –Lack of software brand names –Only 1-5% of packages succeed –Needs high risk long term investment

12 CHARACTERISTICS OF INDIAN SOFTWARE EXPORTS n US Domination in Software exports market –Might present a limitation to future growth because US share of the world market is slowly declining. –Growth in other markets, such as those of Asia and Europe. n Uneven Skill Divisions: Dominance of Programming –Majority of software contracts have less-skilled coding and testing work.

13 CHARACTERISTICS OF INDIAN SOFTWARE EXPORTS n Uneven Market Share: Economic Concentration of Production –Out of 400 firms, top 20 export 70% –Reputation: An Entry Barrier n Locational Concentration of Production –Availability of labor –Quality of life

14 STUDY OF OTHER MAJOR SOFTWARE PRODUCING COUNTRIES IRELANDAUSTRALIA

15 REVENUES OF IRISH SOFTWARE INDUSTRY

16 IRELAND n Strong export bias –Small domestic market –80% of all indigenous developers are active in overseas markets.

17 n Strong product bias –40% of all Packaged Software sold in Europe is produced in Ireland. –65% of the companies are developing and/or marketing software products.

18 REASONS FOR SUCCESS n People with skills –Young (40%) and Well Educated –Low employee turnover –Cooperation between industry and academia n Focus for Investment –Investments in training, research and development –Policy incentives n Technology in Place –Advanced digital telecommunications

19 AUSTRALIA n Exports worth $2.1 billion n Growth Rate 10% n IBM Australia was the highest ranked IT&T exporter ($601m)

20 SOFTWARE INDUSTRY GOVERNMENT POLICIES AND THEIR EVOLUTION OVER TIME

21 BRIEF OVERVIEW n Before 1984: State Planned Development n 1984 - 1991: Guided and guarded liberalization n 1991 - 1998: State getting out of the way n Post 1998: Complete Liberalization

22 A BRIEF HISTORY IN TIME – SOFTWARE POLICY PRIOR TO 1984 n First mention in 5-Y Plans in late 1960s & early 1970s. n Electronics Commission and the DoE instituted in 1970 –Allowed the import of computers on condition to export software above 200% of import over a period of 5 years. –In 1976, NRIs allowed to invest for export commitment of 100% of imports over a period of 5 years. In retrospect, one might consider that the high export requirements for imported computers might have contributed towards the "export of human resources" as a strategy to expand software exports.

23 1984-1990: GUIDED AND GUARDED LIBERALISATION n Software Policy of 1986 aimed to –promote software exports –promote the integrated development of software –sirnplify the existing procedures –promote the use of computers for decision making –Better access to telecommunications services –Assistance in the training and education of computer software personnel n Measures Undertaken –Liberalisation of access to imported inputs –De-licensing production capacity for computers/electronics –Allowing foreign firms to operate 100% EoUs n Agencies formed/ Programs undertaken –S/W Dev. Agency in the DoE –Software Technology Parks –Electronics & Computer S/w Export Promotion Council –Software export seminars

24 INDUSTRY EVOLUTION OF SOFTWARE POLICY IN THE LAST DECADE n The appropriateness of the policy's objectives. –The goal of rapidly expanding exports of software and computer services via deputation? –Reducing the % of exports in deputation contracts from the 80- 85% in 1990 to around 50% by 1995. n The importance of altering the composition of software exports –Low portion of value-added market with Indian firms –steps identified: n developing long term relationships with clients and foreign affiliates n developing embedded software for hardware manufacturers n setting up corporate service centres in India, and n constructing alliances among Indian software services

25 INDUSTRY EVOLUTION OF SOFTWARE POLICY IN THE LAST DECADE n The nature of liberalisation, government support or other policy changes required –necessity of obtaining import licenses for equipment, –continuing tariffs on imported software under the open general license scheme, –high export performance commitments to offset the foreign exchange cost of foreign equipment, and –improved availability, quality, and price of inputs obtained within India. –Development of national and international protection for intelligence for intellectual property rights

26 ECONOMIC LIBERALISATION - 1991 ONWARDS n New measures introduced were: –Virtual abolition of industrial licensing, –The dilution of MRTP Act w.r.t. expansions/mergers –Relaxation of FERA on foreign companies holding a majority stake in certain Indian operations –the abolition of import licenses –the lowering of customs duties. n Software exports were also aided by –Decline in disputes over intellectual property rights –Lessening of complaints from the international s/w industry –Lessening of export of certain technologies after Cold War ended

27 PMS IT TASK FORCE - THE NEW IT POLICY OF THE GOVERNMENT

28 MAIN FEATURES n INFO INFRASTRUCTURE DRIVE –No license fees for ISP for first 5 years –Promotion of Hi-Tech Habitats –Export shipment time for air cargo will be reduced to less than 24 hours n FINANCIAL SOPS –IT Software shall be entitled for zero customs duty and zero excise duty –The definition of software and export turnover changed so as to include IT services exports to get Tax Exemption under Section 80 HHE of the IT Act

29 MAIN FEATURES n FINANCIAL SOPS (Contd... ) –Banks to give 25 percent of the contract value for 18 months n with the first six months as term loan (without collateral's) n From the 7th month onwards annualised Cash Flow Statements shall be accepted instead of collateral's. –IT software and services industry shall be treated as a Priority Sector by banks for the next five years –Working Capital amount increased from 400 Crores to 1200 Crores –Banks shall be allowed to participate in Venture Capital funds –Banks shall setup JVs for setting up of at least four different venture capital of a corpus not less than Rs. 50 crores

30 MAIN FEATURES n GLOBAL THRUST –A blanket approval for acquisition of software/IT companies across the board for software exporters –Combating Visa regulations of the recipient countries through a planned diplomatic strategy –Enabling Indian Marketing companies to set up wholesale companies abroad. –'India Pavilions' shall be set up in several major IT exhibitions –'Mega Web sites' shall be created on INTERNET for promoting marketing

31 MAIN FEATURES n MANPOWER ISSUES –The seven national level institutions (IITs, IISc.) shall be encouraged to triple their output of students in IT –IT Course Module shall be made a compulsory component of all Degree Courses –The setting up of Indian Institutes of Information Technology (IIIT) shall be implemented with urgency –Promote pairing of our Universities with centres of excellence in IT in developed countries –Specific courses in association with the Software Industry and top management institutes to provide Project Management skills and Software Marketing

32 IMPACTS OF SLOWDOWN DOWNSIZING DOWNSIZING COMPANIES FORCED TO REVISE RATES COMPANIES FORCED TO REVISE RATES DOWNWARDS DOWNWARDS COMPANIES LOOKING FOR MERGERS COMPANIES LOOKING FOR MERGERS VENTURE CAPITALISTS ARE WARY OF VENTURE CAPITALISTS ARE WARY OF INVESTING INVESTING SMALLER FIRMS HIT HARDER THAN SMALLER FIRMS HIT HARDER THAN LARGER FIRMS LARGER FIRMS PURSUING EQUITY DEALS WITH TOP PURSUING EQUITY DEALS WITH TOP CUSTOMERS CUSTOMERS

33 THE ROAD AHEAD... n IT exports will move to the paradigm of global manufacturing n Conditions have been created for the much talked about Value Chain jump of Software industry n Working Capital problems for software exports will be eased n Venture capital funding will unleash the entrepreneurial talent n Quality Manpower shortage to ease out n Development of Management Skills

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