Indian IT sector success linked to small firms, start ups booming

Nasscom survey reveals shift in growth and a slight fall, but the sector is one of the highest employer in the country

GN Bureau | February 11, 2015


#Nasscom survey   #IT sector India   #Nasscom Strategic Review 2015   #nation news   #india news  


There has been sharp shift in information technology sector with segments like engineering, research and development, and digital shining bright.

Nasscom Strategic Review of 2015 also says that the country saw 800 new technology start-ups setting shop so far this fiscal and is poised to house the second biggest eco-system for them after the US in the next two years on account of the ongoing high growth rates.

The review said engineering, research and product development revenues were $20 billion. Business process management was at $26 billion and digital revenue, which represents social, mobility, analytics and cloud computing, grew from 4 per cent of the industry’s export revenues to 12-14 per cent in 2014-15.

Nasscom said the industry added 230,000 jobs in 2014-15, growing 7 per cent against a revenue growth of 13 per cent. The industry’s employee base crossed 3.5 million and created indirect employment for over 10 million people.

Revenue per employee grew 1.2 times between 2008-09 and 2013-14. Nasscin chief R Chandrashekar pointed out employment was not growing in line with revenue and this was expected to continue. He added companies were becoming more efficient and disconnecting the headcount and revenue link.

The number of patents filed has grown 10 times in the last five years. From just 150 in 2008-09, it was more than 1,500 in 2013-14.

Meanwhile, Chandrashekhar said “we expect that within the next couple of years, we will have the second biggest start-up ecosystem in the world."

He said the rate at which the start-ups are growing is much faster than Britain and Israel, which are ranked between India and worldwide leader US at present.

In 2014, the country witnessed 800 new companies starting up, taking the total number of start-ups to 3,100, Nasscom said.

Chandrashekhar said there is a difference between the scene here and the one outside, and pointed out that domestic companies address both opportunities within the country as well as internationally.

Nasscom said such companies have received over $2.3 billion in funding since 2010, while over 70 private equity and venture capital funds remain active in the segment.

It added that apart from this, there were over 62 angels active in 2014. Apart from that, there are over 80 incubators and start-up accelerators operating in the country at present, Nasscom said.

Among the areas in which the start-ups are engaged includes wearable technologies, big data and analytics, augmented reality, cloud computing, hardware, education, advertising and healthcare, Nasscom said.

Chandrashekhar said the country will be having a large number of successful small companies, as against the global experience of having small number of mega successful companies who command huge valuations.

The review also said currency volatility, macroeconomic headwinds and changing technology are likely to pull down growth of Indian information technology and business process management services exports to 12-14 per cent in 2015-16.

This is lower than its growth forecast of 13-15 per cent for 2014-15. The export revenue grew 12.3 per cent on a reported currency basis in 2014-15 and 13.1 per cent on a constant currency basis.

The revenues, including hardware and e-commerce, are expected to be $146 billion in 2014-15. Exports have touched $98.5 billion for the period already. But Nasscom said the sector was on track to reach $300-billion revenue by 2020.

Nasscom said global information technology and business process management spending had grown 4.6 per cent and sourcing nine-10 per cent in 2014. The 12 to 14 per cent export growth forecast is similar to last few years’. “We are seeing continuity. But this year’s numbers are also an aggregation of all the segments, some growing fast,” said Chandrashekhar.

In FY 2016, Nasscom expects  IT-IBM industry  will add $20 billion to existing industry  revenues  of $146 billion. Domestic revenues including ecommerce for the same period are expected to grow at 15-17% and expected to reach $ 55-57 billion during the year. The total Indian IT and BPM industry revenues (including e-commerce and hardware) is expected to be somewhere in the range of $165-169 billion in FY16.

The Indian IT-BPM sector continues to be one of the largest employers in the country directly employing nearly 3.5 million professionals, adding over 2,30,000 employees.


Highlights

 

  • Industry revenues (including ecommerce) estimated to grow by 13% in FY2015, to aggregate $146 Billion.
  • Industry a net hirer, adding ~2,30,000 employees in FY15; focus on skill over scale, embedded non-linearity - 7% employee growth corresponding to 13% revenue growth
  • Digital Disruptions creating new opportunities- Digital accounting for 12-14% of industry revenues
  • Product engineering solutions fastest growing export revenue segment at 13.2%
  • Industry building competencies through acquisitions, collaboration and partnerships- industry M&A in excess of USD 5.3 Billion in FY2015
  • Rapid growing product and startup ecosystem redefining innovation- 3100+ startups, 4th largest startup hub in the world

 

  • Government investments in technology of USD 26 Billion in FY2015 driving domestic market

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