Traditional Markets

SEGMENTS

The size of the revenue streams are regarded as the best criteria to asses the success of revenue models. Revenue models themselves address the market segments they expect to service. Revenue stream classification is therefore a good surrogate to identify market segments that generate them.

Most IT majors report revenue streams in more ways than one. Typically the client’s industry class or vertical domain identifies the market segment by industry. The service offering identifies the market segment by type of service provided. The revenue streams are also classified by geographies. Technology is also used to segment revenue streams.

Traditionally the Indian IT industry has provided on-site manpower requirements that evolved into offshore development centres as the gap of cost between the two narrowed. Most of the business has come from the USA, Europe and rest of the world. Manufacturing, banking, finance and insurance, telecom, and retail have been the major industry classes’ serviced by the Indian IT industry.

The Indian IT industry has provided development, maintenance, Y2K, and re-engineering services to these clients. The Indian IT industry has been supporting their clients on distributed systems, mainframes, internet, and proprietary telecom systems.

SIZE

The size of the Indian IT market has grown through its focus on geographic segments servicing the USA, Europe and the rest of the world. Offshore development centres servicing more of the same industry classes has driven the growth.

Historical evidence suggests radical shifts in technologies and offerings had to happen to enable the Indian IT industry to its phenomenal growth rates. These technologies, developed and promoted by the geographical segments IT industry serviced, have always created significant costs and posed high risks to the Indian IT industry.

A consequence of centring the industry around technologies from other geographical segments has been the gaps in skills between those needed and those provided for by the IT manpower training industry.

STRUCTURE

The Indian IT industry’s size is heavily skewed to the small. Although they successfully emulate the revenue models of their larger counterparts, these smaller units have been unsuccessful in emulating their growth strategies.

Less than 4 percent of the Indian IT industry makes for the bulk of its revenues. Together the traditional IT markets contribute to less than 2 percent of the Gross Domestic Product of India. Of this less than 0.5 percent contribution is from servicing traditional domestic IT markets and 1.5 percent from traditional exports.

NEW SEGMENTS

Since the mid ‘90’s the units providing business support enabled by IT were included in the IT industry as IT enabled services (ITES).

The ITES in India has been offering to its overseas clients customer interaction services (including call centres), back office operations/revenue accounting/ data entry/data conversion (including finance and accounting/HR services, transcription/ translation services), content development, and other services including research.

The ITES has grown through American companies outsourcing their routine operations to cheaper service providers. Most ITES is as yet at the lower end of the business value chain as indicated by table 2.

STRENGTHS

The Indian IT industry’s biggest strength is its large and mobilised manpower produced by an organised technology education industry.

WEAKNESS

Indian IT industry has been developing manpower based on technology skills that has short lifetimes. This places a high cost to have a rapid and continuous turnover or upgradation of human skills deployed in the industry.

Indian IT industry is centred on technology that is not indigenous. This means that its human resource and technology industry is extremely vulnerable to the changes in technologies and standards as well as the costs to access these technologies or standards. Access, costs, and experience with technology limit the rapid deployment of new technology solutions and leave the industry to make offerings that are at the lower end of the technology spectrum.

The Indian IT industry is focused on industry classes that have had traditional IT spending. Many of these have questioned or begun to question the return on investment (ROI) on IT spending. This threatens to slow down the growth of the Indian IT industry.

The Indian IT industry is also very service offering focused. It has focused on development, maintenance, Y2K and to a very small extent re-engineering. These service offerings are firstly at the low end of the value chain. Secondly most of the service offerings in these categories are time-bound or of a fixed-volume. The offerings are therefore very vulnerable to changes with time.

OPPORTUNITY

The Indian IT industry has an enormous opportunity to discover needs based IT markets. Focusing on the information needs of the Indian society, the Indian IT industry can leverage itself and boost the entire Indian economy in the process.

The Open Source and Free Software movements offer enormous opportunity to the Indian IT industry to develop address the societal needs. These movements not being centred on revenues for a product have greater potential to address and create research, development, products and services around the needs of society.

THREATS

The Indian IT industry is largely servicing markets outside India. In a post September 11 scenario the global economies are even less resilient than before. Not only are similar scenarios likely to disrupt new contracts but also disrupt operations.

Even without terrorism or wars the bulk of the industry depends on the US and Europe. socio-economic or political crisis in these locations makes the entire Indian IT industry extremely vulnerable.

The comfort of established revenue models place a huge threat in the ability of the Indian IT industry to chart new grounds, take new opportunities and undertake good business risks in building new revenue models.

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