IT Services Annual review July 2009 : Market Research Report

IT Services Annual review July 2009

Published by: CRISIL Ltd.

Published: Jul. 31, 2009 - 176 Pages

Sections
Near-term prospects adversely impacted by slowdown
Executive summary: 1.0 Exports growth outlook; IT services exports growth plunged to 12 per cent in 2008-09; Indian IT services exports projected to remain flat in 2009-10; Global IT services spend to decline by 2.4 per cent in 2009-10; Despite it all, long-term prospects look positive; IMS expected to grow at a faster pace; Discerning trends in the IT services industry; 2.0 Profitability analysis; Wage inflation and its impact on operating margins; Cost control measures adopted by IT companies; Profitability of the Tier-I and mid-sized players set to be advesely impacted; 3.0 Enterprise application service - growth outlook; Enterprise application service spectrum; Enterprise application service - Value chain; EAS - current scenario and trends; Indian EAS revenues projected to grow at 16 per cent CAGR; Factors affecting the offshorability of EAS; 4.0 Performance review; Utilisation levels drop in 2008-09; Client profile and thus revenue per client impacted; Slowdown in hiring by Indian players; Contract trends - smaller contract activity prevalent
Boxes: 1.0 Exports growth outlook; 01 Indian IT services export demand - approach and research methodology; 3.0 Enterprise application service - growth outlook; 01 Methodology - EAS exports forecast
Charts: 1.0 Exports growth outlook; 01 Methodology for forecast of IT services exports - 2009; 3.0 Enterprise application service - growth outlook; 01 EAS spectrum; 02 EAS value chain
Figures: 1.0 Exports growth outlook; 01 Indian IT services exports: 2003-04 to 2009-10; 02 Export growth rate; 03 Revenue share by services; 04 Offshore billing rates; 05 Fixed price contract movements; 06 Forex movements; 07 US corporate profitability (PBT); 2.0 Profitability analysis; 01 Impact of wage inflation on operating margins and average revenue per employee; 02 Utilisation levels; 03 Employee additions; 3.0 Enterprise application service - growth outlook; 01 Indian EAS revenues; 02 EAS - Vertical wise share 2008-09; 03 SAPs licence revenues - degrowing y-o-y; 04 Global EAS revenues; 05 Indian EAS export revenues (Organic growth); 4.0 Performance review; 01 Industry Utilisation levels; 02 Client profile of large Indian players; 03 Revenue per active client for large Indian players; 04 Indian IT industry exports - Key geographies; 05 Indian IT Industry exports - Key verticals; 06 Revenue growth and employee additions; 07 Employee additions by large Indian players; 08 Industrywide contracts with TCV > $25 million
Table: 1.0 Exports growth outlook; 01 Revenues by service-lines
Sections: 1.0 Global IT Industry; Overview; Hardware; Software product industry; Global IT services industry; 2.0 Indian IT Industry; Overview; Key Trends; Risks faced by an IT company; 3.0 Evolution of the Indian IT Industry; Phase I (1985-95); Phase II (1995-00); Phase III (2001 onwards); 4.0 Domestic market; Overview; Domestic hardware market; Domestic IT services market; 5.0 Export market; Introduction; Exports by key vertical markets; Exports by service-lines; 6.0 Policy framework; Information Technology Act; Policies relating to inbound and outbound investments; Extension of incentives for units located in a STP/EOU/SEZ for a year; Other policy-related aspects; State level incentives and subsidies; Customs/excise duty for hardware and software products; Reservation in private sector
Charts: 1.0 Global IT Industry; 01 IT services - Key business drivers; 2.0 Indian IT Industry; 01 Overview of risks faced by IT companies; 5.0 Export market; 01 Composition of exports; Continued…; State of the industry
Figures: 1.0 Global IT Industry; 01 Worldwide spend on IT and related business services; 02 Spending on equipment and software in the US (quarterly); 03 Worldwide hardware spending; 04 Regionwise hardware spend; 05 Movement of 1 American dollar vs 1 unit of base currency in 2008; 06 Percentage change in R&D and SG&A expenses of major players; 07 Worldwide spending on packaged software (2006-2011); 08 World-wide IT services spending by foundation market; 2.0 Indian IT Industry; 01 IT Services — Revenues of top three Indian players; 02 IT Services — Manmonths billed of large Indian players; 03 Offshore billing rates; 04 Utilisation rates; 05 IT Services — Cost structure and operating margins of large Indian players; 06 IT Services — Operating margins of large Indian players; 4.0 Domestic market; 01 Dometic IT-ITeS market; 02 Domestic IT-ITeS market - 2008-09 (estimated); 03 Domestic IT industry - Key industry vertical; 04 Domestic IT services market; 05 Domestic software products market; 06 Domestic software products industry - Key segments - 2006; 07 Domestic ITeS market revenues; 08 Domesties ITeS market - Service line-wise; 5.0 Export market; 01 India’s exports by geography; 02 India's exports to the Americas; 03 India’s exports to Europe; 04 Key verticals for India IT-ITeS industry in 2008; 05 Worldwide financial services IT spend; 06 Indian IT services exports - Key segments; 07 Indian IT services export revenues
Tables: 1.0 Global IT Industry; 01 Worldwide IT spending forecasts; 02 Hardware players - Revenue growth; 03 Growth in worldwide GDP; 04 % Change in revenues of major players in the software industry; 05 SG & A costs of major players; 06 R&D costs of major players; 07 Region-wise piracy rates (per cent); 08 Piracy rates in BRIC countries (per cent); 09 Global IT service-lines; 10 Revenue of major players; 2.0 Indian IT Industry; 01 Indian IT industry revenues; 02 IT services — Financials of large and mid-size Indian players (2003-04 to 2007-08); 03 IT Services — Revenues of large Indian players (Rs billion); 3.0 Evolution of the Indian IT Industry; 01 SEI quality assessment; 4.0 Domestic market; 01 Hardware sales in units; 02 Hardware sales in value; 5.0 Export market; 01 Economies by GDP and their IT spends; 02 Percentage of revenues from financial services; 03 Percentage of revenues from telecom; 04 Percentage of revenues from manufacturing; 05 Percentage of revenues from retail; 06 Percentage of revenues from utilities; 07 Percentage of revenues from healthcare; 08 Indian IT services exports - Key service categories; 6.0 Policy framework; 01 Incentives offered to units locates in STP/EOU/SEZ; 02 IT: Hardware and software tariffs
Sections: 1.0 Domestic players; 2.0 International players
Table: 1.0 Domestic players; 01 Hexaware Technologies; 02 HCL Technologies; 03 Infosys Technologies Ltd; 04 Mastek Ltd; 05 Patni Computers; 06 Polaris Software Laboratories; 07 Tata Consultancy Services; 08 Tech Mahindra Ltd; 09 Wipro Ltd; 2.0 International players; 10 Accenture Ltd; 11 Affiliated Computer Services; 12 Atos Origin; 13 CA, Inc; 14 Capgemini Ernst & Young; 15 CGI Group; 16 Computacenter Plc; 17 Computer Science Corporation; 18 Dell Inc; 19 DST Systems; 20 Hewlett-Packard Co; 21 IBM; 22 Logica; 23 Microsoft; 24 Oracle Corporation; 25 Perot Systems; 26 SAP AG; 27 Sun MicroSystems Inc; 28 Unisys Ltd; Industry statistics

Abstract

Export growth rate to remain flat in 2009-10 After registering healthy growth for several years, the estimated export growth rate for the IT services sector moderated to around 12 per cent y-o-y in 2008-09 and is expected to further dip in 2009-10. Indian IT service players continue to face the brunt of a slowdown in the key markets of US and UK and the key vertical of banking, financial services and insurance (BFSI). Clients across the board are cutting down IT budgets and seeking concessions on billing rates from their vendors. This does not augur well for Indian IT services players in the near term. CRISIL Research expects the decline in global IT spends, weakening demand, delay in decision making and weak sentiments due to the protectionist stand taken by developed countries to further pull down the IT services export growth rate in the band of 2 to -2 per cent in 2009-10.

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IT Services Annual review July 2009

Table of Contents

Abstract