Tcs+iit industry analysis

  • View
    10.482

  • Download
    0

Embed Size (px)

DESCRIPTION

IT industry Analysis

Text of Tcs+iit industry analysis

IT Industry & TCS Strategic Analysis

IT Industry & TCS Strategic Analysis Business Strategy This report is submitted as part of industry analysis project of the course Business Strategy, under the guidance of Prof. Rushi Anandan, in Post Graduate Programme In Management at SPJIMR, Mumbai

Group 7: Sameer | Sohail | Sankar | Himanshu | Arun V M PGPM508

7/10/2009

PGPM508-Group 07 Page 2

Table of Contents INDIAN IT INDUSTRY OVERVIEW .................................................................................................. 3

INTRODUCTION ................................................................................................................ 3

EXTERNAL ANALYSIS ......................................................................................................... 4

PORTERS FIVE FORCES MODEL (INDIAN IT INDUSTRY) ........................................................... 7

SWOT ANALYSIS - IT & ITES INDUSTRY .............................................................................. 8

TATA CONSULTANCY SERVICES .................................................................................................... 9

INTRODUCTION ................................................................................................................ 9

SWOT ANALYSIS ........................................................................................................... 10

TCS RESOURCES & CAPABILITIES ..................................................................................... 11

TCS STRATEGY ANALYSIS ............................................................................................... 12

RECOMMENDATIONS .............................................................................................................. 19

REFERENCES .......................................................................................................................... 21

Disclaimer: This report should be treated strictly for academic purpose and should not be used elsewhere. Users of this report are required to take permission from authors before

reproducing or publishing this material anywhere else.

PGPM508-Group 07 Page 3

IINNDDIIAANN IITT IINNDDUUSSTTRRYY OOVVEERRVVIIEEWW

Introduction

In an increasingly flat world, significant complexity and uncertainty is getting attached to the unprecedented economic crisis. The Indian economy has also been impacted by the recessionary trends, with a slowdown in GDP growth to seven per cent. The focus and exponential growth in the domestic market has partially offset this fall and insulated the country, resulting in net overall momentum. The IT-ITeS industry in India has today become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a young and resilient India. During the year, the sector maintained its double digit growth rate and was a net hirer. This growth has been fuelled by increasing diversification in the geographic base and industry verticals, and adaptation in the service offerings portfolio. While the effects of the economic crisis are expected to linger in the near term future, the Indian IT-BPO industry has displayed resilience and tenacity in countering the unpredictable conditions and reiterating the viability of Indias fundamental value proposition. Consequently, India has retained its leadership position in the global sourcing market. India is now the leading country in providing IT Enabled Services in the world. According to a recent study, Indian IT & ITES is expected to grow at 10.8% in 2009, the lowest in the last five years, due to the current global meltdown. But in next four years, it would grow at 13.9% to touch revenue of $110 billion. NASCOM, the premier institute which manages all the IT and ITES companies in India, estimated that the revenue of the IT Enabled Services will cross the revenues of IT industry by 2010. The export revenue generated from ITES is about US$ 47.5 billion and has a projection of more than US$ 86 billion by 2012. (CAGR 20.7%)

Source: NASSCOM McKinsey Research India holds a dominant share of the global offshore IT-ITES sector (65% of the global market in offshore IT and 46% of the ITES market). Yet, at US$ 31.3 bn in FY07, Indian IT-ITES exports accounted for less than 3% of the global spend on IT-ITES. This clearly indicates significant headroom for growth. If India maintains its current share of the global offshore IT-ITES market, IT-ITES exports from India will exceed US$ 60 bn by FY10 and US$ 86 bn by FY12. Further, growing at current trends, Indian IT-ITES exports are projected to reach nearly US$ 330 bn by FY20 (nearly 14% of the projected worldwide spend). Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, employing over 1.76 million employees. But the Indian IT companies will have to move up in the value chain and concentrate more on high value added services.

0

100

200

300

400

FY06 FY08 FY09 FY10 FY12 FY20

23.6 37.6 47.5 6086.6

328.9

IT-ITeS Exports - USD bn

PGPM508-Group 07 Page 4

Why Outsourcing? Outsourcing system allows companies to contract for services that are not within the scope of their expertise, so that they can focus their time, money and energy on their core competencies instead of wasting valuable resources trying to gain Understanding of areas that are somebody else's expertise". Challenges While the industry has significant headroom for growth, competition is increasing, with a number of countries creating enabling business environments aimed at replicating Indias success in the IT-BPO industry. Hence, concentrated efforts are required by all stakeholders to address the current challenges, to ensure that India realizes its potential, and maintains its leadership position.

External Analysis

Current position of IT/ITeS sector in India

PGPM508-Group 07 Page 5

Environmental Scanning

Figure: Financial Attractiveness of Top 5 Global service locations Figure: Number of IT graduates in India

External Environment - PESTLE Analysis

PGPM508-Group 07 Page 6

National Revenues: IT & ITES Industry in India

IT SEZ requirement: IT companies can set up SEZ with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. Positive

Contract / Bond requirements: Huge debates surrounding the bonds under which the employees are required to work, which is not legally required. Negative

IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies to operate esp. related to security of data in transmission and storage, etc. Positive

Companies operating in Software Technology Park (STPI) scheme will continue to get tax-benefit till 2010. Mildly Positive

Legal

Energy Efficient processes and equipments: Companies are focusing on reducing the carbon footprints, energy utilization, water consumption, etc. Positive

Environment

PGPM508-Group 07 Page 7

Porters Five Forces Model (Indian IT Industry)

Low

Very High

Shift from High to Low

Medium

PGPM508-Group 07 Page 8

Market Share: Sources of Revenue:

SWOT Analysis - IT & ITES Industry

Considering industry and any IT firm in general

Strength Weaknesses

Cost advantage most financially attractive country in a study by A T Kearney on global IT destinations Breadth of service offering end to end solutions including high end services like IT consultancy and KPO Ease of Scalability more than half of Indias population is less than 25 years old. English speaking IT ITES professionals growing at a good pace Quality and Maturity of process many players have quality standards such as CMM to differentiate from other low cost advantage countries Global and 24/7 Delivery capability excellent internet backbone and telecommunications facilities enabling companies to develop 24/7 delivery capabilities from India itself

Excessive dependence on USA for revenues US Companies are cutting down IT budget hence revenues to be hit hard of Indian IT firms Excessive dependence on BFSI sector for revenues Banking sector is facing a crisis globally and is going to spend less on IT High rates of attrition Although slowdown in global economy has lowered attrition rate but the industry still faces high attrition rates as compared to other sectors Decreasing competitive advantage rising salary expenses is taking away the cost advantage enjoyed by India.

Opportunities Threats

Greater scope for product innovation Increased focus on high end work like consulting and KPO Domestic demand for IT services is to grow at 20% Greater scope to service domains other than BFSI such as Transportation, Infrastructure, etc. Satyam fiasco Likely to have positive impact on business considering corporate governance, possibility of shifting of business, getting higher incremental business from overlapped clients, and winning new business from new clients

Global economic slowdown may continue for several years hence low IT spending globally US Govt. against outsourcing Shrinking margins due to rising wage inflation Rupee-dollar movement affects revenue and hence margins Increased competition from foreign firms like Accenture, IBM etc. Increased competition from low-wage countries like China, Indonesia etc.

PGPM508-Group 07 Page 9

T