IDC Report 2006 FNL on Domestic Services Market Opportunities

NASSCOM-IDC Study onDomeDomestic Services Market Opportunitystic Services Market Opportunity

NASSCOM-IDC Study onDomestic Services Market Opportunity

2 NASSCOM -- IDC Study on the Domestic Services Market Opportunity

Copyright ©2006

NASSCOMTM

NATIONAL ASSOCIATION OF SOFTWARE AND SERVICE COMPANIES

International Youth Centre,Teen Murti Marg,Chanakyapuri

New Delhi -110 021 India

Phone: 91-11-23010199 • Fax: 91-11-23015452

E-mail: [email protected]

Website: www.nasscom.in

First Print : August 2006

Published by

NASSCOM, New Delhi

NASSCOM is India’s National Association of Software and Service Companies, the

premier trade body and the chamber of commerce for the IT software and services

industry in India. NASSCOM is a truly global trade body with around 1050

members, of which over 200 are global companies from the US, UK, EU, Japan,

China and other countries.

Disclaimer

The information contained herein has been obtained from sources believed to be

reliable. NASSCOM disclaims all warranties as to the accuracy, completeness or

adequacy of such information. NASSCOM shall have no liability for errors,

omissions or inadequacies in the information contained herein or for

interpretations thereof.

The material in this publication is copyrighted. No part of this can be reproduced

either on paper or electronic media without permission in writing from NASSCOM.

Request for permission to reproduce any part of the report may be sent to

NASSCOM.

3NASSCOM -- IDC Study on the Domestic Services Market Opportunity

The success achieved by the Indian IT-ITES sector over the past decade has

established India as an indispensable part of the new world IT order, not

only for global sourcing of services but increasingly also for innovation and new

product development. However, much of this success is attributed to the

meteoric growth in exports - and that has overshadowed the latent

opportunities unlocked and growth observed in the domestic market over the

past few years.

This study undertaken by IDC India outlines the domestic services market

opportunity for IT-ITES in India and provides a snapshot of the current trends

observed, and the future outlook for the market. Additionally, this study has

also tried to analyze the views of user organizations - to understand the

perceived gaps between the services offered by providers and those expected

by the users.

The statistics and analyses presented in this report have not only brought out

some valuable insights, but have also helped identify and confirm a few key

themes on which we have to focus our efforts. This will ensure that the

domestic segment remains both a beneficiary of as well as a contributor to

India's continued IT-ITES dominance.

Kiran Karnik

President

NASSCOM

FOREWORD


Like many earlier initiatives that helped to spearhead the growth of the Indian IT Services

and ITES-BPO industries, NASSCOM, the premier association of Indian IT Services and

ITES-BPO companies approached IDC India with a fresh brief. The challenge was to design

and conduct a study to gauge the current size and future potential and direction of the

domestic IT Services and ITES-BPO markets.

The findings of the study more than justified the excitement of the IDC India research team,

when viewed in the context of a whole new growth opportunity emerging in the domestic

space for the Indian IT Services and ITES-BPO players.

The key learning from this study has undoubtedly been unearthing the current scale and the

future scope of the domestic IT Services and the domestic ITES-BPO sectors, slated to touch

INR 15,604 crores and INR 6,608 crores, respectively by end of 2006.

However, the Indian domestic IT Services market or the share of spending which goes to

make up the revenues of India's domestic IT service providers, is estimated to be only 45%

of the total IT Services spending of Indian businesses. The total spending on IT Services by

businesses consists of payouts to a service provider plus salary and training costs of in-

house IT staff and the associated overheads.

For IT service providers this represents a great challenge and as well as an opportunity to

develop and showcase their skills to domestic customers, and remove the commonly held

perception that IT Services vendors have a lack of focus on domestic markets or that there

is little return from outsourcing IT operations.

By eradicating the gap between real versus perceived value of IT outsourcing, vendors can

play a critical role in helping the CIO showcase IT investments as a tool enabling strategic

business advantage. The IT Services market in the country can thus gradually evolve from

low-value, long-term service engagements through high-value, one-time service

engagements on to high-value, long-term service engagements.

Another revelation from the current study was about the ITES-BPO space, which has been

historically associated with exports. There is huge opportunity waiting to be tapped, as

globalisation demands higher efficiencies and competitiveness from Indian businesses.

Unlike the IT Services exports market where price arbitrage plays an important role, the

domestic market will be driven more by access to specialist skills and helping businesses

free up their scarce resources for focusing on core business activities.

IT Services and ITES-BPO players urgently need to work together with customers,

government and other stakeholders to remove some of the perceived inhibitors and help

develop a conducive environment for healthy, long-term growth of the domestic industry.

Kapil Dev Singh

Country Manager

IDC (India) Ltd.

PREFACE


Foreword

Preface

Snapshot of IT-ITES Spending Trends in India 7

Spotlight on the Domestic IT Services Market Opportunity 11

Market Landscape and Opportunity Assessment

Key Service Lines

Key Vertical Markets

Vendor Landscape

Key Findings from End-user and Service Provider Surveys

Spotlight on the Domestic ITES-BPO Market Opportunity 31

Market Landscape and Opportunity Assessment

Key Service Lines

Key Vertical Markets

Vendor Landscape

Key Findings from End-user and Service Provider Surveys

Appendix 47

CONTENTSCONTENTS


With an estimated growth rate of over 20 percent in 2005, India has emerged

as one of the fastest growing IT markets in the Asia Pacific region.

Increasing adoption against a backdrop of low penetration levels and a rapidly

growing economy, is expected to sustain India's pole position as a key market with

domestic IT (including hardware, software and services) spends forecast to grow at

a CAGR of over 17 percent over 2005-2010.

While spending on hardware is projected to remain strong, domestic IT demand is

witnessing a gradual transformation from being predominantly hardware driven


The India Domestic IT Market, 5-Year Forecast

Software

Services

Others

Growth

2004 2005 2006 2007 2008 2009 2010

Hardware

23% 24% 23%

17%15%

14% 14%

100,000

Mar

ketS

ize

(INR

Cror

e)

50,000

30%

0%

5%

10%

15%

20%

25%

CAGR17%

21%

17%

52%

8%

YoYM

arketGrow

thR

ate(%

)

Note: The CAGR figures in the chart are for the period 2005-2010

India has emerged as one of

the fastest growing IT markets

in the Asia Pacific region

Snapshot of IT-ITES Spending Trends in India

towards a solutions oriented approach - resulting in a growing emphasis

on services.

Hardware accounts for nearly 54 percent of the total IT market in 2005 and is

forecast to grow at a healthy 17 percent in the next 5 years (2005-2010). The

hardware market growth will be sustained by the continuing investments in IT

infrastructure and would result in increased penetration of IT.

The domestic software market is expected to grow at 21 percent and the domestic

IT services market at 17 percent (CAGR 2005-2010). The 'others' segment is

constituted by consumables accessories and individual IT education, and forms a

small part of the overall IT market.

The liberalization of Indian economic policy, de-regulation of key sectors and

progressive moves towards further integrating India with the global economy have

been key catalysts of increased IT adoption in the country. This is best reflected in

the fact that most indigenous players in telecom and banking, two key sectors with

significant multinational corporation (MNC) participation, have significantly

upgraded their levels of IT adoption to offer best-in-class services comparable to

those offered by the global competition and these two sectors together account for

approximately 35-40 percent of the domestic spend on IT services.

Similar competitive pressures in other more recently deregulated service sectors

such as airlines and insurance, and the uptake in the manufacturing and industrial

sectors; and the several large e-governance initiatives launched by the government

under the National E-Governance Plan (NEGP) are expected to provide sustained

growth in domestic demand for IT services over the next few years.

The expanding scope and scale of the domestic IT market is also reflected in the

evolving nature of spending patterns in the domestic market - with a steady shift

from being predominantly hardware led towards a solutions approach that is

characterized by a growing role of services.

The entire IT delivery system is gradually moving towards services, with entities like

system integrators playing major roles either as front-ends to IT solution deals or

as key influencers in the market. Service providers are increasingly becoming the

client interface in many big solutions deals, and are playing a greater role in terms

of being the first contact for the end-users. In many cases, the first-line contact

influences the overall dynamics of the deal, including the purchase of hardware

and software components of the desired IT architecture. As a result partners and

channels are beginning to play an increasingly important role in the ecosystem.

Economic liberalization, de-

regulation of key sectors and

increasing integration with the

global economy have been

key catalysts of increased IT

adoption

Broad basing of the industry

and successful execution of

planned e-governance

initiatives are expected to

sustain strong growth


Further, growth and maturity (currently witnessed in a few sectors) of demand is

also driving some structural changes in the domestic IT market. The following table

captures the highlights of the changes observed.

While the steady growth observed over the past few years and the underlying

drivers supporting sustained growth over the forecast period reflect a positive

outlook for the domestic market. Growth projections may be further accentuated

by addressing some basic issues highlighted by the findings of the surveys

conducted as a part of this study.

The following sections of this report analyze the market opportunity and likely

development models forecasting the growth in domestic demand for key IT and

ITES-BPO services over the next few years, outline the major issues highlighted by

service providers and user organizations, and propose actions required by the

stakeholders to address the issues raised - that could help accelerate the

domestic services market development.

Domestic demand for IT in

India is witnessing a gradual

transformation - with a

growing emphasis on services




IT services formed one of the fastest growing segments of the domestic IT

market with a revenue growth estimated at over 25 percent in 2005 over

2004, outpacing the growth seen in the hardware and software segments.

MMaarrkkeett LLaannddssccaappee aanndd OOppppoorrttuunniittyy AAsssseessssmmeenntt

IT services spends (for the vendor addressed segment) in the domestic

market are estimated to have grown from INR 10,361 crores (USD 2,300

million) in 2004 to INR 12,984 crores (USD 2,900 million) in 2005.

In addition to the vendor addressed market, it is estimated that in-house

spending on IT services (including training costs, salaries of in-house IT

staff and associated overheads) still accounts for more than half of the

corporate IT spend in India, while the outsourced / vendor addressed

spends account for just 45 percent of the total.

Domestic outsourcing gaining

traction - services emerged as

the fastest growing revenue

segment in 2005

Spotlight on the Domestic IT ServicesMarket Opportunity

However, in-house spending

on IT services still accounts

for more than half of the

corporate IT spend in India

1IT spending in India has historically been predominantly hardware led. While external spendon services by Indian corporate houses has been relatively low most organizations have builtinternal functions to support their IT infrastructure investments and consequently still source anumber of these services from in-house teams. While the value of work undertaken by these in-house teams has been estimated (to provide a true representation of the domestic marketpotential), to maintain definitional consistency, the market sizing and forecasting for the ITservices opportunity is based on the vendor addressed segment only - with the in-house spends asa additional share potentially addressable by the vendors.


With growing IT adoption and

expected increase in

penetration of in-house spends

by IT providers, the domestic

market is projected to grow at

a CAGR of more than 17

percent over 2005-10

Over the next five years, the vendor addressed market is projected to grow

at a CAGR of 17 percent, to cross INR 27,979 crore (USD 6,200 million) by

2010.

KKeeyy SSeerrvviiccee LLiinneess

Based on the size and growth, the above services categories can be broadly

divided into:

• High growth-large size category: Integration services (systems

integration and network integration)

• High growth-small size category: Enterprise-wide outsourcing,

applications management

• Low growth-large size category: Hardware deployment and support,

custom application development


• Low growth-small size categories: IT education and training

System integration (SI) activities are one-time project-based engagements.

While today almost 90 percent of system integration engagements have IT

services vendors involved, in some cases the in-house IT teams are also

present at varying levels.

This segment will continue to show significant growth in India, especially

because of the low levels of IT maturity. The focus of the IT services vendors

has to be to convince their customers that end-to-end integration can be

handled by the IT services vendors, with minimum involvement for the

customer’s IT team. SI vendors will need to proactively provide advice and

offerings to clients.

The network consulting and integration market in India has witnessed rapid

growth in the past few years, growing by 41 percent in 2004 (over 2003)

and an estimated 37 percent in 2005 (over 2004). Looking ahead, the

telecom vertical is expected to drive strond demand for network integration

services. According to the erstwhile Cellular Operators Association of India

(COAI) (now Indian Cellular Association (ICA)) projections, the mobile

subscriber base in India is slated to grow from 48 million in 2004 to 207

million by 2007. This reflects significant potential for ramp-up of the

telecom infrastructure by operators, leading to a huge demand for network

integration services.

Demand for IT consulting services, as a discrete activity, is still quite low in

India and much of these services are delivered as a part of other

engagements such as system integration.

With a large part of the

market still in the early stages

of adoption, domestic demand

for system integration services

is expected to remain strong

over the forecast period

Demand for IT consulting

services, as a discrete activity,

is still quite low

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• TCS is implementing a core banking solution for the Central Bank of India covering over 1,000

branches. The solution, set to be implemented, will include B@NCS from the Sydney-based

Financial Network Solutions (FNS), the Exim Bills Trade Finance software from China Systems,

and eTreasurybv from TCS.

• The scope of the entire project covers 1,000 branches of the CBI network, including the retail,

corporate, trade finance and delivery channels for Internet banking, phone banking and

mobile banking (SMS and WAP). TCS, along with CMC, will redesign and deploy a bank-wide

corporate network, covering about 1,367 locations, by designing, building, and maintaining

the data center and disaster recovery center and facilities management services to the bank

over five years.

• The centralised core banking system implementation is expected to result in efficient and

personalised customer service, 24x7 banking through multiple delivery channels, faster time-

to-market, and superior relationship management at the bank.


The custom application development market in India grew by 28 percent in

2004 over 2003. While the projected growth in domestic demand for

custom application development services is projected to be relatively

slower (compared to other service lines) - attributed to a trend towards

increased adoption of packaged applications, this segment is expected to

sustain significant share of the market as demand from the SME segment

and vertical markets such as retail and the government picks up.

Application management (AM) is the traditional form of AO and refers to the

ongoing support of portfolio of applications. These applications may be

custom-built, off-the-shelf packaged products, or a combination of third-

party products and customized components. Application outsourcing (AO)

describes the provisioning of an outsourcing service around software

applications and includes both application management and software as a

service (SaaS).

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TTyyppee ooff EEnnggaaggeemmeenntt:: IITT CCoonnssuullttiinngg

• Wipro Infotech has a 30-month contract with Ashok Leyland for strategic cost reduction.

• The contract involves developing a vision and road map for strategic cost reduction and

supplier relationship management at Ashok Leyland. The consulting and markets division of

Wipro Infotech implementing the project will look at all the elements of material costs. It will

provide consultancy and a technology solution where the market's dynamic pricing tool engine

and cost management tools will be used.

• Wipro Infotech will also be equipping and training the strategic sourcing and purchasing team

at Ashok Leyland, with the best-in-class purchasing practices and technologies, and

transferring knowledge to them in a planned manner.

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TTyyppee ooff EEnnggaaggeemmeenntt:: AApppplliiccaattiioonn DDeevveellooppmmeenntt

• Bangalore Development Authority (BDA) has selected HCL to design an integrated man-

agement information system to automate the business processes in its various departments

by reducing current paper work by almost 80 percent.

• The solution provided by HCL identifies the business workflow, i.e., the stages in the various

departments along with the various attributes/parameters associated at each stage.

• The project encompasses interfacing with the present IT infrastructure at BDA with respect to

the existing applications. Some of the current applications include OCMS (an applica-tion for

online complaint management), IVRS (interactive voice response system, an application with

voice response capabilities for complaint management), GIS (geographical information

system) and e-KIOSK.

Growth in domestic demand for

custom application development

services is projected to be

relatively slower…

…SME segment and emerging

vertical markets expected to

drive growth


The core value proposition of AO is the maintenance and daily operation of

business applications and services, including business needs analysis

consulting, system configuration, application enhancement, problem

management and resolution, user and operations support, portfolio

enhancements, remote system monitoring, database performance

management, service level agreement (SLA) reporting, escalation

management, system tuning, etc.

As customers scale-up their usage of corporation wide IT applications,

demand for application management services is likely to increase.

Though few in number, market activity over the past two years has

witnessed the emergence of large, end-to-end outsourcing deals - at the

higher-end of the enterprise domain. While this trend is expected to

continue, a lot will depend on how the experiences of the early deals pan

out for the customers as well as the service providers.

Demand for application

management services is likely

to increase…

Early days yet for end-to-end

outsourcing… a lot will depend

on how the experiences of the

early deals pan out

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• Till date, the biggest IT activity in the telecom sector has been the IBM-Bharti deal. For the

Bharti case, IBM is maintaining hardware, software, and provisioning IT services, including

billing, CRM, data warehousing, e-mail and intranet services. IBM is also managing Bharti's

data centers and IT helpdesks and enhancing its disaster recovery capabilities.

• The total deal size for the 10-year period is likely to be in the range of US $700-750 million.

For the first five years, it is likely to be in the range of US $250-275 million.

• The agreement specifies that payments made to IBM India will be linked to the percentage of

revenue generation by BTVL and pre-defined service level agreements. The percentage-linked

revenue payment is modeled to decrease with BTVL's increase in revenue.

• The deal includes all customer-facing IT applications, like billing, customer relationship

management and data warehousing. In addition, Internet, e-mail and online collaborations are

also included.


Over the near future, much of the demand for outsourced services is

expected to be in the form of discrete activities such as network and

desktop management.


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NNaammee ooff tthhee CClliieenntt:: YYEESS BBaannkk


• YES Bank outsourced its entire technology requirements for offices and branches across India

to Wipro Infotech. Wipro is implementing core infrastructure and hardware, doing branch

rollouts, networking, managing the data center and backup support for disaster recovery. The

deal protects the bank from all obsolescence and redundancies in technology and insulates it

from carrying forward legacy systems.

• Wipro would deploy comprehensive technology solutions to meet Yes Bank's business

requirements. This would include the IT infrastructure and hardware, branch rollout, net-

working, managing the data center besides the backup support for disaster recovery.

• The service level agreements ensure integrated 24x7 support for the bank.

• The deal is spread over a 7-year time-frame.


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• In the Bank of India deal, HP is implementing and managing data warehousing and document

imaging as well as providing integrated channel management, including tele-banking, Internet

banking and ATMs. It also supervised the implementation and management of Finacle across

750 branches in India.

• HP will implement and manage a core banking system across the bank's 750 branches

in India.

• The contract also envisages building and managing a data center, disaster recovery site,

helpdesk, and call center. HP will also manage IT infrastructure and networks across Bol's

branches, supply and maintain technology products including servers, desktops and

peripherals, and provide asset refresh and obsolescence protection for IT assets.

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• HDFC Bank, among other banks, has outsourced its entire ATM management to NCR. It has

over 1,000 ATMs over 192 cities. NCR is providing the bank with a total suite of serv-ices,

including ATM monitoring and management, caretaker services, deposit processing services,

consumables, as well as cash replenishment.


KKeeyy VVeerrttiiccaall MMaarrkkeettss

Among the verticals, financial services, manufacturing, communications

and media, and the Government account for the bulk of the IT services

spending. These industries contribute more than 90 percent of the total IT

services spending in the region.

While these verticals will continue to be the prime drivers for IT spending in

general and IT services spending in particular, the future growth will also be

catalyzed by specific sectors such as retail, travel and tourism, healthcare,

and education. From a vertical perspective, the key factors that enhance IT

services spending are:

• CCrriittiiccaalliittyy ooff IITT ffoorr ooppeerraattiioonnss aanndd ccoommppeettiittiivveenneessss:: While IT has

become important for every type of business; certain verticals such as

banks and telecom service providers have a higher dependence on IT

systems. Consequently, their IT services spend is higher. For these

sectors, their customer interfacing systems are increasingly

dependent on IT systems.

• DDee--rreegguullaattiioonn:: The de-regulation of sectors has a direct impact on IT

spend in many cases. It leads to an increase in competition and also

opens the doors to the forces of globalization. The competitive

environment creates the necessity for highly proficient IT systems. This

has already happened in banking and telecom services and is taking

place in the insurance sector. Future de-regulation of segment such as

retail can result in spurt in IT spending from these verticals.

Banks have been at the forefront of technology adoption and have been

amongst the first to deploy new technologies and systems. This, coupled

with the rapid growth of the banking sector, especially retail banking, has

made the segment a star vertical as far as IT implementations are

concerned. The banking sector has been growing rapidly in the country and

Financial services,

manufacturing,

communications and media,

and the Government account

for more than 90 percent of

the total spend


projections indicate that there will be over 70,000 bank branches and

almost 200,000 ATMs by 2009.

It is pertinent to note that while the banking sector is at the forefront of IT

adoption in the domestic market, IT penetration is not equitable across the

sector. The three broad categories of MNC and large private sector banks,

public sector banks, and the co-operative banks and small private sector

banks in general reflect declining levels of IT adoption.

The MNC and large private banks have already reached comparatively high

levels of IT maturity with core banking solutions and other banking

applications in place across their branches.

The following table depicts the business imperatives and IT challenges

faced by banks in this segment.

Within PSU banks, a few have gone far with IT adoption and reached

comparable levels of IT maturity with the large private sector banks. A large

majority of these banks, however, are still lagging behind when it comes to

IT adoption.


The co-operatives and small private banks represent a relatively nascent

market. The following graph depicts a pictorial representation of the IT

adoption patterns in the banking sector.

There is an increased thrust on network integration and managed services

as more and more banks and financial institutions are increasing their

focus on modernizing their IT infrastructure and providing state-of-the-art

connectivity. Deployment, operations, and ongoing support are some of the

key service activities that have come up in this segment. A number of

financial institutions and banks have been adopting CRM solutions and

other front-end tools to boost relationship management with existing

customers and to garner new business.

Other factors driving IT spends in the banking sector is the adoption of IT

enabled processes and systems such as real time gross settlement,

Internet-enabled remittance facilities, the automated clearing house direct

debit programs, check truncation facilities, etc.

The insurance sector is also witnessing increased IT spending activity

around the modernization of existing IT infrastructure, and added spending

on hardware and security solutions.

The domestic manufacturing sector reflects a wide variation in IT maturity,

with certain segments, such as the automotive sector, on a higher IT

maturity level and certain traditional sectors, such as textiles, at lower

levels of IT maturity. Further, there is also a visible difference between the

IT spending patterns of large organizations and the SME segment in the

manufacturing sector.


The telecommunications sector is the third largest segment driving IT

spends in the domestic market. Over the past few years, this segment has

witnessed rapid and progressive regulatory reform, entry of multiple

players and has encouraged intense competition - which has led to

significant price declines and volume growth. While the explosive growth

(~4-5 million mobile subscribers are being added every month) is

supported by a large under penetrated population, players are also

witnessing increasing levels of subscriber churn - making high levels of

service quality an important factor in retaining and growing the

customer base.

The demonstrated gains from the use of IT to sustain high levels of

operating efficiency; reduce costs and scale-up operations are reflected in

the high levels of IT adoption in the sector.


National Citizen

Database

Project objectives include preparing a National

Population Register (NPR), National Register of

Indian Citizens (NRIC), National Register of

Residency (NRR) - for non-citizens and providing

a National Identity Number (NIN) to each person,

a Multi-purpose National Identity Card (MNIC) to

each citizen, and a Multi-purpose Residency

Card to non-citizens

Ministry of Home

Affairs/Registrar General

of India (RGI)

Government spending on IT in the domestic market has had a slow uptake,

but represents significant potential - both as a direct driver of scale as well

as the potential to drive IT usage across the grassroots levels which can

trigger a domino effect on subsequent spending.

Recognizing the importance of the role that ICT can play in the country's

development, the Indian government has initiated the National

E-Governance Action Plan. The NEGP, approved for implementation over

2003-07, seeks to lay the foundation and provide the impetus for long-term

growth of e-Governance within the country, by creating the appropriate

governance and institutional mechanisms, setting up the core

infrastructure and policies, and implementing a number of mission mode

projects (MMPs). These MMPs have been deployed under the central

government, the State departments, as well as several integrated projects

spanning multiple ministries, departments or agencies.

The central government projects cover programs such as national ID,

central excise, income-tax, DCA-21, passports/visa and immigration,

pensions, banking, and insurance, while the state-level includes projects

such as land records, property registration, transport, agriculture,

municipalities, gram panchayats, commercial taxes, treasuries, police and

employment exchange. The integrated projects, on the other hand, include

e-business, common service centers, India portal, e-procurement

and e-courts.

MISSION MODE DESCRIPTION MINISTRIES/

PROJECTS DEPARTMENT

Income Tax A pan-India network to cover 745 Income tax

offices in 510 cities and 12000 online users

over a hybrid network comprising optical fiber

leased lines, ISDN for backup and VSAT

connectivity for remote locations

Ministry of Finance/Central

Board of Direct Tax

Passport Visa and

Immigration Project

Electronic recordkeeping and verification of

passport and immigration information

Ministry of External

Affairs/Ministry of Home

Affairs

CCEENNTTRRAALL GGOOVVEERRNNMMEENNTT

DCA21 Modernization and computerization program of

Ministry of Company Affairs; envisages

electronic-filing of companies' documents

through an entirely paperless process

Department of Company

Affairs



PROJECTS DEPARTMENT

Central Excise Computerization of Income tax system including

dissemination of tax related information,

dissemination of taxpayer specific information,

PAN and TAN related services, preparation of

returns of income e-filing of returns of income, e-

filing of TDS returns/ demat of TDS certificates

e-payment /refund of taxes, grievance redressal

mechanism and direct tax advisory services

Department of

Revenue/Central Board of

Excise and Custom

SSTTAATTEE GGOOVVEERRNNMMEENNTT

Land Records Project aims to facilitate on demand distribution

of land record entries and related information,

online filing of mutation applications,

submission and tracking of complaints, location

details of plots along with ownership

Ministry of Rural

Development

Road Transport Computerization of Driving License (DL) and

Registration Certificate (RC); Creation of State

and National Databases inter connecting all

RTOs in the State and all states subsequently

Ministry of Road Transport

and Highway

Property Registration Electronic record of property ownership details Department of L Resources

Agriculture To Establish a Nation Wide Communication

Network for Effective and Speedy Information

Exchange in Agricultural Marketing Related

Areas; to Empower Farming Community with

Market Information, thereby expanding

Marketing Opportunities for obtaining better

Returns; A Joint Collaboration Between the

Directorate of Marketing and Inspection (DMI),

National Informatics Centre (NIC), State

Governments

Department of Agriculture and

Cooperation

Common Service

Centers

To help drive ICT access and usage at the grass

root level, the Department of information

Technology (DIT), Government of India, has

initiated a nationwide program to create a

network of access points termed Common

Services Centers (CSCs) throughout the country.

It is envisioned that these centers will serve as

outlets for the provision of e-government,

entertainment, education, telemedicine, e-

commerce, info-services, etc. ubiquitously. The

draft framework brought out by the DIT aims to

create an enabling environment for the

establishment of 100,000 CSCs in rural areas

by the year 2007 and outlines the policy

framework, strategy and contours of financial

support of government for rapid proliferation of

CSCs across the country.

Department of Information

Technology

IINNTTEEGGRRAATTEEDD SSEERRVVIICCEESS



PROJECTS DEPARTMENT

E-Biz To promote e-business adoption by establishing

a single-window for G2B services for Central,

State, and Local Governments; to enable on-line

event-driven interactions by re-engineering and

forms and procedures thereby reducing time for

establishment, and reducing burden of

compliance

Department of Industrial

Policy and Promotion /

Department of Information

Technology

NNoottee::

The above list is indicative and may not be exhaustive. Please visit www.mit.gov.in for details.

Selection Criteria for the Mission Mode Projects:

• Impact in terms of number of people likely to be affected by project

• Impact in terms of likely improvement of the quality of service

• Impact on the economy or economic environment in the country

• Impact in terms of the likely cost-benefit of investments in the project

• Readiness and willingness of ministry/ department to position a National Mission Project

• Feasibility of implementing the project from a financial, administrative and political perspective

within a reasonable time frame

In addition to the MMPs, most state governments, ministries and

government departments are actively engaged in implementing e-

Governance solutions. While many of these are already in regular

operation, others are at various stages of implementation while an even

greater number are at a conceptual stage.

As noted earlier, these four sectors (financial services, manufacturing,

telecommunications and the Government) account for over 90 percent of

the current IT spends in the domestic market. Other sectors with significant

growth potential include retail and hospitality, healthcare, education and

entertainment.

VVeennddoorr LLaannddssccaappee

The vendor landscape of IT services providers in India is quite fragmented

and broadly comprises two categories: the ~20 Tier I players accounting for

42 percent of the market (~30 percent accounted for by the top 10), and

the Tier II vendors comprising smaller, predominantly regional, players

accounting for the remaining 58 percent of the revenues.

Tier I vendors comprise both Indian service providers as well as MNC

companies operating in India.

Source: Department of Information Technology, Ministry of Communications and Information Technology, Government of India

The vendor landscape serving

the domestic market is quite

fragmented with the 20 Tier I

players accounting for just 42

percent of the market…


India is home to many world-class IT service vendors who have a domestic

focus (though it is a small percentage of their overall revenue, it is

significant from the point of view of the Indian market). The prominent

Indian IT service vendors serving the domestic market include Wipro, the

Tata Group (TCS/CMC/Tata Infotech), the HCL Group (HCL Infosystems and

HCL Comnet), Infosys, Ramco Systems, etc.

The MNC vendors are quite active in the domestic market. Having set up

their operations primarily as product vendors (software/hardware), these

companies, following their global strategy and leveraging on their product

strengths, have been able to capture a substantial chunk of the domestic

services sector. The prominent names in this category are IBM Global

Services HP and Accenture. Also there is significant revenue coming from

supporting products installed in India for vendors like SAP, Oracle, Sun, etc.

Tier II vendors comprise the SME system integrators (SIs), independent

software vendors (ISVs) and niche service providers.

The SME SIs and ISVs constitute a very significant part of the domestic IT

services market and work on two fronts:

• As sub-contractors for the Tier 1 vendors, they handle specific domains

within a larger contract won and front-ended by the Tier 1 vendors.

• As primary service providers to small and mid-size enterprises, they

leverage their regional presence, lower costs, and offer personal

attention to smaller clients.

Niche service providers are a small segment, with specific vertical or

horizontal expertise and focus on niche markets.

…smaller, predominantly

regional players and niche

players account for the rest of

the market

The Engagement Linkages

The way the supply side, i.e. the IT services engagements, and the demand side are linked de-

fines the current scenario in the domestic IT services market. These linkages and the resultant

markets are as below:

• DDiirreecctt EEnnggaaggeemmeennttss bbyy tthhee TTiieerr 11 VVeennddoorrss:: These are the engagements where the larger

vendors deal with the users directly. However, purely direct engagements are not very

common, except in the IT consulting space. These engagements cover the larger users only.

• PPaarrttnneerreedd EEnnggaaggeemmeennttss--TTiieerr 11 aanndd TTiieerr 22 VVeennddoorrss:: This is the largest market in this

ecosystem. In most of the IT services engagements, while the Tier 1 vendors front-end the

deal, other Tier 1 vendors, Tier 2 vendors, and the smaller regional vendors act as sub-

contractors. These engagements cover the entire gamut of IT services, and cover the larger

enterprises as well as medium-sized companies.

• DDiirreecctt EEnnggaaggeemmeennttss--TTiieerr 22 VVeennddoorrss:: These are the engagements where the Tier 2 vendors

deal with the users directly. These engagements primarily cover custom application

development, integration and support, hardware and software support, as well as network and

desktop outsourcing. These engagements are mainly seen in the SME users segment.


KKeeyy FFiinnddiinnggss ffrroomm EEnndd--uusseerr aanndd SSeerrvviiccee PPrroovviiddeerr SSuurrvveeyy''ss

As noted earlier, a significant portion of the domestic corporate IT spends

still lies in-house, predominantly driven by a perceived lack of focus by

service providers on the domestic market and a perceived absence of

value generated by outsourcing.

Cost (price) and quality of services were highlighted as the biggest pain

areas in dealing with service providers. Lack of people with suitable skills

and delayed service / response were the other two primary pain areas

reflected in the end-user survey responses.

This appears paradoxical as a majority of the end-user organizations

acknowledge the capabilities of service providers, believe that the available

vendors have the relevant experience and expertise and feel that the

vendor pricing is justified for the services delivered.

Interviews with end-users and service providers revealed some interesting

insights that explain these paradoxes.

A significant portion of the

domestic corporate IT spends

still lies in-house,

…predominantly driven by a

perceived lack of focus by

service providers on the

domestic market and a

perceived absence of value

generated by outsourcing.


Based on the survey responses, cost (price) of service delivery is the

primary pain area for user organizations. Yet over three-fourths of the

respondents either felt that the pricing justified the services offered (44.7

percent) or were indifferent (34 percent).

PPrriicceess CChhaarrggeedd bbyy IITT SSeerrvviiccee VVeennddoorrss--PPeerrcceeppttiioonnss

Price is often perceived as a barrier due to the perceived lack of value

delivered by outsourcing services in the domestic market. As the labor cost

arbitrage (observed in offshore outsourcing contracts) is not available in

domestic outsourcing, the upfront cost savings to customer organizations

are also much lower. As a result the arguments in favor of outsourcing in

the domestic market are considerably weakened due to the mismatched

expectations about cost savings.

Further, while the capabilities, skill sets and staff available with service

providers are not lacking, the service levels delivered have at times been

below expectations. This is attributed directly and indirectly to the

(perceived) higher emphasis by vendors on servicing their export

customers. For instance, the staff assigned to servicing the domestic

customers is often rotated / changed frequently - either because they are

re-assigned to other (export) customers once they have gained some

experience, or because they change jobs (often attracted by higher salaries

offered by an export focused service provider). This in turn impacts the

quality of service in the form of delays / lags in service support.

Availability of adequately trained in-house staff and general satisfaction

with the economics of an in-house solution were cited as the top two

factors favoring the use of in-house teams - across service categories,

further supporting significant inertia to move away from status quo (use of

in-house staff).

Attitudes towards outsourcing

in the domestic market are

considerably weakened due to

the mismatched expectations

about cost savings

Higher (perceived) emphasis

by vendors on servicing their

export customers also acts as

a deterrent


With price and quality of service and delivery personnel being the primary

factors guiding an outsourcing decision for end-user organizations the gaps

(both real as well as perceived) between services expected and delivered

are critical factors to be addressed to drive growth in this segment.

There has been a visible shift by user organizations in a few sectors

towards greater adoption of the outsourcing model, driven by increasing

competition (e.g. telecom, banking, etc.) their preference to focus on and

improve efficiencies in their core business (also witnessed in some

manufacturing sectors) while leaving the management of the evolving and

increasingly more complex IT architectures to experts. This has been

supported by the service providers demonstrating tangible results (ROIs).

This trend can be further strengthened by focusing on developing and

providing the required staffing, focusing on the specific needs of domestic

Price and quality of service

and delivery personnel are the

primary factors guiding an

outsourcing decision for end-

user organizations


market clients, demonstrating the potential business value (beyond cost

savings alone) from IT investments and showcasing successful

engagements.

While there is room for improvement, the observed strength in domestic IT

spending (from the steady revenue growth) and its positive outlook is

reinforced by the fact that a majority of the user organizations are

acknowledging the value derived from their IT investments - specifically

from the amounts spent on services.

While most firms do not have a standard measure for gauging the ROI

earned from their IT services spends, they rely on derivative measures such

as productivity improvement and satisfaction measures, and typically use

multiple measures to gauge IT spending effectiveness.

Looking ahead, the development of the domestic IT services market will

need to become more broad-based. To achieve sustained development,

new verticals will need to be penetrated as it is not sufficient to increase

business from only the currently addressed verticals.

Notwithstanding the 'pain-

areas', a majority of the user

organizations acknowledged

the value derived from their IT

investments


A large proportion of the current IT services market is predicated on the

banking, financial services and telecom verticals. While IT services for these

verticals will continue to show strong growth, new verticals will need to be

developed to increase the rate of growth of the IT services market in India.

As the Indian economy opens further opens up, other verticals including

manufacturing, travel and tourism, healthcare, entertainment will

increasingly look towards IT to increase competitiveness. For both new and

existing verticals, the small and medium business (SMB) segment will

represent an important source of growth for the domestic IT services market.

Further, IT services vendors need to assist the CIO(s) in understanding and

building a case (internally at their organizations) about the potential to

generate increased business value from IT investments. Service providers

also need to extend strong end-to-end service capabilities to their domestic

customers, as the IT services market moves to high-value, annuity

engagements.

As the level of IT investment increases, there is a change in the perceived role

of IT from a support function to an enabler of 'competitive advantage'. There

is increasing pressure on the CIO(s) to justify the IT investment by

demonstrating the value delivered from IT investments. The increased

expectations from IT, requires them to move from routine IT operations to

strategic IT management. The challenges they face in making this

transformation has to do with the existing complexities in their IT

environments, which make the IT departments and the CIOs spend most of

their time and effort in day-to-day operations.

The IT services vendors have a key role to play in helping the CIO (s) make this

transformation. New offerings and service delivery models need to be

developed that can assist the CIOs in streamlining their IT operations to such

a level that they can then devote their IT investments and efforts to

transformational initiatives.

The evolution of the IT services landscape is defined by the market

graduating from low-value long-term services (such as basic maintenance

and support) to high-value one-time services (such as system integration) and

then on to high-value long-term services (such as discrete and end-to-end IT

outsourcing).

Larger and mature IT users are beginning to seek end-to-end IT services and

this will be a major growth engine for the market. This segment will be

dominated by a few large IT services vendors who have the size and the

capabilities to address this demand. The vendors most likely to gain from this

shift are those who will have the capability to offer end-to-end services.



ITES-BPO is arguably the most commonly discussed topic in corporate

boardrooms across the world. India's compelling value proposition, early

mover advantage and continued success have established it as a distinct

leader in this space. This is evident from the fact that the total revenue

earned by this sector in India is estimated to have grown from a little over

INR 4,200 crores (~USD 900 million) in FY2001 to nearly INR 32,000

crores (~USD 7.2 billion) in FY2006.

However, with exports averaging over 90 percent of the total revenues,

while the Indian outsourcing exports story is well documented, relatively

little has been compiled about the domestic market potential for these

services.

This section of the report provides an overall perspective of the current

state of ITES-BPO adoption in the domestic market in India and assesses

the prevailing demand drivers and inhibitors, analyzes the primary service

lines and the current supply-side landscape. This section also highlights

the key findings from the end-user organization and service provider

surveys and interviews conducted by IDC over the course of this study.

Spotlight on the Domestic ITES-BPOMarket Opportunity

DDeeffiinniinngg IITTEESS--BBPPOO iinn tthhee CCoonntteexxtt ooff tthhiiss SSttuuddyy

A business outsourcing engagement transfers responsibility for ongoing management and

execution of a business activity, process, or functional area to an external service provider, ideally

to gain efficiency and improve performance. Business outsourcing contracts may involve the

transfer of fixed assets and personnel from the customer to the service provider.

Contract terms for business outsourcing engagements typically range from one year to more than

ten years. A business outsourcing engagement can include an entire corporate function, such as

human resource (HR), procurement, or logistics, or discrete segments/activities within the

business functions, such as benefits administration, strategic sourcing, or warehousing.

Depending on the nature of the engagement, IDC internationally classifies outsourcing

engagements into two categories. Engagements involving the transfer of management and

execution of one or more complete business processes or entire business functions to an external

service provider are categorized as core BPO. In such deals, the service provider is often part of

the decision-making structure surrounding the outsourced business function, and performance

parameters are primarily tied to customer service and strategic business value delivered.

Strategic business value is recognized through results such as increased productivity, new

business opportunities, new revenue generation, cost reduction, business transformation, and/or

the improvement of shareholders' value.


MMaarrkkeett LLaannddssccaappee aanndd OOppppoorrttuunniittyy AAsssseessssmmeenntt

According to IDC estimates, the domestic ITES-BPO market in India was

valued at a little over INR 2,321 crores (~USD 500-550million) in 2004.

This segment of the market is estimated to have nearly doubled over the

past two-three years and is forecast to cross INR 6600 crores (~USD 1,400

million) in 2006.

Certain contracts involve the transfer of management and execution of activities or single

business processes that tend to be high-volume and/or automated, to an external service provider.

IDC distinguishes these contracts from core BPO, categorizing them as processing services-with

high volume processing of select activities/processes (as opposed to complete business

processes or entire business functions) being their key characteristic. The performance

parameters for processing services are primarily tied to tactical measures, such as accuracy,

adhering to timelines, and the efficiency of high-volume service capabilities. These are typically

standardized and involve little or no customization within a client engagement.

Given the nascent nature of this sector in India, this study does not make the distinction between

BPO and processing services, and instead focuses the market opportunity assessment on a

broader aggregation of such activities where service delivery may be enabled by IT to make it

location independent and disaggregated from the internal workflow of a company - making the

activities 'outsource-able'. Further, the market opportunity assessment is not restricted to the

value of work delivered by external service providers, but also incorporates the work undertaken

by companies in-house - through their captive operations.

Domestic ITES-BPO market in

India was valued at a little

over INR 2,300 crores in

2004 and is forecast to cross

INR 6600 crores in 2006

ITES-BPO DEFINITIONS CATEGORIES/SERVICE

SERVICES LINESINCLUDED IN

THE SCOPE OF

THIS STUDY

Cutomer Care These services support customer care activities

and business processes associates with the

customer center. Dominated by inbound contact

(yet inclusive of out bound interaction as well),

customer care typically takes place via the

telephone, but may also occur via e-mail, chat, fax,

self-help, or mail.

• Billing inquiries

• Account maintenance

• General information enquiry


DDrriivveerrss aanndd IInnhhiibbiittoorrss ooff DDoommeessttiicc IITTEESS--BBPPOO GGrroowwtthh iinn IInnddiiaa

DDrriivveerrss

•• IInnccrreeaassiinngg aawwaarreenneessss ooff ddoommeessttiicc ccoonnssuummeerr:: greater awareness and experience of world

class customer service levels: The entry of multinationals in sectors such as telecom and BFSI

has provided consumers in India with an increased choice of service providers as well as the

experience of relatively higher levels of customer service (comparable to those in advanced

markets). Since customers are now beginning to expect and demand these levels of customer

service, companies will be forced to support scalable levels of customer contact and related

back office processes. Thus generating significant primary demand for ITES-BPO by end-user

industries in the domestic market.

•• FFrreeeeiinngg uupp rreessoouurrcceess ttoo ffooccuuss oonn ccoorree:: Outsourcing the non-core processes allows client

organizations to significantly free-up management bandwidth and resources to focus on their

core business. The responsibility for operational execution and its related issues such as

managing scale expansion, attrition, productivity, etc., are offloaded to the external service

providers. If the demonstrated success in delivering business value through ITES-BPO, to

overseas customers, is evidenced in the domestic market as well-it is likely to provide a fillip

to growth in this segment.

•• AAcccceessss ttoo aann oorrggaanniizzeedd sseett ooff vveennddoorrss pprroovviiddiinngg IITTEESS--BBPPOO sseerrvviicceess aass ssppeecciiaalliissttss:: The

development of ITES-BPO as a service industry in itself is enabling end-user industries to

leverage the services of specialist providers to execute several non-core activities. In an

increasingly competitive environment, the ability to execute such relationships efficiently is

expected to contribute to a significant competitive advantage and will drive growth in domestic

demand for ITES-BPO.

•• OOppeenniinngg uupp ooff nneewweerr sseeggmmeennttss ooff ddoommeessttiicc ddeemmaanndd:: Several public sector enterprises (PSUs)

Sales &

Marketing

The includes the services that augment or manage

the business processes that are associated with a

companie’s need to market and sell its goods and

services. Specific services may address leads

development and qualification selling products

and services, channel development, post-sale

support, customer service, advertising, brand

management, public relations, direct marketing,

promotional development, corporate

communications, conference sponsorship,

business development and market research.

• Account activation/balance

transfer

• Product/Service direct sales

• Up-selling

• Cross-selling

Human

Resources

HR management services as those sevices that

support the core HR activities and business

processes associated with HR administration.

• Payroll processing

• Benifits administration

• Employee communication

administration

Finance and

Accounting

F&A services as those associated with a

company’s need to manage to flow of money into

out of the organisation.

• Accounts payable, Accounts

receivable

• Credit and collections,

Billing/Invoicing

Others Categories not included in the above • Administration

• e-Learning

• Order management


KKeeyy SSeerrvviiccee LLiinneess

Domestic demand for ITES-BPO is currently driven by basic voice-based

services, with customer care and marketing and sales accounting for

nearly 70 percent of the market.

have recently invited bids for outsourcing core ITES-BPO processes. The scale of business in

these organizations and the sizeable opportunity in similar organizations that still remains

untapped, but is likely to open up in the near future, is also expected to drive growth in

domestic ITES-BPO demand.

IInnhhiibbiittoorrss

•• LLaacckk ooff eexxppeerriieennccee wwiitthh oouuttssoouurrcciinngg:: Inexperience of potential client organizations with

organized/large scale outsourcing may constrain the growth of the domestic market. This may

be manifested in several ways, such as mistrust regarding sharing of data, inability to identify

appropriate processes and/or vendors in the selection process, drafting of inadequate SLAs,

etc. Any or all of these factors may lead to some bad experiences of client organizations acting

as a deterrent to other client organizations attempting such a move.

•• RReellaattiivveellyy lloowweerr ccoosstt aarrbbiittrraaggee iinn tthhee ddoommeessttiicc bbuussiinneessss ccoommppaarreedd ttoo ooffffsshhoorree oouuttssoouurrcciinngg::

The absence of a comparable labor cost advantage in the domestic business (as compared to

that enjoyed by US/UK customers) makes selling these services a little more difficult.

However, research with some vendors indicates that though the potential for cost savings

actually exists, demonstrating these savings requires some degree of customer education to

ensure that the total cost of service delivery is compared with the cost of using an external

service provider. Further, the potential for cost savings increases as the scale of operations

increases.

•• AAbbsseennccee ooff tthhiirrdd--ppaarrttyy sseerrvviiccee pprroovviiddeerrss wwiitthh ssiiggnniiffiiccaanntt ssccaallee:: Unlike the export-oriented

vendor landscape where there are several third-party players with a scale of operation of over

~5,000-6,000 employees, the largest vendors serving the domestic market still have only

~3,000-4,000 employees each. For this segment to grow rapidly, the vendor landscape will be

required to develop equally rapidly to keep pace with the forecast demand.

•• SSllooww bbuuiilldd--uupp ooff ssccaallee iinn ccoonnttrraaccttss iinn tthhee ddoommeessttiicc mmaarrkkeett:: Given that the cost advantage in

the domestic business is relatively lower, this segment is more prone to margin pressures. As

a result, the ability to rapidly achieve scale opportunities is essential for service providers to

make this a viable business opportunity. Although a few recent deals and announcements

indicate sizeable scale of business, a slowdown in large-scale deals could inhibit growth in the

domestic market.

•• GGoovveerrnnmmeenntt pprrooccuurreemmeenntt ppoolliicciieess:: There is a concern that restrictive procurement policies

adopted by some government departments, such as insisting on high levels of earnest money

deposits (leading to additional capital costs), may deter some service providers from bidding

for their contracts (this has been observed in the IT services space as well).

•• OOtthheerr oobbssttaacclleess tthhaatt ccoouulldd ssllooww ggrroowwtthh iinn tthhee ddoommeessttiicc mmaarrkkeett:: Lack of interoperability norms

that restrict service providers from offering a national tollfree access number, lack of

adequate funding avenues for domestic market players.

Domestic demand for ITES-

BPO is currently driven by

basic voice-based services,

with customer care and

marketing and sales

accounting for nearly 70

percent of the market


Sales and marketing forms the largest segment of the domestic ITES-BPO

market, accounting for nearly 37 percent of the segment revenue in 2004.

Though predominantly focused on outbound voice-based activities aimed

at up-selling and cross-selling various products, services offered (in the

domestic market) in this segment are being expanded to include other CRM

activities to better leverage available customer behavior data.

The customer care segment accounts for a third of the domestic ITES-BPO

market. Given the increasing emphasis on customer satisfaction in highly

competitive sectors such as BFSI, telecom and consumer durables, this

segment has witnessed growth in demand over the last few years.

This is further complemented by the rapid proliferation of globalization. The

Indian customer, increasingly exposed to global markets and the high levels

of customer service offered overseas, is demanding similar levels of

service from the Indian providers.

Since setting up a 24x7 customer service department is a costly

proposition, and manpower provisioning and scaling up are also very

challenging, companies are turning towards professional service providers

to deliver these services in an organized and efficient manner.

HR outsourcing is a rapidly growing segment of the domestic ITES-BPO

market. Currently, much of the growth in this segment is driven by the

demand for basic payroll processing services, with only a few larger

BPO/ITES deals covering HR transactions. However, it is expected that the

market will move from basic payroll processing to more high-end contracts,

where the HR outsourcing provider will manage the entire employee

systems as complete functional solution providers.

Interestingly, this segment is dominated by specialist HR firms, such as

Hewitt, Ma Foi, Cross Domain, etc., who have expanded their portfolio to

offer these services. Since this category of providers also has the HR

domain experience, it is expected that these companies will be able to


rapidly integrate their BPO capabilities to offer complete solutions

in this space.

Outsourced F&A services are focused on transaction processing and are

driven predominantly by demand from the retail banking and credit card

products in the BFSI sector.

CCrreeddiitt CCaarrdd PPrroocceessssiinngg:: The rapid growth of the credit card market has

resulted in a phenomenal increase in the transaction processing work,

such as processing of payments and collections. Banks increasingly

outsource the billing and collections to regional players.

EElleeccttrroonniicc BBiillll PPaayymmeenntt ((EEBBPP)):: Offered by many of the leading banks, this is

an area that has witnessed significant traction for outsourcing. Today some

of India's leading private sector banks such as ICICI, HDFC, Citibank, ABN

Amro, etc., as well as public sector banks, such as SBI and Punjab National

Bank, have already outsourced their EBP services to specialist firms like

BillJunction and BillDesk. These service providers follow a pay-per-use

transaction model. Depending on the customer base, both banks and

utilities are charged anything between Rs 4-7 per transaction. In case of a

low frequency of transactions, the service provider will charge a minimum

annual fee as security.

It is pertinent to note that there are several professional firms that offer

services such as accounting and audit, tax consulting, etc. that could

technically fall within the definition of ITES-BPO (as they may be provided

for a professional fee on a termed contract). However, these services have

not been included in our analysis.

As the industry evolves, other processes will be increasingly outsourced. In

India, there are small discrete outsourcing contracts in specific areas.

However, these are still quite small. Specific examples of activities included

in this category are:

Participant/audience contact for television game shows, such as the

famous 'Kaun Banega Crorepati', ' Indian Idol', etc., are outsourced by the

respective channels, to specialist service providers such as Dialnet; who

manage services like the interactive Voice Response (IVR) systems for their

customers.

Order management: While this 3PL (third party logistics) service is still in

the developmental stage in India, there are specific cases where logistics

vendors are taking total end-to-end logistics deals and where order

management is a highly IT-enabled process.


KKeeyy VVeerrttiiccaall MMaarrkkeettss

The domestic ITES-BPO business is at a nascent stage, with not many

industry segments having adopted outsourcing on a large scale. BFSI,

telecom, and consumer durables are the early adopters of ITES-BPO and

currently account for nearly three-fourths of the business in this area.

Services demanded by these segments are concentrated in segments such

as customer care, sales and marketing, and transaction processing. Other

emerging vertical markets with significant potential for the already defined

service lines include aviation, hospitality, retail, and IT and ITES.

Accounting for over 47 percent of the market, BFSI is the single largest

vertical for ITES-BPO demand in the domestic sector. The aggressive push

by private sector banks in an attempt to gain market share and the

retaliatory efforts by the public sector banks have been the primary drivers

of demand in this vertical. Key service lines for this segment include

customer care, sales and marketing, and transaction processing.

On the sales and marketing front, a large part of the outsourcing goes to

smaller regional players, who primarily act as marketing agents for the

banks. These agents also handle a large part of the initial processing work

for the banks.

DDeeaallss iinn DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: BBaannkkiinngg

CCuussttoommeerr:: SSttaattee BBaannkk ooff IInnddiiaa

VVeennddoorr:: MMpphhaassiiSS BBPPOO

DDeeaall SSiizzee:: RRss.. 22550000 mmiilllliioonn

DDuurraattiioonn:: MMuullttii YYeeaarr ((33--55))

EEnnggaaggeemmeenntt ttyyppee:: The engagement involves the handling of customer support operations, mainly

the voice-based inbound services.

BFSI, telecom, and consumer

durables are the early

adopters of ITES-BPO and

currently account for nearly

three-fourths of the business

in this area


The huge growth of the mobile telephony sector in India is continuing

unabated. The growth is expected to sustain as telecom penetrates to

smaller cities and towns. Telecom service providers are now facing the

challenge of scaling up their systems to meet this growth without losing

their increasingly demanding customer base to competition. With

technological offerings becoming universal, customer service is becoming

a key differentiator for players. As a result, this vertical is a key driver of

demand for customer care and sales and marketing services. This domain

has already witnessed a couple of large outsourcing deals in the recent

months and the trend is expected to continue.

Having initially tested waters small internal teams, the manufacturing

sector, covering areas such as consumer durables, packaged consumer

groups and automobiles, have started signing discrete ITES-BPO

outsourcing contracts. Customer contact activities for support, loyalty

initiatives and promotional campaigns are the key activities being

outsourced in this segment.

DDeeaallss iinn tthhee DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: TTeelleeccoomm VVeerrttiiccaall

CCuussttoommeerr:: BBSSNNLL

VVeennddoorr:: SSppaannccoo TTeellee--SSppaarrsshh


DDuurraattiioonn:: tthhrreeee yyeeaarrss

EEnnggaaggeemmeenntt ttyyppee:: The engagement has been undertaking to provide call center services to BSNL

customers. Under the contract, Spanco will be responsible for BSNL's domestic call center

operations. The company will cater to BSNL's mobile and broadband subscribers' inbound calls.

The contract will cover all four of BSNL regions-West (Pune), East (Kolkata), South (Bangalore), and

North (Gurgaon).

DDoommeessttiicc IITTEESS--BBPPOO SSeeccttoorr:: TThhee LLaarrggeesstt DDeeaall

CCuussttoommeerr:: BBhhaarrttii TTeellee--VVeennttuurreess

VVeennddoorr:: NNoorrtteell aanndd ffoouurr BBPPOO vveennddoorrss ((IIBBMM--DDaakksshh,, MMpphhaassiiss,, HHTTMMTT,, TTeelleeTTeecchh))

DDeeaall SSiizzee:: RRss.. 1100,,000000 mmiilllliioonn

DDuurraattiioonn:: SSpprreeaadd ttoo ffoouurr ttoo ffiivvee yyeeaarrss

EEnnggaaggeemmeenntt ttyyppee:: An agreement has been signed with four BPO vendors to outsource Bharti's call

center operations. As part of the customer service agreements, HTMT will set up the contact

centers at Chennai and Hyderabad; IBM Daksh at Chandigarh, Kolkata, and Pune; TeleTech in the

NCR; and MphasiS in the NCR and at Bangalore. Nortel will deliver technology and expert

resources required to provide customer services to Bharti's customers via voice, advanced speech

recognition, multimedia contact center, unified messaging, computer-telephony integration, IP-

enabled video communication, and receiving and rout-ing calls to the respective customer service

partners, 5000-6000 seats will be created with the four BPO vendors. All BPO partners will have

the same processes, as they will function on the same Nortel platform. The agreements will cover

all of the 12 million Airtel customers in the 23 circles.

This is by far the largest deal in the domestic BPO space and the sheer size of this deal and the

comprehensive nature of the deal is expected to act as a reference point and help give a further

boost to the domestic BPO market.


Other areas with significant potential to drive ITES-BPO demand include

sectors such as airlines, retail, hospitality, media, healthcare and ITES-BPO

itself.

DDeeaallss iinn tthhee DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: CCoonnssuummeerr DDuurraabblleess

CCuussttoommeerr:: WWhhiirrllppooooll

VVeennddoorr:: IInnffoovviissiioonn

DDeeaall SSiizzee:: NNAA

DDuurraattiioonn:: SSiinnccee 11999999

EEnnggaaggeemmeenntt ttyyppee:: Infovision is providing customer support activities to its client. These include a

customer interaction center, inbound complaint management and queries and outbound dealer

calling. Infovision also manages the client's customer database, helps in managing merchandise,

conducting contests, and generating analytical reports.

DDeeaallss iinn tthhee DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: PPhhaarrmmaacceeuuttiiccaallss

CCuussttoommeerr:: GGllaaxxooSSmmiitthhKKlliinnee CCoonnssuummeerr HHeeaalltthh CCaarree LLttdd..

VVeennddoorr:: MMaagguuss CCuussttoommeerr DDiiaalloogg

DDeeaall SSiizzee:: NNAA DDuurraattiioonn:: NNAA

EEnnggaaggeemmeenntt ttyyppee:: An employee suggestion scheme in a manufacturing setup, with 750+ em-

ployees, which generated 17,000+ suggestions in three years in that company. Initially this was

taken care of by the HR department. A need was felt to outsource this function to some other party.

GSK gave the contract to Magus Customer Dialog Pvt Ltd. In the factories, the workmen have a lot

of ideas to improve productivity, efficiency and re-duce waste. Magus gathers these input from

them and sends them to the concerned depart-ment heads to get their comments. After a

thorough study by a panel of members, some ideas are accepted for implementation. The best

implemented ideas are rewarded by the management.

DDeeaallss iinn tthhee DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: AAiirrlliinneess VVeerrttiiccaall

CCuussttoommeerr:: AAiirr IInnddiiaa

VVeennddoorr:: SSppaarrsshh ((SSppaannccoo TTeellee))


DDuurraattiioonn:: TThhrreeee yyeeaarrss

EEnnggaaggeemmeenntt ttyyppee:: Sparsh (The domestic BPO arm of Spanco Tele) is already providing the in-

bound customer service to all domestic passengers of Air India. Under the new contract, Spanco

handles inbound services, such as calls relating to flight information, booking and reservations,

hotel and limo bookings, baggage, and tele-check-in, and complaints.


VVeennddoorr LLaannddssccaappee

According to IDC analysis, third-party service providers account for 70-80

percent of the domestic market and captive units (as defined in the study)

account for the balance 20-30 percent of the market.

The third-party vendor landscape for ITES-BPO in India may be classified

into four categories:

DDeeaallss iinn DDoommeessttiicc IITTEESS--BBPPOO SSppaaccee:: MMeeddiiaa VVeerrttiiccaall

CCuussttoommeerr:: SSttaarr PPlluuss ((KKBBCC))

VVeennddoorr:: DDiiaallnneett CCoommmmuunniiccaattiioonnss LLttdd..

EEnnggaaggeemmeenntt ttyyppee:: IIVVRR ppllaattffoorrmm bbaasseedd sseerrvviicceess

DDuurraattiioonn:: DDuurriinngg tthhee ssppaann ooff tthhee sshhooww ((aallmmoosstt aa yyeeaarr))

BBeenneeffiittss GGaaiinneedd bbyy tthhee CClliieenntt:: Star Plus hosted the biggest game show - "Kaun Banega Crorepati",

the Indian version of 'Who Wants to be a Millionaire' which used the IVR platform of Dialnet for the

callers to participate in the quiz on the phone for screening of the contest-ants. Dialnet handled

over 100 million calls during the span of the show, a record of sorts for the value-added voice

applications market in India.

Other prominent IVR applications for Star TV: Include the Dabur Star Parivaar Poll, Samsung Star

Plus Tumse Hai Zindagi Contest, Krishna Arjun Singapore Contest, Asian Paints Screen jodi No. 1

Contest, Whirlpool GR8 Women Awards, among others.

DDoommeessttiicc IITTEESS--BBPPOO:: EEmmeerrggiinngg VVeerrttiiccaallss--HHeeaalltthhccaarree

CCuussttoommeerr:: AAppoolllloo HHoossppiittaallss

VVeennddoorr:: CCuussttoommeerr FFiirrsstt

DDeeaall SSiizzee:: NNAA

DDuurraattiioonn:: NNAA

EEnnggaaggeemmeenntt ttyyppee:: This will be clone via a specific toll-free number, proposed to be termed as

"Apollo Doctors." The work done by Customer First will involve information dissemination,

resolution of customer queries on various plans, coordinating customer requirements with the

hospital team and electronic marketing, among others.

DDoommeessttiicc IITTEESS--BBPPOO:: EEmmeerrggiinngg VVeerrttiiccaallss--MMeeddiiaa

CCuussttoommeerr:: SSppaaccee TTVV ((JJVV--SSttaarr ggrroouupp aanndd TTaattaa GGrroouupp))

VVeennddoorr:: TTeennddeerrss iinnvviitteedd

DDeeaall SSiizzee:: MMuullttii--bbiilllliioonn

DDuurraattiioonn:: SSpprreeaadd oovveerr ffoouurr ttoo ffiivvee yyeeaarrss

EEnnggaaggeemmeenntt ttyyppee:: The work is scheduled to begin with over 300 people across the country. The

company is looking at a partnership model for its call center operations, primarily to pro-vide

improved performance and to deliver greater efficiencies. It is to spread across 23 states and over

100 cities and towns in the country. The services to be offered include programming options, pay-

per-view movies and events, Space TV free view, local channels, Space TV Para Todos service,

international services, channel line-up, channel descriptions, ordering addi-tional receivers,

installing equipment, advanced technologies, technical support, technical help forums, on-screen

messages, parental controls, favorite channels feature and phone-line connection, etc.

Third-party service providers

account for 70-80 percent of

the domestic market


• Players predominantly focused on the domestic market; may have some

international customers/business

• Players predominantly focused on exports with some domestic business

• Niche horizontal-focused service providers, such as HR payroll

processing services

• Smaller regional players, largely undertaking low-end short-term

projects

The first category comprising ITES-BPO players is predominantly focused on

the domestic market and accounts for 20-30 percent of the market. This

category includes players such as Sparsh (Spanco Tele), CustomerFirst,

Magus, InfoVision, etc.

Over the past year, several vendors who have so far focused on the

international markets have also started showing interest in the domestic

market. A few have also bid for and successfully won key contracts in recent

months. However, the domestic business still accounts for a very small

proportion of their overall business. With the demand for export markets

remaining strong, their domestic-export mix is not expected to change in a

hurry. Prominent players in this category include MphasiS, IBM Daksh,

HTMT, etc. While the combined market share of these players was less than

five percent in 2004, continued focus and wins such as those witnessed in

the past few months are likely to the market share of this segment grow in

the coming years.

Niche horizontal-focused service providers: Are mainly HR outsourcing

firms. HR outsourcing, primarily driven by payroll processing services, has

seen significant growth and is expected to move up the value chain with the

vendors offering more complete solutions. The major players in this space

are Hewitt, Ma Foi, Cross Domain, Pro Lease, etc. These firms account for

10 to 15 percent of the market.

There are also small regional players who mainly handle activities such as

direct marketing and related activities, collections, content development,

etc. The significant area within this category is the direct selling agencies

employed primarily by the banks and telecom service providers.

KKeeyy FFiinnddiinnggss ffrroomm EEnndd--uusseerr aanndd SSeerrvviiccee PPrroovviiddeerr SSuurrvveeyy''ss

As a part of this study, IDC surveyed 400 end user organizations and 25

service providers to determine their perspectives on ITES-BPO in the

domestic market.


While much of the data inputs have been incorporated in the estimates

presented earlier, there were several interesting observations about user

and service provider attitudes towards domestic ITES-BPO.

• Domestic companies think that outsourcing will not give them too much

of a cost advantage and are skeptical about outsourcing because of the

security and returns issues.

• Most of the ITES-BPO vendors perceive that the domestic market is not

ready and is unattractive as compared to the export market.

• Users find that the ITES-BPO firms in India are not really interested in

the domestic business. This point of view is partly correct; because

many of the larger export focused ITES-BPO firms still do not want to

look at the domestic market.

• At the same time, there are ITES-BPO vendors who have a definite focus

on the domestic market, and if the Indian firms wish to outsource any

business process there are enough vendors in this space with high

quality facilities and resources to cater to their needs.

• The domestic ITES-BPO sector is being driven by a few companies in

select domains, such as telecom, banking, airlines, consumer durables,

etc. While some of these firms have a very positive outlook towards

business process outsourcing, a vast majority of the Indian firms are still

not clear about their plans for ITES-BPO.

Highlights of the end-user organization surveys and in-depth interviews

with business executives and members of senior management at some of

the large user organizations were2 :

• While ITES-BPO penetration (to external/independent entities) is still

very low, a sizeable proportion of end user organizations have an

internal division to focus on these specific business processes.

• Expressed intent to move from an in-house captive sourcing model to

outsourcing is very low.

2While the respective business managers and/or the CEOs were considered the ideal respondentsto address the questions on ITES-BPO, most of the responses obtained from this sample (even forITES-BPO) have been provided by the CIO/IT managers. This was because most organizationsdid not have a separate office (e.g. project management office) or a separate person responsible formanaging external ITES-BPO engagements. As a result, the tabulated responses may stronglyreflect the perspectives of the CIO/IT managers and may vary from the views of the businessmanagers.

IDC analysts subsequently interviewed business managers in some of the large end-user firms andobserved a relatively more positive outlook towards outsourcing (as compared to the observationsfrom the data tabulated from the responses from the CIOs/IT managers).


• Satisfaction with existing systems, lack of trust in outsourced service

providers, high cost of services, unavailability of suitable vendors and

lack of skilled personnel (with vendors) were the most commonly cited

reasons for not looking at outsourcing.

• Demonstrated focus on serving the domestic market and showcased

examples of successful engagements with domestic customers are key

factors that would make outsourcing a more attractive alternative for

end users.

While less than 5 percent of the respondent organizations spend on ITES-

BPO (non-captive), nearly a third of the respondents have a separate

internal department for specific business processes.

110 respondents had a separate internal department (not necessarily a

captive unit) to look after their specific business processes. This indicates

that a significant number of organizations have realized the importance of

having a separate division to handle specific processes such as customer

support. In other words, the customer support function for many firms is

clearly becoming a separate division. This is, in fact, the precursor to

outsourcing, and a positive trend.

As can be seen from the table above, the presence of a separate division

to handle business processes is more evident in the case of larger

companies.

…a sizeable proportion of end

user organizations have an

internal division to focus on

these specific business

processes.

While ITES-BPO penetration

(to external/independent

entities) is still very low,…


Less than 10 percent of the respondent organizations are considering

plans to shift from in-house sourcing to an external service provider.

Of the above respondents who have been handling business processes

internally, 90 percent respondents are very comfortable with their internal

operations and are not keen on outsourcing them to external service

providers. Only ten companies showed a positive response towards

outsourcing their activities to a third-party vendor. Most of the companies

planning to shift to the outsourcing model will take from one to two years

to do so.

The most important reason for not outsourcing any of their non-core

activities to some third-party vendor is that they never felt a need to

outsource, and this response came from 82 percent of the companies.

The second most important reason is the lack of trust is external service

providers, as indicated by the response of almost 45 percent of the

respondents.

Almost 27 percent said that external service providers seek a high price for

their services, while 18.2 percent cited the non-availability of the vendors

and the same percentage responded that external vendors didn't have

personnel with the desired skill set.

Demonstrated focus on serving the domestic market and showcased

examples of successful engagements with domestic customers are key

factors that will make outsourcing a more attractive alternative for end

users in medium- as well as large-sized organizations.

Satisfaction with the existing

systems, lack of trust in

outsourced service providers,

high cost of services were the

most commonly cited reasons

for not looking to outsource.

Expressed intent to move from

an in-house captive sourcing

model to outsourcing is low.




II.. PPrrooffiillee ooff ssuurrvveeyy rreessppoonnddeenntt

Appendix



IIII.. RReessppoonnsseess ttoo tthhee ssuurrvveeyy






GGLLOOSSSSAARRYY

IITT SSeerrvviicceess EEnnggaaggeemmeenntt TTyyppeess:: DDeettaaiilleedd DDeeffiinniittiioonnss ((SSoouurrccee:: IIDDCC SSeerrvviicceess

TTaaxxoonnoommyy))

IITT CCoonnssuullttiinngg

IT consulting services include advisory services around information

technology. Examples of IT consulting include evaluating an IS

organisation's help desk operation or determining the best technology to

meet a company's order-fulfillment process. IT consulting can also include

product-specific consulting.

•• EExxcceeppttiioonnss aanndd EExxcclluussiioonnss

Some regions include consulting around solution services in the IT

consulting market (e.g., Japan) and others do not (e.g. Asia-Pacific).

SSyysstteemmss IInntteeggrraattiioonn ((SSII))

SI services include the planning, design, implementation, and project

management of a solution that addresses a customer's specific technical

or business needs. SI involves systems and custom application

development, as well as implementation and integration of enterprise

packaged software. An SI contract is a large-scale project contract.

•• EExxcceeppttiioonnss aanndd eexxcclluussiioonnss.. NNoonnee..

NNeettwwoorrkk CCoonnssuullttiinngg aanndd IInntteeggrraattiioonn SSeerrvviicceess ((NNCCIISS))

These services involve the activities associated with planning for,

designing, and building enterprise local and wide area data networks

(commonly known as LANs and WANs), including multiservice, converged

wireless and wireline networks that allow for voice, video, and data

applications (such as VoIP and unified messaging) to be propagated across

a single, common infrastructure. In addition, the network consulting and

integration market includes services provided to the telecommunications

industry for the planning and building of the public integrated voice and

data networks and wireless infrastructures used by telecommunications

service providers to provide services to their customers. These services will

be presented as a separate line item within the NCIS market size and

forecast.

The activities covered in this market include operations assessment,

network planning and design, installation, configuration, project

management, staging, and security implementation.

•• EExxcceeppttiioonnss aanndd EExxcclluussiioonnss

Excluded from this definition are services provided for the planning,


building, or operations of nonconverged enterprise voice networks and

their supporting devices (e.g., traditional PBXs).

CCuussttoomm AApppplliiccaattiioonn DDeevveellooppmmeenntt ((CCAADD))

CAD services deliver customised development of software applications and

interfaces, as well as enhancements to existing packaged applications or

pre-engineered templates.

•• EExxcceeppttiioonnss aanndd EExxcclluussiioonnss.. NNoonnee..

IISS OOuuttssoouurrcciinngg ((IISSOO))

IS outsourcing services involve a long-term, contractual arrangement in

which a service provider takes ownership of and responsibility for

managing all or part of a client's information systems infrastructure and

operations. These are broad engagements that typically include

responsibility for the systems, network, and application components of the

IS infrastructure.


NNeettwwoorrkk aanndd DDeesskkttoopp OOuuttssoouurrcciinngg SSeerrvviicceess ((NNDDOOSS))

NDOS involves the set of activities that are associated with outsourcing the

support and management of one or more elements of the client/server and

network communications infrastructure of an organisation.

•• EExxcceeppttiioonnss aanndd EExxcclluussiioonnss..

In Asia/Pacific and Europe, the Middle East, and Africa (EMEA), IDC covers

network management and desktop management as separate services

markets.

Application Management (AM)

AM's core value proposition is the maintenance and daily operation of

business applications. AM refers to the ongoing support of an application

or system of applications. These applications can be custom products built

to suit the needs of the client organisation, packaged applications, or a

combination of third-party products and customised components.


Often, AM services are embedded in much larger contracts that could

encompass such services as network operations and maintenance,

desktop and hosting services, business process outsourcing, and help

desk support. In such cases, IDC would not count the data as part of the

discrete AM forecast.


Software as a Service (SaaS)

Like AM, SaaS refers to the ongoing support of applications. The core value

of these services is also maintenance and daily operation of business and

consumer applications. The following are core defining characteristics of

SaaS:

• The main value of SaaS is the provisioning of network-based access to

and management of a commercially available (e.g., not custom)

application.

• SaaS activities are managed from central locations, rather than at each

customer's site. Customers access applications remotely.

• SaaS activities are characteristically closer to one-to-many services than

one-to-one services. These include architecture, pricing, partnering, and

management characteristics.

• There are three main components of SaaS: application service

provisioning (ASP), Webnative applications, and hosted Web services

applications.


HHoossttiinngg IInnffrraassttrruuccttuurree SSeerrvviicceess//SSyysstteemm IInnffrraassttrruuccttuurree SSeerrvviicceess

PPrroovviissiioonniinngg

Hosting infrastructure services provide access to systems infrastructure

and/or management that supports infrastructure-related services,

including Web hosting, storage services, content delivery networks,

network management, desktop management, and systems management.


HHaarrddwwaarree DDeeppllooyy aanndd SSuuppppoorrtt ((HHWWDD&&SS))

This market captures support (i.e., telephone support, remote diagnostics,

electronic support, onsite support, predictive/preventive maintenance,

parts repair, inventory/asset management services) and installation

contracts associated with hardware. The hardware included comprises

servers, PCs (desktop and portable), PDAs, storage devices, printers and

peripherals, copiers, and networking equipment.


In the United States, this market includes a submarket: network product

support. Outside the United States, it is a single market. The US submarket

is defined as follows:


Cutomer Care These services support customer care activities

and business processes associates with the

customer center. Dominated by inbound contact

(yet inclusive of out bound interaction as well),

customer care typically takes place via the

telephone, but may also occur via e-mail, chat, fax,

self-help, or mail.

• Billing inquiries

• Account maintenance

• General information enquiry

NNeettwwoorrkk PPrroodduucctt SSuuppppoorrtt SSeerrvviicceess ((NNPPSSSS))

Includes telephone support, remote diagnostics, electronic support, onsite

support, predictive/ preventive maintenance, parts repair, and

inventory/asset management services.

SSooffttwwaarree DDeeppllooyy aanndd SSuuppppoorrtt ((SSWWDD&&SS))

These services encompass spending on technical support and deployment

services for all types of software.

•• EExxcceeppttiioonnss aanndd EExxcclluussiioonnss -- NNoonnee..

IITT EEdduuccaattiioonn aanndd TTrraaiinniinngg

IT education and training services include the content processes or

structures that support employee, client, or supply chain development to

meet identified business requirements related to developing,

administrating, or using information technology.


This category excludes business skills training, learning services, or

learning infrastructure engagement.

ITES-BPO DEFINITIONS CATEGORIES/SERVICE

SERVICES LINESINCLUDED IN

THE SCOPE OF

THIS STUDY

Sales &

Marketing

The includes the services that augment or manage

the business processes that are associated with a

companie’s need to market and sell its goods and

services. Specific services may address leads

development and qualification selling products

and services, channel development, post-sale

support, customer service, advertising, brand

management, public relations, direct marketing,

promotional development, corporate

communications, conference sponsorship,

business development and market research.

• Account activation/balance

transfer

• Product/Service direct sales

• Up-selling

• Cross-selling


IIDDCC DDEEFFIINNIITTIIOONNSS--VVEERRTTIICCAALLSS

FFIINNAANNCCEE

This is a macro vertical composed of banking, insurance, and financial

markets, defined as follows:

•• BBaannkkiinngg refers to all credit institutions by any name that accepts

deposits from individuals or entities and use those funds for any of

various forms of financial and/or monetary intermediation. Examples

include central banks, retail banks, commercial banks, savings banks,

savings and loan associations, and credit unions. Banking also refers to

credit institutions that back or execute loans without having received

deposits (e.g., consumer finance companies and central credit card

services).

•• IInnssuurraannccee comprises all establishments primarily in the business of

offering non-compulsory insurance of any kind (e.g., life, fire and

casualty, medical service, and pension funds).

•• FFiinnaanncciiaall markets include a variety of institutions that facilitate and

execute capital transfers (e.g., security and commodity exchanges and

money markets including currency exchange).

MMaannuuffaaccttuurriinngg

Manufacturing is a macro vertical that can be divided in a number of ways.

IDC has selected two broad divisions, discrete and process manufacturing,

as the most relevant for IT purposes and defines them as follows:

11.. DDiissccrreettee mmaannuuffaaccttuurriinngg is manufacturing in which products are

produced through the assembly of distinct and/or individual parts.

Examples include machinery, automobiles, and apparel. Discrete

manufacturing can be considered to be a superset encompassing

transportation equipment, office automation and computers, other

Human

Resources

HR management services as those sevices that

support the core HR activities and business

processes associated with HR administration.

• Payroll processing

• Benifits administration

• Employee communication

administration

Finance and

Accounting

F&A services as those associated with a

company’s need to manage to flow of money into

out of the organisation.

• Accounts payable, Accounts

receivable

• Credit and collections,

Billing/Invoicing

Others Categories not included in the above • Administration

• e-Learning

• Order management


electronic equipment and components, and other discrete

manufacturing, each defined as follows:

a) Transportation equipment involves the manufacturing of complete

equipment designed to move passengers and/or freight as well as

major parts required for its assembly. The parts included are those

integrated into the body of the equipment and those that power it;

ancillary parts and components (e.g., tires, windows, and batteries)

are treated in other manufacturing subdivisions as appropriate.

b) Office automation and computers refers to the assembly of digital

computers, associated peripherals, and office-related equipment,

such as typewriters and word-processing equipment, copiers,

automatic teller machines (ATMs), and point-of-sale (POS) devices.

IDC does not count the manufacture of information technology (IT)

products for use by employees of the manufacturer as part of the IT

market.

c) Other electronic equipment and components refers to the

manufacture of equipment that generates, stores, and/or transforms

electric energy, with the exception of computers.

d) Other discrete manufacturing refers to the elements of discrete

manufacturing remaining after setting aside transportation

equipment, office automation and computers, and other electronic

equipment and components.

22.. PPrroocceessss mmaannuuffaaccttuurriinngg is manufacturing in which the basic product is

created primarily through one or more continuous activities, including

milling, curing, weaving, smelting, and/or refining. Process

manufacturing can be considered to be a superset of the chemical

industry, petroleum refining, and other process manufacturing, each

defined as follows:

a) Chemical industry includes organisations creating chemicals and

their combinations, including pharmaceuticals.

b) Petroleum refining is the process of refining petroleum and

manufacturing primary derivatives, such as lubricating oils.

c) Other process manufacturing refers to the elements of process

manufacturing after the chemicals industry and petroleum refining

have been set aside.

RReettaaiill//WWhhoolleessaallee

Retail/wholesale is a macro vertical, comprising retail and wholesale of

goods, defined as follows:

11.. RReettaaiill includes enterprises involved in the sale or resale of goods,


sometimes with related services (e.g. preparation of food prior to

service in a restaurant or maintenance of goods sold) primarily,

although not necessarily exclusively, to individual consumers. Because

the same company can play roles in both retail and wholesale

distribution, the distinction is made on the primary sales targets. If the

enterprise's activity is primarily a service, such as repairs, it is counted

by IDC as within the service sector for the purpose of global roll-ups,

even if a minor amount of consumer product sales occurs.

22.. WWhhoolleessaallee includes enterprises primarily involved in the sale of goods to

other enterprises or organisations, whether for resale (e.g., by retail

companies or other wholesale organisations), for value add by

manufacturing entities, or for internal consumption.

HHeeaalltthhccaarree

Healthcare is represented by healthcare providers, including individual

practitioners, clinics, health maintenance organisations (HMOs), hospitals,

hospices, home care services, and related

analytic and/or diagnostic laboratories. Note that, as a separate industry,

pharmaceutical preparation is counted in process manufacturing, while the

distribution of pharmaceuticals is divided

between wholesale and retail.

GGoovveerrnnmmeenntt//EEdduuccaattiioonn

Government/Education is a macro category comprising government and

education, defined as follows:

•• EEdduuccaattiioonn refers to all institutions dedicated to academic and/or

technical/vocational instruction, with the exception of certain training

environments that are better treated as social services (e.g., job training

for the unemployed).

•• GGoovveerrnnmmeenntt is a category consisting of all public administration,

defense, and justice activities. With few exceptions, where governments

play the same role as private entities (e.g. in owning and running

utilities, hospitals, schools, or means of transportation), priority is

accorded to keeping all similar functions together (thus, in the examples

cited, the government owned-and-run organisations would be counted

in utilities, health, education, and transportation, respectively). The key

exception in IDC's worldwide roll-ups is social services, for which

government-financed activities tend to function differently from social

services with other origins. The government grouping divides further into

the following:

•• CCeennttrraall ggoovveerrnnmmeennttss are the governmental structures associated with

national self-identity and responsible for all citizens, typically

headquartered in one or more capital city, but radiating throughout


society. Where applicable, the worldwide roll-ups will also include

supranational bodies here when they have a discernible regulatory

and/or legislative role

•• LLooccaall ggoovveerrnnmmeennttss are any governmental structures (e.g., state,

province, county, city, and town) other than and lower in rank than the

central government. In the case of a city-state such as Singapore, IDC

assigns all governmental activities to the central government and leaves

the local government as a null set.

UUTTIILLIITTIIEESS

Utilities include organisations created to generate and/or disseminate

broad social necessities such as electricity and water.

TTeelleeccoommmmuunniiccaattiioonnss

Communications include services providing point-to-point contact by

telephone, telegraph, or any convergence device. The value of the

hardware used to transmit or receive telecommunications is counted in

discrete manufacturing

OOTTHHEERR

Other is a macro vertical composed of media, transportation, resource

industries, services, and home, defined as follows:

11.. MMeeddiiaa include entities engaged in creating cultural content, associating

themselves with it, and/or disseminating it through various means,

including broadcasting, publishing, and visual projection. Dissemination

of cultural content not directly associated with it (e.g. distribution of

printed and other matter through postal services) is not differentiated

from other transportation services. The value of the hardware used to

transmit or receive the content is counted in discrete manufacturing.

22.. TTrraannssppoorrttaattiioonn is the operation of means of moving freight and/or

passengers, with services defined as preliminary and support services

provided to assist transportation companies in operating efficiently

and/or end users in making use of transportation facilities (e.g. storage

and warehousing, travel agencies, and tour operators).

33.. RReessoouurrccee industries include fuel extraction; agriculture, mining, and

other extractive industries; and construction. The following are

definitions for these groupings:

aa)) FFuueell eexxttrraaccttiioonn is the exploration and extraction of natural fuels (i.e.,

coal, gas, and petroleum).

bb)) AAggrriiccuullttuurree,, mmiinniinngg,, aanndd ootthheerr eexxttrraaccttiivvee iinndduussttrriieess involve the

process of cultivating or otherwise exploiting natural resources.


cc)) CCoonnssttrruuccttiioonn is the contracting and building of commercial, public,

and residential structures and other projects (e.g., highways),

including closely related specialized activities such as painting,

roofing, and electrical work when entities specialising in providing

these services through large contracts are involved. The difference

between, for example, a special trade contractor for electrical work

and an electrician providing maintenance services (in "personal

services," defined below) is congruent with the distinction between

wholesale and retail distribution.

SSEERRVVIICCEESS

Services include business services and personal services with the following

definitions:

• Business services are business-to-business services (occasionally with

major components servicing individuals as well), often staffed at higher

echelons with individuals requiring special certification.

• Personal services focus primarily on the consumer (occasionally with a

notable business-to-business component).

Documents

IDC Report 2006 FNL on Domestic Services Market Opportunities