IT Industry in Transformation

Opportunities and Challenges for India

The rapid expansion of the IT industry has been a key feature of economic development worldwide. The IT
industry has become a main source for export earnings and also a key driver in the transformation of the domestic economy and its international interface in several Asian economies. In the past decades, East
Asian countries have been successful in capturing a large share of the global sourcing of IT hardware, and India has emerged as a major center for offshoring of IT services.

These sectors, however, continue to face multiple challenges such as the need to respond quickly to changes in technology and demand. This is illustrated by the fact that the IT industry in India went through a radical transformation in the 1990s and the 2000s and is poised to be reshaped again in the 2010s. The deceleration
in global demand for IT following the global financial crisis in September 2008 and the subsequent economic recovery phase underscored the opportunities and challenges which the global IT industry will have to deal with in the 2010s.

A study compares developments in the 2000s and to what is likely to happen in the 2010-2020 period. It contains analysis of the global economic slowdown in 2008 and 2009 as well as long term IT-BPO industry transformation issues as manifested in the revenue earnings, industry linkages, human resource, finance, and industrial organization and innovation developments. It highlights opportunities as well as factors constraining growth and provides growth scenarios for exports and the domestic market for the 2010s. Furthermore,
it points to key corporate strategy and public policy imperatives and lessons in enabling continued growth of the IT-BPO industry and the offshoring business in India and internationally.

This study identifies three major growth scenarios for the IT products and services industry and the BPO sector in India for the 2010-2020 period

•  The low growth scenario: ITBPO industry revenue reaches $185 billion level by 2020 out of which exports accounts for 140 billion while the domestic market accounts for 45 billion. This implies an especially substantive deceleration of IT-BPO industry growth compared to the 2000s.

•  The medium growth scenario: IT-BPO industry revenue reaches the $255 billion level by 2020 out of which exports accounts for 200 billion while the domestic market accounts for 55 billion. This implies that IT-BPO industry growth is substantial but significantly lower than in the past.

•  The high growth scenario: ITBPO industry revenue reaches the $350 billion level by 2020 out of which exports accounts for 270 billion while the domestic market accounts for 80 billion. This implies that overall IT-BPO industry growth will grow at comparatively higher rates but the CAGR will still not reach the 2000s level.