INFORMATION AND COMMUNICATION

TECHNOLOGY SECTOR, INDIA

By Abhinav Duggal, Arushie Mangla, Nikita Singal

AUGUST 17, 2014

PANORAMA | ISSUE 2
ABSTRACT:
ICT industry refers to convergence of
telephone and computer industries
constituting a global market worth
more than 3 trillion dollars. Subject to
evolving technological changes and
rapid growth, ICT industry needs a
closer look. This report talks about the
evolution of the ICT industry and its
major classifications. It highlights the
recent trends and key drivers for the
industry growth. It also elaborates upon
the major revenue and cost drivers of
the industry.

EVOLUTION

INTRODUCTION
ICT refers to an expanding assembly of technologies that are
used to handle information and aid communication. These
include hardware, software, media for collection, storage,
processing, transmission and presentation of information in any
format (i.e., voice, data, text and image), computers, the
Internet, CD-ROMs, email, telephone, radio, television, video,
digital cameras etc.

The Indian ICT sector has evolved in three phases.

As of 2010, the Indian ICT industry contributes about 6.1% to

the national GDP, which is about 5 times of its contribution
about 10 years ago. Large players dominate the Indian ICT
sector with the top 200 firms contributing to 85% of the
revenue.

CLASSIFICATION
The ICT sector can be classified into 3 categories:

Figure 1: ICT Industry Share of Indias National GDP

The growth in the sector is primarily driven by software and

telecommunication services.

INSIDE THIS ISSUE

2. Evolution
3. Classification
4. Major Players of ICT

5. ICT Clusters
6. Revenue Drivers
7. Recent Trends

OIL AND GAS INDUSTRY : PANORAMA

ISSUE 1 | AUGUST 7, 2014

billion by 2015. The sharp rise of consumer electronics is

attributed to the growing demand of the Indian middle class and
their rising disposable income. The industry is slated to grow at
12% annually. The government is offering favorable policies to
the entire consumer electronics ecosystem right from
manufacturers to startups making mobile apps for phones,
tablets and other electronic hardware. Advanced technologies
coupled with higher competition are driving prices down,
making it more attractive for consumers to buy. The sector is
allowed a 100% Foreign Direct Investment (FDI) in electronics
hardware manufacturing.
IT/ITES, BPO
The IT market (including ITES, IT Security, and BPO) has
grown exponentially over the past decade. Global economic
uncertainty has not tainted the growth trajectory of the IT
sector in India. The current size of the IT sector, in terms of
revenue, in the financial year 2012 - 2013 is estimated to be
US$ 108 billion of which US$ 95 billion are contributed by IT
software and services. The IT/ITes/BPO industry has
tremendous scope in India and is spread across different
functions. Some of these important functions are:
Infrastructure Outsourcing: Large enterprises
need to focus on their core competencies rather than
investing time and money on setting up and managing
their IT infrastructure.
IT Consulting: Theres a need for enterprises to
adopt the latest technologies and best practices to
improve their own business processes, hence, IT
consulting is expected to grow at a more robust rate.
Business Process Outsourcing (BPO): It is
largely driven by cost-effective processes, and might
not be of significant interest to overseas ventures.
Electronic Hardware
The Indian consumer electronics industry is estimated to be
valued at US$ 5.5billion and is expected to grow to US$ 8.5

Telecommunication
India is the worlds second biggest telecom market with a total
subscriber base of 897 million at the end of April 2013 (wireless
and fixed lines). India has more than 205 million Internet users,
of which 110 million users access Internet using their mobile
devices. The telecom market can be broadly classified into
Wireless
Fixed line
Internet and Broadband
Value Added Services (VAS)
ILD (International Long Distance)/ NLD (National
Long Distance) Enterprise data
Telecom equipment and infrastructure
There is tremendous scope for developing products and services
in the mobile phone segment today. Indian mobile Value Added
Services (VAS) such as game based applications, music, and
news has grown significantly. The opportunities that lie in the
telecom sector are two-fold. First, most of the growths in the
VAS segment will come from rural areas, as smartphones are
not yet economical for rural consumers. Second, significant
smartphone growth in urban areas will unleash an opportunity
for a plethora of service providers offering applications that are
consumed by the urban population.

MAJOR PLAYERS OF ICT

FY13 Revenue by Sector and Major Players
Telecommunication S171B

Hardware - $458B

IT/ITES, BPO - $28B

OIL AND GAS INDUSTRY : PANORAMA

ISSUE 1 | AUGUST 7, 2014

ICT CLUSTERS
ICT sector has grown across the country but has been
concentrated in specific regions. These are highlighted in the
given map.

Innovative Business Models

GROWTH DRIVERS
ICT industry, especially in India is fueled by 3 key drivers.
Appealing Ecosystem
In many terms, an appealing ecosystem offered by India has
been a key driver for growth of ICT sector worldwide. It not
only offers a huge domestic market for ICT consumption, but also
offers a sizeable talent pool that can be tapped for production and
delivery of ICT services. The Asian ecosystem of many
prospective investors has initiated a shift of ICT services such as
BPO, Software Services, and backend infrastructure to Asia
from North America and Europe. This bandwagon of change is
also fueled by demographic reasons such as shrinking working age
of population in countries such as India. Also, owing to rapid
industrialization of emerging economies themselves, a large
potential domestic market is at offer.

With the emergence of mobile and cloud as the frontrunners of

ICT industry, scope of deployment of technology is increasing
and expanding. New business models utilizing cloud-based
services (such as Software as a Service (SaaS) and Platform as a
Service (PaaS)) are enabling smaller companies to deliver new
services to small and large domestic enterprises in a profitable
manner. Advent of new technology on lines of these business models
has created significant impact in sectors such as travel, healthcare
and financial services among many others. Moreover, these
models have enabled affordability, which has captured emerging
middle class. This has fueled the growth of not only electronic
hardware segment but also the telecom sector through the
medium of value added services.

Economies of Scale
ICT industry has leveraged economies of scale to grow at a
brisk pace in the past decade. Expansion in populous economies
(such as India and China) has helped the industry tap into
nascent markets and develop a huge consumer base with time.
Moreover, with lowering costs and newer technological trends, not
only large corporations but also SMEs and Startups have joined
the ICT consumer brigade. There has been a noticeable
increase in the number of educated masses, especially science
and engineering students. This has furthered the cause of ICT
industry
3

OIL AND GAS INDUSTRY : PANORAMA

ISSUE 1 | AUGUST 7, 2014

REVENUE DRIVERS FOR THE INDUSTRY

Communication

Electronic Hardware

Consumer Base
Service Rates
Value Added Services

Sales
Others(e.g. asset

Real Estate
Training & Recruitment
R&D

Infrastructure & Real Estate

R&D

Infrastructure & Real Estate

R&D
Patenting

Manpower
Repair &Maintenance
Advertising & Sales

Manufacturing
Power & Fuel
Advertising & Sales

Raw material
Power & Fuel
Advertising & Sales

Variable
Costs

Fixed
Costs

Revenue

IT
Number of projects
Size of Projects

Promotion

Promotion

maintenance, management)

Promotion

Repair &Maintenance Stores

Distribution& Storage

(consumables, etc.)

RECENT TRENDS
The Indian government has been focusing on the growth of this
sector and has allocated around 927crore to it in the past
three years. The main aim of the present Modi government for
ICT is in line with this and aims to provide better connectivity
to educational institutions, content generation and innovation of
low cost access devices. Service providers, like Tata
communications are all set to profit from the governments
agenda by scaling up and pumping investments to increase the
data center capacity in the country. The governments policies
regarding counterfeit and substandard products are also factors
encouraging the growth of ICT industries in the country. A
rising demand for storage given the immense amount of data
generation is being witnessed throughout the nation. However,
basic hindrances such as lack of internet connectivity and
assured power supply have been a major concern for companies
in the past. This has been a key reason for a slower growth of
ICT in India as compared to other nations, leading to a fall in its

References:

1.
2.
3.
4.
5.

cloud index rankings. However, given the present

governments focus on broadband connectivity and
improved access, a steeper growth in the coming years can be
expected.
Globally, IT spending is forecasted to increase by 4.5% during
2014 with the most potent growth areas being smartphones and
the software industry. Emerging markets such as India, Brazil
and Russia are expected to dominate in 2015 as the more
mature markets stabilize. Greater adoption of cloud services
may hit the sales of the traditional IT services however. The
tablet and smartphones markets are expected to grow
worldwide while the market for PCs declines. The overall surge
in the demand is set to lead to an increase in the global ICT
sector to $ 3.7 trillion.

Market Study ICT Sector India, 2011, OSEC, Switzerland

ICT: Indian Scenario for Swiss Entrepreneurs, 2013, Excubator Consulting
The ICT Sector in India: Performance, Growth and Key Challenges, 2010, OECD
Changing landscape and emerging trends: Indian IT/ITeS Sector, 2011, CII-PwC
Newspaper articles and secondary research