Employment Scenario

The employment scenario in the IT sector is expected to be very promising in

near future. Indian IT company has the project of almost two third of the company
in fortune 500 and has generated approximately 40 lakhs jobs directly. The Indian
Ministry of Electronics & IT along with NASSCO has produced few reports
which indicates a positive and encouraging future of the IT industry in India. The
NASSCOM has reported that the IT industry is going to add around 2.5-3 million
jobs by 2025. Along with this NASSCOM also criticized the mass layoff in the
IT sector and has reported that in 2017, IT industry has added 1,70,000 new jobs.
The IT industry has added 600,000 jobs in past 3 years and there is overall 3.9
million people working in the IT industry.
Indian startup sector has also contributed almost 1Lac jobs in the IT industry.
Software product market has saw a growth of 9.5% in FY2017 to reach USD 7
billion. IT services and Business process outsourcing(BPO) sector is expected to
grow at 8.5% from USD 35 billion in 2016 to an anticipated USD 37 billion in
2017.
Under the Government of Indias Digital India project, there is expected to be
increase in opportunities in the IT industry. State owned Technology park has
contributed half of the employment in the IT industry in India. BPO sector has
provided employment to 1.48 Lacs people in India and with the prospect of
creating BPO centre in North East India and other cities, this segment promises
wonderful opportunities in near future.

Key profiles in the IT Sector

There is plethora of opportunities present in IT sector in India. IT professional in

India works under following profile:

Software engineer: Software Engineer is responsible for designing and

programming system-level software: operating systems, database systems,
embedded systems and so on. They understand how both software and hardware
function.

System Analyst: Systems analysts investigate and analyse business problems and
provides suitable solution for the business.

Business analyst: BA identifies opportunities for improvement to processes and

business operations using information technology.
Technical support: Many technical support specialists work for hardware
manufacturers and suppliers solving the problems of business customers or
consumers, but many work for end-user companies supporting, monitoring and
maintaining workplace technology and responding to users' requests for help

Technical consultant: Technical consultants provide technical expertise to, and

develop and implement IT systems for, external clients. They can be involved at
any or all stages of the project lifecycle.

Business Model
There is various business model applicable in IT industry which are as follows:

Common and Emerging Business model

In common business Model, generally IT companies are considered to be as the
creator of intangible goods. In this model, Software companies create their own
software and sell it different client. Most company who creates their own software
are known as IP lessor. The company creates a standardized software and sell it
to different vendor and provides them right to use the software. If a vendor sells
or provides right to use software to another vendor then it is called IP distributor.
If a vendor provides usage rights for a SaaP offering, it acts as a lessor of physical
rack space, storage, and computer and it is known as physical lessor.
In emerging business model, large software vendor provides a combination of
goods and services and business architype. The diagram below shows the most
common archetype.
Financial Lessor: Software companies lend customers money to pay for soft-
ware license fees.

IP distributor: Software companies trade IP. They revise their IP portfolio

regularly and might decide to sell IP rights, mostly patents.

IP Broker: Large software vendors have marketplaces that their partners use to
advertise their solutions.

Hybrid Model
Most of the business model in IT industry are generally Hybrid business model.
Company chooses this model because in this model, a company can be inventor
as well as IP lessor or software company can differentiate themselves either in
Software as a Product(SaaP) or Software as a Service(SaaS). In SaaP, the
customer gets usage rights but not the ownership (Fig (a)) while in SaaS model
customer gets access and usage rights both (Fig (b)).

SAP Model

SAP is going about as a creator, which implies cash is spent on

development. In any case, by having a hybrid model, SAP's income
streams as an IP lessor and contractual worker take care of the sunk
expense of invention. SAP's plan of action likewise incorporates the IP
distributor model, in which SAP goes about as reseller and income
sharing accomplice for partner solution. SAP appropriates use rights
for its partners product while abstain from the sunk cost of developing
in these arrangements. Moreover, SAP has an IP lessor business
working specifically and in-straightforwardly with clients. While SAP
owns direct business for expansive and extensive undertakings, it
connects with partners to get little and medium-sized client
organizations. SAP acts as a physical lessor by providing hardware to
run SaaS solutions. SAP also acts as a contractor by providing
consulting, support, and maintenance services, as well as customer-
specific development for its SaaS products.

Microsoft Business model

Microsoft has direct and indirect IP- lessor business with its customer. Microsoft
has evolved its business model by partnering with Yahoo for advertisement.
Microsoft main business comes from partner ecosystems. Many hardware
providers give Microsoft OS as a part of their offering while many SaaS provider
provides their solution hosted on Microsoft platform. Along with this, Microsoft
also generates its business from appliances like Xbox and windows Live a SaaS
product.

Competitive analysis: Forces driving competition in any industry are:

1) Buyer power
2) Supplier power
3) Degree of rivalry
4) Threat of new Entrants
5) Threat of Substitute products
The impact of these factors on competitive in IT industry is shown below with
diagram which depicts that Threat of New Entrants in the industry is the key
factor that should be taken care of. We will also be discussing the impact of all
the factors on the competitiveness of IT industry.

Buyers Power

Fig: Factors affecting the Buyers bargaining power

The software market has many buyers like individual customer, private
organization and government. The private organization customers vary to very
large extent in respect of the industry they are operating. Sometimes organization
rely on single software company for outsourcing their work because it smoothens
the process of training and installation across various departments. This also
results in high switching cost for the customer. However, it also empowers the
organization with high bargaining power as many company requires many
different solutions for their different business.
Switching costs can also be lowered if software companies partner among
themselves which helps in interoperability of the application in multiple platform.
Due to presence of open source software in the market, many companies try to
shift to open source because of cost constraint and it also provides power to the
buyer. Also with the evolution of the SaaS, customer only pays when they use or
they pay a fixed amount for unlimited usage. These features has also increases
the bargaining power of the buyer.

Suppliers Power

Fig: Bargaining Power of Suppliers

In IT industry, the knowledge of the employees plays a key role in selecting a

company for outsourcing. Skilled programmer is key to success. The hardware
components are generally purchased from a single supplier because of the
differentiated product offered from the player. This also provides power to
supplier. As most of the software are designed for particular system hardware
therefore increases the bargaining power of supplier. Forwards integration in the
industry is quite rare as software production entails a highly complicated process
with large amounts of proprietary knowledge, which directly weakens supplier
power. However, because of changing market of hardware and software, supplier
wants to forward integrate.

Threat of New Entrants

Fig: Impact of new Entrants

The software industry is hugely dependent on the skills of the employees.

Employees and hardware in software industry are both key inputs and with
increasing the labor market the affluence of the skilled employees is eased and
low-cost hardware eases the access of all the requirements. In terms of
distribution, with the advancement of the technology in payment and distribution
system, allows the new entrants to exploit the market.
Also patents and intellectual properties in current scenario plays a vital role as
many big giants has to face fine related to patent violation. Therefore, new comers
should carefully take into consideration about how much time it will take and
which may discourage new entrants with proprietary strategies.
A large software company can acquire the small company for the access of the
intellectual property. Also, in Software Industry Research and Development
plays a key role in new technology development. In this case the incumbent can
have an advantage over the new entrants.
Threat of Substitute

Fig: Threat of Substitute

The substitute in software industry is open source software product, free web
based application and pirated version of product. Open source products are good
alternative to the licensed one because of very less cost involved. Along with this,
the bug fixing time in open source product is relatively very low as compare to
licensed products. Few websites like Stack overflow, has given access to a gamut
of information to the programmers that is unavailable for many other
programmers. Open source products can cause compatibility issue and also
requires expertise to use them. The availability of the application on the internet
has caused piracy and with advent of Google applications, they pose a significant
threat to conventional software market.

Degree of Rivalry

A quickly extending market permits programming organizations to develop their

own particular income without having such a negative effect on competitors
market share of the industry, in this manner facilitating competition; in spite of
the fact that this relies upon the specific specialization of every product
organization. Advances in innovation imply that products are persistently being
acquainted with the market, improving competition and permitting new rival the
likelihood of picking up piece of the overall industry. The market is notable for
seeking after patent prosecution, especially among the major players. Because of
the high benefits that can be made on a worldwide premise, the IT Industry is
additionally subject to patent 'trolls', who look to buy licenses as opposed to create
and offer programming, basically to record claims and acquire permit expenses.
Fig: Degree of Rivalry

Profitability Analysis

Profitability analysis of major player in UT industry is as follows:

For Infosys Limited, key profitability measure are as follows:
For IBM, key profitability measure are as follows:

For Microsoft Corporation, key profitability measure are as follows:

From the key ratios to measure profitability of Major player in IT

industry it has been found that return on asset for major companies is
very lucrative and in case of Microsoft, return per employee is a very
magnificent number and it also indicates that if different companies
focus on identifying key opportunities and have key employees who
are highly skilled, innovative and adoptable to new technology, the
prospect of the industry is very positive and encouraging and will
generate huge number of employment and bring prosperity and
harmony to the country.