Indian IT crosses $50 billion: Dataquest

New Delhi

August 2nd, 2007

The sunrise Indian IT industry recorded a growth of 32 percent in rupee
terms, in fiscal 2006-`07, to cross the $50 billion mark, according to a survey
by Dataquest magazine. The industry growth in dollar terms was at 30 percent.

Export earnings of Rs 153,744 crore and a domestic market of Rs 73,135 crore
contributed the revenue of Rs 226,879 crore. Exports revenues grew at 35 percent
and the domestic market at a consistent 27.2 percent, roughly the same for three
years now, Dataquest's 20th DQ Top 20" annual survey of the Indian IT
industry.

The IT services exports crossed trillion rupees mark to reach Rs103,647 crore,
representing a growth of 37 percent. BPO Services grew 33.5 percent to touch Rs.
37,800 crore.

Engineering services (Rs. 4,146 crore) and entertainment and gaming (Rs. 1810
crore) too emerged as strong exports areas.

Talking about the Indian IT industry crossing $50 billion mark, Pradeep
Gupta, publisher of Dataquest, said, "After a consistent 30 percent-plus
growth for over three years, this achievement marks a truly a proud moment for
Indian IT's entrepreneurs, as well as the 1.6 million technology professionals
who contributed directly to it."

The Top 20 players accounted for as much as 77 percent of the software
services exports by growing at 44.2 percent, the highest in the first seven
years of the millennium.

The top three players Tata Consultancy Services (TCS), Infosys and Wipro got
into the big league by bagging several large deals and growing their consultancy
business in the face of competition from the established players from North
America and of late, Europe.

British Telecom awarded a billion dollar contract to Tech Mahindra, a company
that recorded a growth of 134 percent to jump into the Top 10 list.

The next 20 players comprised companies like Hexaware, L&T Infotech and NIIT
Technologies contributed to nearly 11.4 per cent of the total revenues. Several
hundred smaller players contributed the remaining 12 percent.

Top eight software firms, TCS, Infosys, Wipro, Satyam, HCL, Cognizant, Tech
Mahindra and Patni, earned nearly 63 percent of their export earnings from North
America, 29 percent from Europe and five percent from the Asia Pacific region.

The Dataquest study noted that Application Development and Maintenance still
contributed to nearly two-thirds of the total software export revenues, despite
efforts to bring this down. Infrastructure services and Engineering Services
contributed to five per cent and four per cent of the revenues.

Others including package software implementation, systems integration,
testing, consulting, product development for ISVs and embedded software
contributed 32 percent.

Domestic IT services touch Rs. 21,000 crore

The domestic IT services market reached Rs. 20,948 crore by reporting 30
percent growth. Several large BPO/ITeS players started focusing on the
relatively untapped domestic BPO market that recorded a growth of 48 per cent to
touch revenue of Rs. 5400 crore. Packaged software industry grew 19 percent to
touch Rs. 8053 crore.

"The all round high-growth performance in the domestic market in areas
beyond the usual banking and telecom sectors: manufacturing, education,
government, retail makes 2006-`07 very special," said Prasanto K Roy, chief
editor of Dataquest.

Just as the exports sector diversified beyond the USA, the domestic market
truly went beyond the top ten cities and reached deep into tier-three towns last
year, added Roy.

The Top 10 Indian software product companies recorded a growth of 62 percent
to report revenues of Rs. 3777 crore.

I-flex, TCS, Infosys. 3i Infotech and Subex Azure were the Top five revenue
earners from this segment. Polaris with revenues of Rs.184 crore reported the
highest growth at 148 percent.

Microsoft Windows remains on top (47 percent) even though Linux started
gaining ground (21 percent) in the systems software market. Governments in a few
states too chose to support Linux and a few mission critical projects adopt
Linux as the standard.

Notebook computers emerged as a serious challenger to desktop computers with
one in every five computers sold being a notebook computer. India sold 49 lakh
desktop computers and over 11 lakh notebook computers. Notebook computers market
grew 69 percent in value terms and 89 per cent in terms of units shipped.
Mobility of users, increased connectivity and more affordable prices made this
possible.

Digital Cameras, MFDs record high growth

Laser Multi Functions Devices (MFDs) that usually carry varying combinations
of a printer, scanner, phone, fax and copier grew 69 percent during the year
while inkjet and dot matrix printer sales dropped. LCD (liquid crystal display)
monitors sales increased 153 percent as sales of the traditional bulkier CRT
(cathode ray monitors) monitors dropped.

The highest growth of 112 percent was recorded with the sale of digital
cameras touching nearly half a million, Dataquest said.

The networking product sales grew 32 percent to Rs. 5543 crore with increased
demand from the Banking Finance and Insurance; BPO and Telecom sector and the
government initiative to set up State Wide Area Networks. Structured cabling (42
percent) and WLAN (44 percent) were the high growth areas in networking.

The data storage sector, comprising storage hardware, secondary storage and
storage software, grew by 47 per cent to reach Rs. 1561 crore (highest
percentage growth amongst all product segments in the domestic market).

Training industry growth rate quadruples

The training sector gathered momentum as demand for training within
corporations in India and overseas was met by the Indian players. They posted
revenues of Rs. 2135 crore. Market leader NIIT reported a higher market share as
a result of acquisition of a $ 80 million American training firm.

The Dataquest annual survey revealed that premier management institutes like IIM-Calcutta
and Ahmedabad started executive education programs in partnership with a leading
IT training major for offering management education.

Internet subscribers touch 9 million, Users at 23 million

The number of Internet users (over 15 years of age and above) in the country
touched 23 million during the year with nine million Internet connections,
including 2.6 million broadband connections, the survey said. BSNL and MTNL
enjoyed almost two-thirds of the subscriber base. The industry is targeting 60
million Internet connections by 2010. Internet services revenues grew by a
quarter to reach Rs. 2040 crore.

The details of this survey will be available in the July 2007 issue of
Dataquest.