India’s IT industry can be divided into five main components, viz. Software Products, IT services, Engineering and R&D services, ITES/BPO (IT-enabled services/Business Process Outsourcing) and Hardware.
Export revenues primarily on project-based IT Services continue to drive growth with IT Services accounting for 59% of total revenues followed by BPO and Engineering services at 20% and Software Products at 19%. Multi-year annuity based outsourcing agreements are expected to increase going forward.
In terms of total export and domestic revenues, Application and Maintenance (ADM) still continue to be the bread and butter for Indian IT companies, contributing to roughly 60% of their total revenues.
Increasing competition, pressure on billing rates and increasing commoditization of lower-end ADM services are among the key reasons forcing the Indian software industry to make a fast move up the software value chain by providing higher value-added services like consulting, product development, R&D, social media, mobility, analytics, cloud computing and end-to-end turnkey solutions.