IT firms' sales may touch $11 b by '15
ET Bureau, Bangalore, August 11, 2008: The IT industry, dominated by software services and BPO segments, is rapidly seeing the emergence of product companies and a latest study projects that India could account for roughly 2%, or $11 billion, of global product business by 2015.

In the first-ever survey of India's software products segment conducted by Nasscom along with Zinnov Consulting, the study lists 371 companies in this sector with two-thirds of them being less than three-years old. These companies together had a combined revenue of $1.4 billion in FY'08 growing at 44% CAGR in the last three years. The Nasscom-Zinnov study has projected that India's software products space may touch $11 billion by 2015.

This could mean that Indian companies will be accounting for nearly 2% of the overall global products business estimated at $500 billion by then. Interestingly, at present, the top 10 companies accounted for around 85% of the existing industry revenue, with the top five including Finacle of Infosys Technologies, i-flex, Subex and TCS products division, forming the bulk of it.

The Indian software products space, according to the survey, is defined thus: The company must be registered in India and have an IP. It must have a tangible brand character and it must be an end product reaching the customer/client. Nasscom-Zinnov says India's software products story, mainly on the application side, will be vertical focused unlike its global peers that have horizontal spread. In fact, some of India's leading companies are heavily or exclusively focused on verticals-Subex on telecom, Finacle and i-flex on banking.

Nasscom has identified about 10 key verticals where Indian companies may do well. Among them, business intelligence, BFSI and telecom have already emerged rather strongly. Key challenges for the sector include funding, especially paucity of venture capital, and attracting talent. Though it's a long haul for many of the product companies to gain the traction at the marketplace, there is no particular linearity in this business. However, IT services companies are also getting into this segment by increasingly "productising" their offerings, which could mean higher revenue without actually adding the necessary headcount.