Software: Home is not where the heart is! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Software: Home is not where the heart is!

May 8, 2003

While discussions and debates about the share of India’s software exports round the globe take prominence, the domestic software services industry continues to languish in comparison. During 2002-03, while the entire IT industry has grown by around 21% (Source: NASSCOM), the domestic software and services segment contributed Rs 124 billion as revenues to the IT sector, at a growth rate of 13%. We take a look at the reasons for low growth in the domestic software services segment as well as the potential for the same.

The Indian IT Market: Composition
Rs bn 2001-02 2002-03 Change
Software Services Exports 365 475 30%
Domestic Software & Services 110 124 13%
Hardware & Networking 167 178 7%
Training 16 16 0%
Total 658 793 21%

A listless economic environment has led to low levels of IT spending in the country. Also high levels of piracy are hurting the domestic software services industry. Pirated software sales are eating in to the market of software services companies. While there is no lacking on the supply front, what lacks in the domestic environment is the demand for IT products and services. Presently, the domestic IT segment is bearing the brunt of Indian companies that are reluctant of any new IT spending and are focused on realizing the benefits accruing from their existing IT investments.

Source: Nasscom

In the domestic segment, the IT/Telecom vertical contributes the biggest chunk to revenues. However, the banking and insurance vertical holds the biggest promise for the future. The need to manage risks in the financial system, asset-liability management, electronic banking, and management of customers will drive demand from the BFSI vertical. This will help the cause of companies like i-flex and Infosys, which are dominant in this vertical.

On the manufacturing front, the need to become cost-efficient and productive will be the growth driver. With recent initiatives from certain state governments like those in Andhra Pradesh, Delhi, and Haryana to implement technology in their departments, the market for e-governance will get a fillip, and would help the companies that provide products and services in this area. Another area that holds promise for the software services industry in the domestic context is the field of biotechnology. India is slowly emerging as a major center for biotechnology related initiatives and this will create a market for software specific for this industry.

The situation looks bleak at present, yet a long-term view provides some consolation that the domestic market has the potential to develop into a high growth one. A number of players are entering the ITES segment to provide solutions in areas of customer care and telemarketing to domestic companies, this is likely to drive demand for services from this segment. Also the Indian corporate sector, going forward is likely to make investments in areas of CRM, SCM, and ERP in order to become more efficient. While in the external segment, Indian companies continue to score over their competitors in China, Ireland, and Israel on cost, quality and scalability fronts, the domestic segment holds substantial promise for the future.

Equitymaster requests your view! Post a comment on "Software: Home is not where the heart is!". Click here!

  

More Views on News

INFOSYS Announces Quarterly Results (3QFY21); Net Profit Up 16.8% (Quarterly Result Update)

Jan 14, 2021 | Updated on Jan 14, 2021

For the quarter ended December 2020, INFOSYS has posted a net profit of Rs 52 bn (up 16.8% YoY). Sales on the other hand came in at Rs 259 bn (up 12.3% YoY). Read on for a complete analysis of INFOSYS's quarterly results.

INFOSYS Announces Quarterly Results (2QFY21); Net Profit Up 20.3% (Quarterly Result Update)

Oct 15, 2020 | Updated on Oct 15, 2020

For the quarter ended September 2020, INFOSYS has posted a net profit of Rs 49 bn (up 20.3% YoY). Sales on the other hand came in at Rs 246 bn (up 8.6% YoY). Read on for a complete analysis of INFOSYS's quarterly results.

INFOSYS 2019-20 Annual Report Analysis (Annual Result Update)

Aug 5, 2020 | Updated on Aug 5, 2020

Here's an analysis of the annual report of INFOSYS for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of INFOSYS. Also includes updates on the valuation of INFOSYS.

INFOSYS 2018-19 Annual Report Analysis (Annual Result Update)

May 21, 2019 | Updated on May 21, 2019

Here's an analysis of the annual report of INFOSYS for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of INFOSYS. Also includes updates on the valuation of INFOSYS.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

A Stock with 700% Return Potential Comes with Additional Payoffs (Profit Hunter)

Apr 15, 2021

Narayana Murthy was one of the first unicorn founders to get the backing of this entity...

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

A Unique Sector for Short-Term Profits (Fast Profits Daily)

Apr 12, 2021

This ignored sector could deliver big short-term profits.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

INFOSYS SHARE PRICE


Apr 16, 2021 (Close)

TRACK INFOSYS

  • Track your investment in INFOSYS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE INFOSYS WITH

MARKET STATS