There is a vast untapped domestic opportunity for IT in the country. India spends less than 1% of its GDP on IT. This is significantly lower than the global average of 2.5%, a Frost and Sullivan report said.
Every sign points that the Indian government has under-invested in IT. For instance, we lose over 30% of our power and energy, while this can be controlled easily with smart grids. This shows the vast opportunity that lays ahead for IT service providers in India. The IT domestic market this year has grown by 14% according to industry estimates. Indeed a very healthy growth compared to last year's 9% growth.
For Infosys, the India Business unit (IBU) contributes over 2% of its revenue at present. Two years ago, CN Raghupathi, VP and head, India Business, Infosys, had said at an analyst meet that the IBU's share in Infosys' revenue would be around 10% by 2015. Their clients include mainly Indian organizations and MNCs which operate in India. Compared to other IT services companies, Infosys was a latecomer and launched a separate business unit for the domestic sector in 2008.
In India, the government plays an important role here-as a buyer and a facilitator. The public sector takes a 30% chunk domestic IT market. This remains true for Infosys IBU, "About 70 to 80% of IBU's business comes from the government," reveals Raghupathi. He adds, "Many of our projects come from sectors like BFSI, energy, manufacturing and retail. In healthcare, it is still struggling."
The IBU is doing fairly well, Infosys has seen some strong wins last year, including the India Post. Infosys believes that it is able to touch a large section of the society. For instance, the Ministry of Corporate Affairs project receives about 135 applications which filed every day on the portal, and the Income Tax department handles over 3 crore tax payers. "Last year, we touched over 2.5 crore filings. It is our way of contributing to the nation."
However, some organizations shy away from such projects due to the challenges involved. Raghupathi admits, "It is not easy to get used to working with the government as it involves sluggish payments and slow decision making. What makes the situation better is the enthusiasm within the company."
Many argue that Infosys' services and solutions are not cut out for the Indian market, mainly in terms pricing. To this, Raghupathi responds, "Proof of the pudding is in the eating. Our clients include names like the India Post, Income Tax department and Airtel Money.
The big challenge that lays ahead for the IBU is elections this year. This government has business to wrap up, and new projects will start after the elections. This also affects the private sector as we see lack of business confidence. Some have put their spending on hold and this affects the overall growth of this sector. Post elections, IT projects that were deferred will see light of the day."
What has changed since Murthy's return? "He has been guiding the IBU on how to fine tune its strategies," Raghupathi reveals nothing more.