How big is the Indian IT services market?

This is an interesting interview with Phaneesh Murthy – who left Infosys (I think after a scandal) and joined iGate. He has taken the company from negative 8% to positive 37% profit margins. That’s a big jump.

Some of his stats are interesting to read:

In 1991-92, I used to talk about the addressable market for Indian services as being about $25 billion. Today, the entire industry is $55 billion and I consider the addressable market as $1.5 trillion.

and then about the how much of the CIO budget ends up in India:

From an Indian outsourcer perspective, I see light all the time. Today’s CIOs spend 16-18 per cent of their IT budgets in India and that will go to 25 per cent over the next 3 years. That itself has the capacity to increase the industry by 40-50 per cent.

Just existing customers expanding their engagement can take the market to about $80-85 billion from where it is now

And then he gives some stats on the resource market in India.. I hadn’t seen numbers in this way:

Question: How much do you expect this industry to grow?

Answer: I think we will have to readjust models and capacity. Today, the industry absorbs 150,000 engineering graduates out of about 420,000 graduating. It is now down to a choice of 1:3. It could come down to 1:2 in the future.

In 1991-92, the industry used to hire about 100 people out of 200,000 people. So the choice was a lot more at that point of time. So there is a dilution in the industry as a result.

Overall, I am confident that the industry will double over the next five years.

This stat is very important and points to a strong need for training in India. If the capacity is there but the absorption hasn’t been 100% but is growing, then it means that quality of the input will suffer. In that scenario, the company which can train the best in India (for IT services) will prosper the most. Ultimately, training is the key to success in HR terms in Indian IT sector.

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