The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.
April - 2005 - issue > Editor's Desk
The next growth engine
Pradeep Shankar
Top three IT services firms in India—say, the TCS, Wipro and Infosys—today generate revenues of approximately $4 billion for an employee base of 120,000. While the top three software product firms in the world—Microsoft, Oracle and SAP—generate revenues of $60 billion for the same number of employees.
Imagine if India could generate $60 billion by building product companies. That would be like three times the size of the Indian IT industry and the country would possibly surpass its current state. The IT exports from India today are $17 billion, growing at a CAGR of 30 percent. Assume that TCS, Wipro or Infosys will increase by 50 percent in the next five to ten years. Even then, their combined revenue will be similar to the top two software product companies in the world.
Considering that margins are fairly high for product companies compared to services firms, which are typically 80 percent, much of the generated revenue would be profits. Adding $10 to $20 billion in product revenue will have significant impact on the exports adding up to the foreign currency.
But generating billion-dollar exports is not the ultimatum. For a similar base of IT services industry, the ecosystem that product companies create is four to five times bigger than what the services sector creates. This would mean increased employment and productivity.
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