Indian software product business to touch USD 9.5 to 12 billion by FY2015

Key highlights of the report

• Recent trends in market activity aided by a maturing ecosystem indicate that Indian software product businesses are now approaching an inflection point in their evolution. The next decade will be a period of disruptive growth for this segment, with the annual revenue aggregate of Indian software product businesses forecast to grow from USD 1.4 billion in FY2008 to USD 9.5 to 12 billion by FY2015.3

• Market: over the past two decades, India has emerged as a global hub for product research and development (R&D) activity, especially in the technology industry. Today, there are over 600 multinational companies (MNCs) undertaking product R&D in their subsidiaries in India

• Accelerating growth: over the past 3 years, the annual revenue aggregate of Indian software product businesses has grown at a CAGR of 44 per cent. Leading Indian software product firms have strengthened their product portfolio through steady investments in organic growth as well as through overseas acquisitions4, and have reached credible business scale

• Broadening industry base: Of the existing 371 software product start-ups since 2001, over two-thirds have been formed in the past three years – of which ~100 companies have started their operations in 2007 alone. As a result, while the top 10 companies still dominate, accounting for 84 per cent of the segment revenues, there are over 200 midsized companies and start-ups that have started generating revenues and are contributing to its growth

• Incubation support and venture capital (VC) interest - today there are 38 incubation centres spread across the country that are actively focused on assisting technology start-ups with funding and mentorship. Since 2005, total VC investment in India has grown at a CAGR of 42 per cent to reach USD 543 million in 2007. Over the same period, funds invested in the software products segment have grown at a slightly faster CAGR of 43 per cent, from USD 76 million in 2005 to USD 156 million in 2007

• Growing market - India is forecast to be the world’s fastest growing IT market over the next few years, with its share of the global software market growing threefold by 2015. Increasing IT penetration across small and medium businesses (SMBs) and the government/public sector are likely to be the key drivers of this growth. Estimated SMB share of domestic IT spending is forecast to grow from 38 per cent, currently, to over 50 per cent by 2015 Current trends in the evolution of these factors indicate strong momentum, supporting a positive outlook. Targeted actions by key stakeholders across four key themes will help accelerate the next phase of growth, and enable the annual revenue aggregate of this segment to reach USD 9.5-12 billion by 2015. These are

o Influencing market development
o Enhancing talent pool
o Strengthening capital ecosystem
o Augmenting the support ecosystem





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