Emergence of India as a Software Product Nation

Sanjeev Kumar Gupta and Ajai Kumar Garg
Ministry of Electronics and Information Technology

The emergence of globalization and constant technological changes are steadily transforming society and making it more knowledge intensive than ever. The industrial landscape too is witnessing a similar evolutionary pattern. Importantly, the rapid development of information technology has connected firms, customers, suppliers and various other stakeholders in a complex and interdependent web of interactions. These developments have resulted in a paradigm shift in the nature and scope of economic progress. India presents enormous development challenges, as well as models of innovation and globally-competitive IT capabilities. The use of ICT in areas like health and education is opening up newer avenues for reaching out to remote and marginalised populations, while offering affordable and accessible solutions to persistent challenges of development.
The country has large untapped domestic market with high consumption and young population are also key strengths. India is one of the fastest growing IT services markets in the world. As per NASSCOM, the Indian technology and services sector has done well during FY 2021-22, touching the USD 227 billion mark with a growth of ~15% YoY. The Indian IT-ITeS sector continues to be one of the largest employers in the country directly employing nearly 5 million professionals, adding over 4,50,000 employees in FY 2021 -22.
In recent years, the Indian IT Industry has of shown signs of moving up the value chain with the mushrooming of a number of young entrepreneurs focusing on software products and are trying to exploit the possibilities that have arisen due to emerging of cloud infrastructure, alternate delivery models including off the self and SaaS (cloud) based Software Products and mobile based delivery model using social media platforms. This is further complimented by fast evolving use of Big Data and Internet of Things (IoT) ecosystem resulting in the convergence of hardware with software.
In order to make the Indian IT Industry move up the value chain and thereby sustain its growth trajectory, the National Policy on Software Products-2019 has been approved by the Union Cabinet on February 28, 2019 with a vision to create a robust Indian Software Product development ecosystem, thereby enabling IP driven holistic growth of the IT Industry.
National Policy on Software Products-2019 synergies the efforts of the Government and Industry to create a robust Software Product Industry, which enables the germinating ground for large number of Software product startups, promotes development of an ecosystem encouraging R&D and innovation, opens up multitude of opportunities of access to capital and helps build and improve the domestic demand.
In recent years, the software product sector in India has evolved substantially through various policy interventions by the Government and domestic demand. The sector is growing from $ 7.1 Bn in 2019-22 to $13.3 Bnat present with ~10% CAGR growth. This tremendous growth in the sector has been driven by massive adoption of cloud infrastructure and expansion of the sector in major global market. The India software product industry has performed well in FY 2021-22and was fastest growing sector at by ~18% compared to the Indian software industry which has grown by ~15.5 % in the same period.
Now a days, Software products become the integral part of daily lives. The focus of Indian Software product industry has been progressively shifting from horizontal based tech solution to verticalbased tech solution. More and moreverticalizedtech solutions have been coming up with cutting edge innovation. The Horizontal tech solution based business / enterprises continue to be the largest segment with respect to attract investment however still, vertical enterprises / businesses has grown tremendous. The significant shift in growth for vertical business software is mainly driven by an increased number of deals and domestic demands. The value addition in vertical tech solution is offering an opportunity of over $10 Bn across different verticals segment like health, energy distribution, education, entertainment etc. and many other emerging segment showing promising growth in business.
Software as a Services (SaaS), digitization of MSMEs, and Digital adoption in each sector are the key enablers for the growth of software product sector. Themarket share of global SaaS industry alone growing with a rate of 2X, which clearly indicating strong acceptance of Indian products in global market. Massive investment in technology like enterprise resource planning (ERP) software and customer relationship management (CRM) software in horizontal segment continues to dominate software product enterprises accounting for ~50% of the revenue. Moreover, new emerging horizontals like content/data, management, etc also getting significant traction. The Indian software products has shown high acceptance in verticals segment like Hi-Tech accounting, Banking, financial services and insurance accountingfor ~65% of the revenue.