Thursday, September 4, 2008


(All the below information is my personal opinion and understanding of the IT business , need not be apt in all case all sense scenarios)

About Myself: I worked with two of the top 4 Indian MNC software companies and 2 of top Fortune 100 clients. Here I would like to share my experience about how Software Business is generated and how it flows.
What I am going to cover: The journey of Software Industry business from end to end and broader perspective of the software business at industry level.
Interesting Facts and Figures:
Total revenue of IT industry in 2008 will be $87 billion dollars.
IT exports account for 35% of total exports of India.
Indian IT export breakdown by Region Wise:
U.S. 61%
U.K. 18%
Continental Europe 12%
Others 8%

Indian IT export breakdown by Industry Wise:
Financial Services 40%; (Includes Banking and Insurance)
Technology & Telecom 19%;
Manufacturing 15%;
Retail 8%; and
Others 18%.

Some of the top companies (industry wise) generating large source of income for IT companies:
Worlds top 10 companies generating lots of revenue to IT companies are as below.
1. Wal-Mart Stores
2. Exxon Mobil
3. Royal Dutch Shell
4. BP
5. Toyota Motor
6. Chevron
7. ING Group
8. Total
9. General Motors
10. ConocoPhillips

Worlds Top Air Line companies:
Air France-KLM Group
Lufthansa Group
Japan Airlines
Delta Air Lines
British Airways

Worlds Top Banking Companies

ING Group
Dexia Group
HSBC Holdings

Worlds Top Health care and Insurance companies:
United Health Care

Worlds Top Petroleum Refining Companies:
Exxon Mobil
Royal Dutch Shell

Worlds Top Telecommunication companies
Verizon Communications
Nippon Telegraph & Telephone
Deutsche Telekom
Telefónica France Télécom

How does client companies operate (from Software company perspective):
Client Company for a software business works in its own business model, it differs from industry to industry, company to company from country to country.

Live Examples: BP is one of the US top oil major company. It operates in almost all the countries of the world. It will have different internal business units like Refining, Retail, Pipeline, E&P, Supporting units like HR, legal etc.,

I know one such company generating 5 Billion dollars of income for software companies over 5 year period!!!!!!

Signa is one of the US top health insurance company it operates through out US in different divisions like Claims, Disbursement, Underwriting (giving an insurance quote), Customer support, Vendors (generally companies opted for XYZ insurance for their employees ), Doctors (authorized doctors/hospitals for this insurance company).

I know one such company which is operating in different locations of US east coast generating more than 300 million dollars per year business for software companies!!!!

Target is one of the Worlds largest company in retail, it will have its branches all over world. It will operate in different divisions like Billing, purchasing, marketing & advertising, customer support etc.,
I know one such company operating from Minneapolis in a 35 floored building full of software employees to support its business!!!

IT Divisions: Each client company will have its own IT department to support its IT needs. It will be headed by CTO (Chief Technology Officer). It will provide budget for each division and those respective division heads will chalk out a plan to spend it on different projects.

Customers / End users will play a major role by providing their IT needs for the year ahead, IT division then will facilitate those projects with Software companies

Bids: Bidding happen for two kind of projects. Developing New project: Client company will invite the software companies they are interested to send proposals and due diligence will be done by client company. Maintaining existing project: It might be migrating from one software vendor to the other.

Preferred Vendors:Some top companies have Accenture and IBM as their preferred vendors. All the server, system administration, network support and firewall support is provided by such companies. There will be no competition. Interesting part is they take a broad band or private line lease from companies like AT&T to support internet connections of the client company.

Partners / Business Transformers: Client companies will identify some software vendors as their partners or business transformers. They will take their help in shaping up their business with the experience of software vendor.

Product Vendors: Some companies like Banking will purchase an existing proven product to serve their customers.
Iflex, Infosys have some good banking solutions.
ESS , ESP and Wipro has proven Compliance and legal solutions.
PLAN VIEW has pre dominant time tracking and reporting tools.
NCR is specialized in ATM software and it has more than 70% of the business world wide.

Staff Augmentation: Some client companies carry on the projects on their own, by taking staff augmentation to deliver project. Like they will hire Software company or outside contractors to deliver the projects.These days Client Companies are preferring to out source their Project Management, Development, Support and Architchturing of applications to software companies rather than maintaining employees within its own company.

How does Software companies operate:

OFFSHORE: Project is executed from countries like India, China and Malaysia. Major economical advantage for client company, but communication and coordination is a problem.
ONSITE: Project will be executed from the same place of the client. Might be Costly for client company, but advantage face to face interaction and better assessment of situation. Less Risk.
ONSITE - OFFSHORE MODEL Project will be executed by some people being at onsite and some people will be in offshore supporting onsite folks.
NEAR SHORE: New trend !!! project will be executed from different country than that of client but will be in the same geographical region. EX: Project in America will be executed from Canada and Mexico. Travel and communications are easier and less expensive, Some commonality of language and culture.

Foreign based MNC Companies Like IBM they operate in different mode like for a project in Netherlands, IBM Netherlands will interact with client and IBM India will be the outsourcing company for IBM Netherlands.
The above categorization is from generalized view, These kind of exceptions will always be there.

If you have your own company you can customize this in more meaning full way to you and your client may be !!!

Internal Structure of Software Company: Software companies generally operate in Horizontal and Vertical Slicing model. Banking, Insurance, Manufacturing, Retail, Energy and Utilities etc., will be vertical domains. Horizontal units will support the vertical units in delivery. Like Data Base Administration, SAP, ERP, Testing will be horizontal units will come and serve the vertical business unit as needed. Marketing division of Software company will be responsible for brand building and Sales department will be responsible for bringing projects, Pre Sales department for sending proposals to clients for new projects, Account management for handling issues at client level and finally delivery units will deliver the Development or Maintenance projects. Learning divisions, HR, Finance, Immigration, Travel desks, Network and Security desks will support the entire company for seamless business.

1 comment:

  1. Hey..Good JOB....Thanks for sharing your Knowlegeable experience.
    N Thanks..for giving your valuable time at this blog.
    Keep it up.
    India[Greater Noida]


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