With the growing use of technology, the requirement for IT service providers is increasing. In addition, India is home to world-famous IT companies like TCS, Infosys, Wipro, etc. Therefore, there is huge scope for an IT company in India. In this article, we will discuss the opportunities in the Indian IT industry and the types of IT companies. Further, we will guide you on how to start an IT company in India and what are the requirements for starting an IT company.
Before proceeding further and understanding how to start IT company in India, first, let us understand the meaning of an IT company.
What is an IT Company?
IT Company or Information Technology Company is a company that is engaged in the task of supervising all the activities related to information such as processing, sending, storing, and retrieving the information, etc. In addition, it handles a number of other responsibilities also, such as providing expert advice on IT systems and addressing problems.
In simple words, IT companies monitor all the activities related to the handling of data.
Is There a Difference Between IT Company and Software Company?
Yes, IT companies and software companies are different.
The scope of the term ‘IT company’ is broad. It includes handling all the tasks related to computers and technology like network management, cloud services, cybersecurity, etc. Therefore, the primary goal of an IT company is to assist organizations in using technology in an effective manner.
On the other hand, a software company only deals with the development and maintenance of software. They create software products and deliver solutions based on the needs of their clients.
Therefore, the term ‘IT Company’ includes a software company.
However, the two terms are used interchangeably in business parlance and software company is the most popular type of IT company in India.
IT Industry in India
India is known worldwide for excellent IT services. The IT industry in India mainly comprises services like Business Process Outsourcing (BPO), IT Consulting and Implementation, IT Outsourcing, and other IT services. Therefore, the outsourcing segment has a major share in the industry being highly cost-effective. Apart from that, the following points are noteworthy regarding the growth of the Indian IT industry –
- India has a major share of 55% in the global outsourcing market.
- The revenue from the BPO segment is expected to grow at the rate of 10.08% annually.
- In 2021, the IT sector contributed approx. 8% of the Indian GDP.
- There are 1000 large IT companies in India with a presence in 50+ domestic locations.
- In 2022, the IT industry employed 4.5 lakh people out of which 44% were females.
- According to estimates, the IT industry is expected to grow more in the future and reach a total size of 350 billion dollars.
Further, the following graph shows the increase in IT spending in India –
In crux, the IT industry in India has shown tremendous growth in the past 2 decades and is expected to perform even better in the future. Therefore, there is huge scope for the setting up and development of a software company in India.
Types of IT Companies
IT companies can be categorized into the following two types based on their offering.
Product-Based IT Company
Product-based IT companies are companies that offer products to customers. Therefore, they generate the majority of the revenue from selling their products. For example, Microsoft, Amazon, Google, etc.
Service-Based IT Company
Service-based IT companies are companies that provide services to customers like consulting services, outsourcing services, etc. Such services help their clients to carry out business operations in a more efficient manner. For example, TCS, Infosys, Wipro, etc.
What are the Requirements for Starting an IT Company?
If you are wondering how to start an IT/ software company in India, you should be aware of certain requirements. The following are the major requirements for starting an IT company.
The market assessment is generally the first step before starting any business. Therefore, before starting an IT company, you should assess the target market to identify its size and the opportunities that you can seize.
In addition, you should assess the external business environment which includes competitors, government policies, media, etc.
Before starting an IT company, you should find out what are the needs of the customers. Once you identify the needs, you will get clarity as to what distinctive features your product should include to fulfill those needs.
Moreover, if you offer a unique product, it might become your Unique Selling Proposition (USP) in the future.
In this digital era of the 21st Century, technological advancements take place every other second. Therefore, if you want to get a significant market share in the IT industry, you should offer an innovative product or service.
We all know that planning is essential for business whether it is small or large, carried on for profit or social welfare. Therefore, for starting an IT company, you should have a sound business plan that outlines the goals and objectives of the company. The objectives of the company should be SMART i.e., Specific, Measurable, Achievable, Relevant, and Time-bound.
Place of Business
Every business must have a place where it operates and where it can receive correspondence. Therefore, you should select the place for setting up your IT company. The place of business shall have a stable internet connection and availability of resources.
Moreover, in India, if the IT company is set up in a Software Technology Park (STP), it receives several benefits. For example, it is not required to pay customs duty on imports, can accept 100% foreign direct investment, can re-export capital goods, etc.
Human resource is the most important resource for any organization. Therefore, for starting an IT company, your team members shall be skilled. In addition, the software industry depends on innovation and technology, therefore, the employees shall have a sound knowledge of technology.
Next, you should develop a marketing strategy to promote your company’s product or service. The marketing strategy shall include product design and development, pricing policy, place of storage and distribution channels, and advertisement strategy.
Money is one of the basic requirements for setting up and running a business. A company can raise funds by issuing equity shares, preference shares, debentures, etc.
In addition, companies can obtain loans from banks and financial institutions. Also, angel investors are ready to invest their money in startup companies that offer innovative products or services. Therefore, before starting an IT company, you should decide on the sources of funding.
Primarily, register your company as per the laws in India. In addition, you should also be aware of the licenses and registrations that are required for an IT company for example, Trademark registration, GST registration, etc.
Scroll down to read the registrations required for IT companies in detail.
How to Open an IT Company in India?
Once you have considered the above points and made the necessary arrangements, the next step is to register the company. Therefore, now we will understand how to start an IT company in India.
You can either run your business through a private limited company or a public limited company. Companies Act, 2013 provides lesser compliance for private limited companies as compared to public limited companies. However, IT companies generally operate on a large scale and therefore, later convert into a public company. Nevertheless, the process of registration is the same.
The following are the steps to register a company in India –
- Obtain DIN and DSC of Directors – For online registration of a company in India, Class 3 DSC of directors is mandatorily required. It can be obtained from certifying authorities of the government. Also, all the proposed directors of the company shall have a DIN. DIN of a maximum of 3 directors can be obtained through SPICe+, an online form for company registration.
- Filing of SPICE+ Form for Registration – For filing the SPICe+ form and online registration of a company, the director of the company first needs to register on the MCA portal. After registration, the director can log in and file the SPICe+ form.
Part-A of the form is for name reservation. A company can submit 2 names in this part along with government fees. If the name is accepted, it is reserved for 20 days during which Part B of the form shall be filed along with the documents mentioned earlier and prescribed fees (registration fees depend on the authorized capital of the company).
However, if the name is rejected, another SPICe+ form needs to be filed along with the fees prescribed.
- Issue of Certificate of Incorporation – If the form is complete in all aspects along with the required documents, the ROC will issue the Certificate of Incorporation containing the CIN, PAN, and TAN of the company.
Moreover, registration of a company in India requires certification from a Chartered Accountant, Company Secretary, or Cost Accountant.
Read more know about the documents required for the registration of a company.
Registrations Required for IT Company
The following common registrations are required for IT companies in India.
A trademark is a sign that is used to differentiate the symbol, design, name, phrase, logo, color, shape, etc. of one brand from that of the other brand offering similar products or services. Although registration of a trademark is not compulsory, it is always advisable to register the trademark to protect the mark from infringement.
Regarding IT companies, their product, name, logo, and design are mostly unique; therefore, they should register their trademark.
Read More: Trademark Registration Online in India
Copyright registration is the process of formally documenting and registering a creative work with the appropriate copyright office or authority. It provides legal evidence of ownership and establishes a public record of the copyright claim.
For an IT company, you can take copyright registration of products like computer software, computer programs, etc. You can register them as a ‘literary work’. Also, it is necessary to provide source code and object code at the time of filing a copyright application.
Just like trademarks, it is not necessary to obtain copyright registration. However, copyright protects your work from infringement and therefore, you should take copyright registration
It is compulsory to obtain GST registration if the aggregate turnover of your business exceeds Rs. 10 lakhs in Special Category States and Rs. 20 lakhs in other states.
Generally, IT companies operate on a large scale and therefore, we recommend you take GST registration if you are starting an IT company.
For more information, get in touch with our experts.
Given the growth and the size of the IT industry in India, there are huge opportunities that can be seized by an IT company. Also, the process to start an IT company is similar to other companies except for the additional registrations that it shall obtain.
Registration Arena is having a team of experts like CA, CS, Lawyers, and other professionals to assist you in the registration of your company. Our experts can also help you in fulfilling different regulatory compliance requirements. To get in touch with us, you can drop a mail at firstname.lastname@example.org or simply call us at +918600544422.