IDC India predicts that the domestic IT/ITeS market will grow by 13.4 per cent in 2009
According to IDC India, the domestic India IT/ITeS market will grow at 13.4 per cent in 2009, the slowest since 2003. The much awaited annual IT/ITeS market forecast suggests that important structural changes, taking place on the back of a global economic meltdown, will propel a new ‘market order’ in the domestic Indian IT/ITeS industry.
This new ‘market order’, termed as Growth Phase 2.0, will be quite different from the earlier phase, Growth Phase 1.0 (2003-08), during which the domestic market witnessed unprecedented growth, nearly tripling the market size from Rs 34,000 crore in 2003 to Rs.1,01,031 crore in 2008, a CAGR of over 24 per cent.
IDC’s report titled ‘India Domestic IT/ITeS Market Top 10 Predictions for 2009’ states that Growth Phase 2.0 will leverage the IT infrastructure built and consolidated during Growth Phase 1.0.
Growth Phase 2.0, expected to evolve 2009 onwards, will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services—infrastructure, applications and connectivity—will need to orchestrate and re-orient completely in order to support their mass adoption.
IDC expects the India domestic IT/ITeS market growth rate to come down from an average of 24.3 per cent recorded during 2003-08 (Growth Phase 1.0) to 16.4 per cent in the coming five years till 2013. This relatively slower growth will see enhanced competition leading to a rapidly changing strategy and continuous market re-alignment on the part of ICT market participants.
2009 domestic IT/ITeS market to grow at 13.4 per cent (against
17.3per cent in 2008)
The combined India domestic IT / ITeS market grew by 17.3 per cent in 2008 to touch revenue of Rs.1,01,031crore (over Rs 86,101 crore recorded in 2007). The domestic IT market (excluding domestic ITeS) grew at 15.4 per cent in 2008 over 2007 to report revenue of Rs. 94,185 crore. The domestic ITeS market grew 53.2 per cent in 2008 to report revenues of Rs. 6,846 crore (from Rs. 4,468 crore in 2007).
IDC expects the combined India domestic IT/ITeS market to grow at a slower 13.4 per cent in 2009 to achieve revenue of Rs. 1,14,574 crore. The domestic IT market is expected to grow at 11.4 per cent in 2009 to post Rs. 1,04,937 crore, while the domestic ITeS market will post revenues of Rs. 9,637 crore, a growth of 40.8 per cent.
* Others include printer consumables, individual IT training, accessories and other revenue streams.
The major product categories expected to grow at a rate higher than the industry average include Collaborative Applications (23 per cent), Storage Software (19 per cent), System and Network Management Software (19 per cent).Within the ambit of IT services, segments reporting higher than average growth include Desktop Management (22 per cent), Information Systems Outsourcing (32 per cent), Network Management (23 per cent) and Application Management (20 per cent).Among IT solution categories the faster growing ones would be Virtualization (28 per cent), Unified Communications (25 per cent) and Business Continuity Services (20 per cent).
All these categories point towards the need for better management of IT infrastructure for their most optimal deployment and use in achieving enterprise business goals.
The India Domestic IT/ITeS Market Top 10 Predictions for 2009 are:
SLOWDOWN TO ACCELERATE IT/ITES MARKET TRANSFORMATION FROM GROWTH PHASE 1.0 TO GROWTH PHASE 2.0 The market transformation of the India domestic IT/ITeS market has already started, with market players preparing for a new landscape. As this new landscape is about a relatively lower growth rate regime, they need to innovate, leverage the existing infrastructure and align continuously to market opportunities.
Growth Phase 2.0 will be an era of following dynamic strategy as any existing strategy will not remain effective for long and would need to be re-constructed. The economic slowdown will only accelerate this transformation, which would manifest itself in terms of cost savings, productivity enhancement and customer retention in the short run, giving way to new engagement and delivery models in the long run.
INDIA TO BE THE FASTEST GROWING MARKET IN APAC The top five growth markets in the APAC region are India, China, Vietnam, Thailand and Philippines. India will continue to lead the pack with 11.4 per cent growth in domestic IT spending projected for 2009.
IT OPTIMIZATION TECHNOLOGIES ADOPTION AND USAGE TO GROW IDC believes that the emerging IT optimization technologies will move from ‘being at the tipping point’ to ‘being mainstream’ in 2009. On account of the slowdown the technologies that deliver significant cost savings such as virtualization, unified communications, open source etc. will see heightened interest and adoption by enterprises in 2009.
Technologies that can deliver near-term cost savings will remain in focus while the larger capital-intensive green investments with longer payback cycles will move down the priority list.
TELECOMMUNICATIONS SECTOR IT SPENDING GROWTH WILL BE FASTEST As the economic meltdown forces enterprises to slash their IT budgets across industry verticals, the telecommunications sector, would continue to grow at higher than average growth rate and will be the least impacted by slowdown.
THE OUTSOURCING SERVICES MARKET WILL MOVE TOWARDS CONSOLIDATION IN FAVOUR OF LARGER PLAYERS IN 2009 IDC believes that the economic slowdown will further increase and accelerate the adoption of outsourcing services by the Indian enterprises.
However, the two ends of the outsourcing services market i.e. lowend services like support services and high-end services like Business Transformations services will undergo consolidation. Low-end volume services, because of increased competition, will find margins coming down and larger players will acquire their counterparts, while at the same time accelerating their movement towards Business Transformation Services in 2009.
EXPERIMENTATION WITH ‘CLOUD
COMPUTING’ MODEL WILL INCREASE BUT WILL NOT BECOME MAINSTREAM IN 2009
IDC India predicts that in 2009, IT ‘Cloud Computing’ service offerings—including software as a service (SaaS), hosted delivery model—will get tested and adopted on a larger scale and will perform even better than in 2008. The cloud model’s advantages of lower capital outlay and operating costs, coupled with the reassurance of more major players coming on board and building capabilities (including enabling and educating the channel), will encourage more customers at the margin to invest in cloud offerings.
Enterprises, which have been shying away on account of issues of security, connectivity etc., will be forced to re-evaluate the model. Organizations across verticals will evaluate different models with services delivered through the cloud, hosted and managed by suppliers (IT vendors), TSPs (Telecom Service Providers), System Integrators or pure-play hosting players.
THE STAGE WOULD BE SET IN 2009 FOR NEW CHANNEL FORMS TO EVOLVE
The channel space had undergone shift during Growth Phase 1.0 (2003-08) with linear distribution models giving way to multiple types of channels. These multiple channels (like system integrators and ISVs) added more value to the technology adopted by the end user. Keeping the key attribute of ‘value addition’ intact newer forms of channels would emerge during Growth Phase 2.0, with the market transforming yet again. The key differentiator for the new channel forms will be their ‘services’ play as compared to the ‘product’ play of the past. This services play will occur around the emergence of ‘Cloud Computing’ technologies and the need for reliable hosting and delivery channels.
CONSUMER 2.0 ELUSIVE! DELAY IN ORCHESTRATION OF CONTENT, CONVERGENCE AND CONNECTIVITY
‘Consumer 2.0’ is not about Connectivity, Content and Convergence in isolation, but their orchestration in an integrated fashion. Not only would the consumer spending on IT moderate (growth rate of 13.7 per cent in 2009 compared to 23.6 per cent in 2008), but the emergence of Consumer 2.0 will also be affected by further delays in the 3G rollout and dismal performance on the broadband adoption front (subscribers expected to touch nine million in 2009).
ENTERPRISES TO LOOK AT AN INTEGRATED SECURITY APPROACH, REVAMP BUSINESS CONTINUITY PLANS
As enterprises look at optimization technologies like virtualization, cloud computing, hosted delivery model, a key challenge will be information security. Keeping the entire data secure on the cloud while at the same time making it accessible remotely and addressing other vulnerabilities will force organizations to look at integrated security solutions. The heightened security risk perception in view of the threat of terrorist attacks will force enterprises to look at Business Continuity services seriously. As a consequence, the Security Solutions space is expected to evolve and grow by 20 per cent in 2009.
GLOBAL IT GROWTH WILL BE HALVED
Global growth will be cut in half and take three years to come back. Taking into account a dramatic slowdown of global GDP, IDC predicts that global IT spending will decrease to 2.6 per cent in 2009 – half of 2008’s five per cent and far below 2007’s seven per cent growth rate.
IDC’s India Domestic IT/ITeS Market Top 10 Predictions for 2009 report covers only the domestic Indian information technology (IT) and IT-enabled services (ITeS) markets. IT/ITeS exports from India are not covered as part of this study.
(Source: IDC India)