Indian IT market on upward spiral

GURGAON/NEW DELHI: IT industry analyst firm, IDC (India) Limited, has announced its Top 10 IT Market Predictions for the year 2007. Most of these predictions relate to the domestic IT market. However, there is a reference to those trends in the global market, which will have deeper implications for the domestic market.

The domestic IT market in India grew by 22.4 per cent in 2006 and is expected to keep the momentum in 2007. The estimated year-on-year growth in 2007 is estimated to be 21.5 per cent, making it the fastest growing market in the Asia-Pacific region.

‘The domestic IT market has posted impressive growth in the last three years and is expected to continue the momentum in 2007 also, which only means the domestic market has come of age’, commented Kapil Dev Singh, country manager, IDC (India) Limited.

From a global perspective, 2007 will be a year of intense ‘hyper disruption’ in the IT industry, with major structural changes taking place along different industry vectors at once – all interacting with each other and, more important, accelerating each other. In 2007, small businesses will become big, more software become services, more services become software, business IT players become more ‘consumer-ish’, and consumer players become more business like. These disruptions, and others, will force most market leaders out of their comfort zones and open up new opportunities to those who choose to surf these disruptions rather than stand against them.

“These deep shifts in the global market place will surely have their implications on the Indian market, which when coupled with its high speed growth, will pose unique challenges. These challenges will be around managing the twin play of IT going deeper into already penetrated market segments and simultaneously exploring newer segments for growth to be sustained’, Singh stressed.

A brief on the Top 10 India IT Market Predictions 2007 from IDC:

•  India continues to soar. South Asia’s largest economy will continue to lead the pack as the next IT market opportunity. A major wave of IT investments has started to take place across banks, financial services institutions (FSI), telecom, manufacturing, government, resource, education, and other industries. This is probably why India is the fastest-growing country by IT spending in 2006 (22.4 per cent) and is forecast to remain so in 2007 (21.5 per cent) when it reaches Rs 75,891 crore

• Dynamic IT to enter Phase 2 in 2007: From Consolidation to Virtualization and Service Oriented Architecture (SOA).

The year will witness Indian enterprises graduate to the second level of Dynamic IT infrastructure – where IT infrastructure can effect changes fast in response to the changing business scenario. The key technology components to attain this state are virtualization, SOA and application integration.

•   Disruption to set in for Small and Medium Business (SMB) focused go-to-market strategies – new delivery and usage models will evolve in 2007.

SMBs will contribute almost 50% to the enterprise applications market in 2007 in India. IT Services vendors will also bring to market packaged services that are pre-scoped, pre-priced, pre-quality assured, shrink-wrapped offerings, ready to be implemented at the client site.

•   Connectivity, Content and Convergence will run parallel courses, but their real orchestration into a fully evolved ‘digital home’ phenomenon will remain elusive in 2007.

The Internet subscriber base in the country is expected to grow at 50 per cent in 2007, with broadband subscribers accounting for 30 per cent of the total. The number of broadband subscribers would touch 3.5 million by June 2007, and cross 5 million by December 2007. In the same period, the mobile subscriber base in India is expected to cross 220 million by December 2007.

•   Vendors will adopt a ‘productized services’ delivery model in 2007 to achieve standardization and enhance profitability

In 2007, System Integration (SI) partners will aim to minimize costs by breaking down activities into smaller modules. With the creation of ‘services products’, vendors would be in a better position to evaluate the feasibility and margins of contracts, thus being in better control of their own profitability as well as better managing expectations in the minds of their customers.

•   Internal security concerns will drive the enterprise security solutions market in 2007

IT managers have long realized that enterprise wide security is not a one-time, single-point activity; rather it needs to be continually evolved by pro-actively visualizing and nullifying future threats and intimidations. The year 2007 will witness enterprises defining their internal processes in detail and putting in place policies to safeguard the core business operation.

•   Despite huge investments slated for telecom network infrastructure, 2007 will be a year of build-outs rather than rollouts for 3G and WiMAX services

India is expected to add around 85 million new mobile subscribers in 2007, beating China for the first time. This growth in subscriber additions would call for a huge network expansion drive, which is expected to result in investments of around $10 billion or more. In 2007, operators will test 3G and WiMAX services on a much wider scale, but may have to delay their commercial rollouts until early 2008, when the spectrum-availability issues are ironed out.

• IT retailing to gain momentum, but 2007 will be remembered more as a year of experimentation

IT retailing will undergo extensive experimentation in 2007. Organized format retailing, which accounted for around 23%* of desktop market shipments in India during the April-June 2006 quarter is expected too witness experimentation with and evolution of a whole new set of go-to-market routes in 2007.

•   Emerging Asia approaches BRIC-like performance

While Asia is home to India and China, two of the dynamic BRIC economies, the region contains a number of other countries with potential to outpace the BRIC economies in the coming years. These Emerging Asian Countries (EACs) include Pakistan, Sri Lanka, Bangladesh, Thailand, Malaysia, Vietnam, Indonesia, and the Philippines. IT spending will expand dramatically, with a market wide compound annual growth rate (CAGR) of 12.5 per cent over the same period.

•   Worldwide IT spending will be marginally higher in 2007, driving vendor risk taking

Worldwide IT spending will grow 6.6 per cent in 2007, up from 6.3 per cent in 2006. Below this top line, IDC predictions for spending in the three major product/service categories are: a) Software will lead growth again, with 8 per cent spending growth in 2007, b) Services will remain stable, with 6 per cent growth, c) Hardware will bounce back in 2007, where IDC predicts 6.5 per cent growth, up from about 6 per cent growth in 2006.

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