IDC's Industry Performance Index sees no impact of economic slowdown on the Indian IT industry

Gurgaon, 14 Dec 2000 - While various economic
indicators for 2000-01 point towards an economic slowdown, the
domestic IT industry is witnessing an exhilarating growth. IDC's
Industry Performance Index (IPI) shows that the Indian IT
industry continues unabated on its growth path. The index, based on
IDC's India IT tracking programs, reveals that in the first six
months of the current fiscal (April-September 2000), almost all IT
product categories witnessed vertiginous growth. This vindicates
IDC's earlier stand that there is tremendous buoyancy in the Indian
IT industry and it will not be impacted by the minor slowdown that
the economy is currently facing.

IDC's Industry Performance Index is a
surrogate measure of the performance of the Indian IT industry as
compared to the base period (first half 1999-00). It is the
normalised weighted score of the domestic industry size across
various IT product categories. The weights refer to the relative
share of a particular product category in the overall market and the
scores are normalised assuming the index for the base period to be
100.

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In the first six months of the current fiscal the
Industry Performance Index has grown to 159.5, which represents a
jump of more than 35 points over the preceding six months. This
highlights the fact that the performance of the industry is
improving significantly between two successive periods.

Unlike in the past year, when the growth
came primarily from the consumer segment, the growth in the current
fiscal is fairly evenly spread. While the home segment remains the
fastest growing segment, there has been a considerable improvement
in business spending as well. This is clearly borne by the fact that
products that move primarily in the business segment, namely
commercial desktops, notebook PCs, servers and LAN hardware, have
also grown at impressive rates.

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Personal
Computers
Personal
Computers represent not only the largest component of the IT
industry, they are also one of the fastest growing product
categories. Although components shortage and currency devaluation
kept the average sales value (ASV) of PCs on the higher side, it
could not arrest the tremendous momentum that existed in the market.
IDC estimates that in the first half of 2000-01, more than 8.5 lakh
(0.85 million) PCs were shipped. Of these, approximately one third
found their way into homes. The home segment has been consistently
growing above the overall average, which is pushing the share of
this segment up. IDC believes that this trend will continue for at
least a few more years.

While the home segment has been growing
at a scorching pace in the last three years, what sets apart the
first half of 2000-01 from the preceding years is the high growth in
the commercial segment as well. While shipments of commercial
desktops shot up by almost 58% in first half of 2000-01 as compared
to the same period of last year, sales of notebook computers, which
move primarily into the commercial segment, grew by 68% in unit
terms.

IDC believes that impressive performance
in the first half would be repeated in the second half of this
fiscal, with another 9.5 lakh (0.95 million) PCs getting sold in the
latter half of the year.

Servers &
Workstations
The first
half of 2000-01 has been particularly good for servers as well.
While Standard Intel Architecture Servers (SIAS, earlier called PC
Servers) contributed the maximum to the total server market and grew
by over 30% in value terms, the growth was driven by the non-SIAS
segment, where the value jump was to the tune of 57%. After
languishing for several years, the market for non-SIAS servers has
got a fresh lease of life now. Internet emerges as the prime driver
for servers; however, the finance segment (including Banks, NBFCs
and Stock Exchanges) is investing heavily on non-SIAS servers,
especially in midrange and high-end servers.

The Workstations market does not echo the
same sentiment as the server market. Being a niche product, the
growth in this segment has been somewhat limited. Traditional
Workstations (RISC/ Unix) are increasingly being threatened by
Intel-based Personal Workstations. As a result, the market for
traditional workstations has been declining over the years. In the
first half of 2000-01, personal workstations grew by as much as
167%, while traditional workstations declined by 19% as compared to
the same period of 1999-00.

LAN
Hardware
LAN Hardware
market also did very well in the first half of 2000-01, notching up
a growth of 65% over the same period of previous year. A strong
growth in demand for switches and routers was the prime reason for
this solid growth. Apart from a strong demand from the ISP segment,
large amounts of LAN hardware is also being bought by software
exporters. In addition, call center business is also booming in
India, thereby adding to the demand for LAN hardware. IDC opines
that this strong growth is expected to continue for the second half
of the year as well as major ISPs are expected to continue investing
in infrastructure to maintain service quality levels for new
subscribers and ward off competition from new market
entrants.

Peripherals
Perhaps the largest beneficiary of the boom in the
computing products market has been the peripherals industry. Apart
from peripherals bundled with computing products, there is also a
substantial after-market for peripherals like hard disk drives and
monitors. The need to upgrade the PCs in the installed base is the
prime reason for higher growth rates for peripherals than computing
products.

The market for monitors crossed the
million-unit mark in the first half, representing a growth of almost
44% in unit terms. The growth in value terms was much higher as the
market made a sudden transition towards wider monitors. The share of
monitors with screen size of 15 inches or above shot up from around
23% in the first half 1999-00 to a substantial 49% in the same
period of the current fiscal.

The growing demand for storage led to an
explosive growth in the hard disk drive market. As organisations
become more IT-savvy, their demand for storage capacity increases.
Moreover, IDC believes that the rise of Internet and eBusiness
continues to put a huge demand on storage needs of organisations
that want to redesign their business strategy around the Internet.
The market is also witnessing a dramatic shift towards higher
capacity drives. In the first half of 2000-01 almost three fourths
of all hard disks sold had capacities of 10GB or above, as compared
to less than 1% a year back. In IDC's view, this shift is more
vendor driven today but user requirements will soon start keeping
pace with the rapid technological advancements in the area of
storage.

The printer market has been witnessing a
flurry of activity as competition intensifies, especially in the
rapidly growing inkjet category. Price and promotion are the main
factors that differentiate the winners from the also-rans. Despite a
heady growth in the PC arena, the growth in the printer market has
been limited by the fact that increased adoption of network printing
in the business segment is forcing the Printer-to-PC shipment ratio
to move southward. Although the growth in the printer market pales
in comparison with that in the PC market, it stands at a fairly
respectable level in absolute terms.

Inkjet printers have now become the
technology of choice for most segments. Nevertheless, the demise of
dot matrix printers is till very distant. Given the inherent
advantages like ability to print multiple pages, ruggedness and low
printing cost, dot matrix printers would continue to find buyers in
certain specific segments of the market. However, the market for dot
matrix printers will start flattening out soon. In the first half of
2000-01, more than half of all the printers sold were inkjet
printers. This marks a significant shift from the same period of
1999-00, when more dot matrix printers got sold vis-à-vis inkjet
printers.

For further information contact:
Aditya
Pant
IDC (India)
Ltd.