Indian IT Industry grew 29%: Dataquest

By : |September 10, 2008 0

NEW DELHI, INDIA: The poster boy of the Indian economic renaissance could have floundered a bit in the face of the global meltdown, but the strong surge in the domestic IT market kept the momentum going for the Indian IT industry, says Dataquest, the flagship publication of specialty publisher CyberMedia in its annual survey of the industry.

FY 2007-08 was memorable for two reasons according to this latest research. The rupee upstaged the dollar, and the domestic market — for the first time in Indian IT’s successful journey– grew faster than the exports market.

An accelerated 34% growth in 2007-08 FY 08 (as compared to 27% in FY 07) took the total domestic IT market to Rs 99,018 crore in FY 08 reversing the decade-old trend of export industry growing faster than the domestic market.

The overall Indian IT industry grew 29% in FY 08 to report revenues of Rs 288,810 crore. Exports, contributed largely by software and services, accounted for nearly two-thirds of the industry at Rs 189,792 crore, grew at 27% (compared to a 35% growth recorded during 2006-07).

Pradeep Gupta, Chairman, CyberMedia says, "Despite the downturn and the challenging economic climate, the top IT services companies managed to keep growth up and their margins intact. This shows the amazing resilience of theIndian IT powerhouses."

Within the domestic IT market the hardware industry (comprising personal computers, servers, peripherals, networking and storage products) contributed one half — Rs 49,589 crore.

And the rest was contributed by domestic IT services Rs 26,756 crore (28% growth over the previous year in Rs) and Software Rs 12,179 crore (27% growth in Rs).

BPO Services (voice only) contributed Rs 8,600 crore (65% growth) and Training Rs 1,894 crore (51% growth).

8.25 million PCs sold in 07-08

Driven by the need for mobility, over 2 million notebooks were sold, registering a growth of 59%, growing at twice the rate of desktops. Notebooks now form nearly one-fourth of the 8.25 million personal computers sold in the year.

Dataquest attributes the handsome showing by domestic hardware segment to the spread of computing to smaller towns and cities of India as well as the rise in small businesses.

The desire to save energy on IT appliances has led many users to switch to LCD monitors. This resulted in an impressive 68% growth in LCD monitor sales.

Pen drives became a ubiquitous mass consumer product selling 4.2 million pieces in the year. Over one million digital cameras and 575000 MP3/MP4 players were lapped up by Indian consumers.

Bank ATMs market grew 150%, installed base at 34,500

The growth of retail consumer banking led to deployment of 9,300 new ATMs, taking the total base of ATMs in the country to 34,500. This resulted in a revenue growth of 150% to Rs 699 crore. The study says that this segment will witness an accelerated growth in the coming years.

But there were some sectors that slowed down as well. Take IT Services exports, for instance – one of the big contributors in the Incredible India IT story. After seeing a 39.9% growth in 2006-07, the momentum in the segment has slowed to 26% in 2007-08.

According to Prasanto K Roy, Chief Editor, CyberMedia, "Exports may have slowed down, but the really exciting story was the consistent growth in almost every sector of India’s domestic IT market: hardware and services, SMB and enterprise, government…"

"No longer were just a couple of verticals like banking and telecom driving most of the market growth…there’s retail, education, and a host of other areas that saw strong growth in IT spend," he added.

Remote infrastructure services grew 126%

Infrastructure services emerged as the fastest growing segment in IT services exports registering a126% growth. Infrastructure services were traditionally not considered for off shoring. However, in the last few years, the market attained growth momentum and the share of infrastructure services’ contribution to the total IT services stands at Rs 11,959 crore or 9%.

Domestic Package Software, Networking, Storage growth tapers 

The areas in the domestic IT market that failed to grow along expected lines were package software, networking and storage. In case of networking and storage the growth slowed down a bit, indicating that most companies have put in place the basic infrastructure and are now looking at extracting better value from IT and expanding the usage of infrastructure, as evident from high growth in hardware.

The performance of the peripherals segment, especially of printers, Multi Function Devices and consumables supports this. It indicates a growing trend of increased usage of IT, rather than the earlier phase of expanding infrastructure and not being able to use it optimally.

However, what disappointed was the comparatively slower growth in packaged software sales. Despite huge adoption of ERP by the small and medium business segment, the lack of spend on package software by the large enterprises meant the Indian IT industry is still waiting for the inflection point in adoption of package software. Only security software segment–thanks to the growing risk of malicious attacks and growing need for compliance–showed 31% growth.

Dataquest estimates the market size with Indian rupee as the primary currency. In FY 08, for the first time, the rupee actually accelerated sharply against the dollar, resulting in very different (higher) growth rates when calculated in dollar terms. For example, the entire IT industry grew 44% in dollar terms, as compared to 29% in rupee terms.

Bank ATMs market grew 150%, installed base at 34,500

The growth of retail consumer banking led to deployment of 9,300 new ATMs, taking the total base of ATMs in the country to 34,500. This resulted in a revenue growth of 150% to Rs 699 crore. The study says that this segment will witness an accelerated growth in the coming years.

But there were some sectors that slowed down as well. Take IT Services exports, for instance – one of the big contributors in the Incredible India IT story. After seeing a 39.9% growth in 2006-07, the momentum in the segment has slowed to 26% in 2007-08.

According to Prasanto K Roy, Chief Editor, CyberMedia, "Exports may have slowed down, but the really exciting story was the consistent growth in almost every sector of India’s domestic IT market: hardware and services, SMB and enterprise, government…"

"No longer were just a couple of verticals like banking and telecom driving most of the market growth…there’s retail, education, and a host of other areas that saw strong growth in IT spend," he added.

Remote infrastructure services grew 126%

Infrastructure services emerged as the fastest growing segment in IT services exports registering a126% growth. Infrastructure services were traditionally not considered for off shoring. However, in the last few years, the market attained growth momentum and the share of infrastructure services’ contribution to the total IT services stands at Rs 11,959 crore or 9%.

Domestic Package Software, Networking, Storage growth tapers 

The areas in the domestic IT market that failed to grow along expected lines were package software, networking and storage. In case of networking and storage the growth slowed down a bit, indicating that most companies have put in place the basic infrastructure and are now looking at extracting better value from IT and expanding the usage of infrastructure, as evident from high growth in hardware.

The performance of the peripherals segment, especially of printers, Multi Function Devices and consumables supports this. It indicates a growing trend of increased usage of IT, rather than the earlier phase of expanding infrastructure and not being able to use it optimally.

However, what disappointed was the comparatively slower growth in packaged software sales. Despite huge adoption of ERP by the small and medium business segment, the lack of spend on package software by the large enterprises meant the Indian IT industry is still waiting for the inflection point in adoption of package software. Only security software segment–thanks to the growing risk of malicious attacks and growing need for compliance–showed 31% growth.

Dataquest estimates the market size with Indian rupee as the primary currency. In FY 08, for the first time, the rupee actually accelerated sharply against the dollar, resulting in very different (higher) growth rates when calculated in dollar terms. For example, the entire IT industry grew 44% in dollar terms, as compared to 29% in rupee terms.

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