Public sector IT spend to grow $5.1bn by 2011

NEW DELHI, INDIA: IT spending by India’s Public Sector reached an estimated $3.1 billion in 2008, and is expected to further grow to $5.1 billion by 2011, signaling a Compounded Annual Growth Rate (CAGR) of nearly 19 per cent between 2007-2011, says the latest research study by market researcher Springboard Research.

Springboard’s report “Public Sector IT Opportunity in India” adds that more than two-thirds of the total spending will be controlled by the federal government in India, with states (22 per cent of spending) and local governments (11 per cent of spending), controlling the rest, said a press release.

The Springboard report provides a detailed coverage of the public sector market dynamics in India, including buying process, for the key segments like healthcare, education, defence and public safety.

“The re-election of the Congress-led UPA government will spur further investments in e-governance projects, including the $5 billion National e-Governance Plan,” said Nilotpal Chakravarti, senior research analyst – Vertical Markets at Springboard Research.

He added that the government’s strong commitment to improve the delivery system in India by leveraging ICT would propel IT investments in the public sector, and would offer significant opportunities for IT vendors eying this high-potential space.

Projects like national ID cards, defense tactical communication system and providing PC and broadband access to schools across the country are forecast to act as further drivers to the growth of India’s public sector IT spending.

The report also notes that education is the biggest individual market segment in terms of spending with an 11 per cent share of total spending; while defense and public safety and taxation and finance round up the list of top three segments. In terms of IT segments, hardware corners half of the overall spending, while IT Services has a bigger share than software.

The current key challenges IT vendors are facing include: slow decision-making process despite the adoption of e-procurement, delays caused by bureaucratic hassles, complex bidding procedures and an especially price-sensitive market. On the other hand, the end-users (citizens) face challenges due to lack of transparency and efficiency in government services, and lack of integration among different government agencies and poor mechanisms of complaint handling, the release added.