There's no slowing down for domestic IT industry

BANGALORE: Even as various economic indicators point towards a slowdown during the current fiscal year, the domestic IT industry shows no signs of slowing down on its stupendous growth. While PC sales grew by a massive 63 per cent during the first half of the fiscal, servers and workstations segments were up by 45 per cent and 23 per cent, respectively.

The continued healthy growth of the domestic IT industry was revealed in the latest India IT tracking program of IDC India. IDC’s Industry Performance Index (IPI), based on the tracking programs, point out that during the first six months of the current fiscal, almost all IT segments witnessed sharp vertical 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, an IDC India statement said.

IDC’s Industry Performance Index is a 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.

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 has improved 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 was fairly evenly spread. While the home segment remains the fastest growing segment, there has been a considerable improvement in business spending as well, the report said, adding that this was due to the fact that products that move primarily in the business segment, namely commercial desktops, notebook PCs, servers and LAN hardware, also grew at impressive rates.

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 component 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 forecast that in the first half of 2000-

01, more than 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. According to IDC, this trend would

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 per cent 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 per cent in unit terms. IDC believes that impressive performance in the first half would be repeated in the second half of this fiscal, with another 0.95 million PCs getting sold in the latter half of the year.

Servers & Workstations

While Standard Intel Architecture Servers (SIAS, earlier called PC Servers) contributed the maximum to the total server market and grew by over 30 per cent in value terms, the growth was driven by the non-SIAS segment, where the value jump was to the tune of 57 per cent. 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, IDC said.

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 per cent, while traditional workstations declined by 19 pre cent 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 per cent 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 per cent 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.