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Indian information technology (IT) services market is expected to grow at 8.3 per cent year-on-year in calendar year (CY) 2013, reaching a value of Rs 44,219.9 crore ($7.97 billion). For the first half of the year, the market grew at 7.6 per cent to reach Rs 24,338.7 crore, said a report from IDC.
The growth in the IT services market was slower than expected largely due to cautious spending by organisations amid slowing economy. Sectors such as telecom, banking, transportation and Information Technology-enabled Services (ITeS), which are heavily dependent on IT to run their business, continued their IT investments.
Interestingly, central government projects witnessed a slow progress, whereas state governments are rapidly adopting IT that contributed to a growth in IT services spend in the public sector as well.
Outsourcing services continued to lead the growth in the IT services market in 1H 2013 with a growth of 10.8 per cent over 1H CY 2012. An increased demand for outsourced services by small and medium enterprises, and greater vendor focus around tapping into the Tier-2 and Tier-3 cities, especially for hosting and discrete managed services, have been some of the key drivers of the market during this cycle.
“The preference to manage everything in-house and the perception that ‘I can do it better’ are being challenged by economic and efficiency objectives. Increased complexity at the infrastructure level and higher operations/maintenance costs will drive more customers to adopt outsourcing services," said Sachin Chaturvedi, senior analyst for IT services at IDC.
Spending on the system integration and IT consulting services also registered a growth of 8.4% and 9.2% respectively.
Growth in these two segments was mainly driven by large infrastructure projects. Long-term projects like Accelerated Power Development and Reforms Programme, UID, State Datacentres, Digitisation and Land registration, automation projects, renewal of core banking systems and investments in enterprise applications were the key drivers for the systems integration market in India.
New data center construction, as well as a trend towards consolidation of data centers, spurred demand for network integration and consulting services as well.
The report further stated that Indian market is witnessing an expansion of new age technology or 3rd platform solutions like mobility, analytics and cloud. Not only large but mid-sized and small organizations are coming forward to evaluate and buy these solutions in order to build successful and nimble business. A number of deals are expected to be signed around the 3rd platform solutions in second half of 2013.
Forecast CY2014
In upcoming H1 CY 2014 organizations are likely to take a cautious approach while spending on IT Services due to pending parliamentary elections in May 2014. However several large outsourcing contracts which are up for renewal in 2014 and adoption of third platform technologies will keep the growth momentum on in India IT services market.
"As the adoption of 3rdplatform technologies like cloud, mobility and analytics picks up in India market, it will drive the growth in IT Services spend as well. The 3rdplatform technologies will change the way services are delivered and consumed and will impact the overall value chain.
Although the IT Services spend will increase in absolute dollar terms but in long run wallet share will shift from vanilla services to these solution oriented services" said Kavita Bhadauria, Research Manager, Software and IT Services at IDC.
