India & China To Fuel IT Services Market

by CXOtoday Staff    Jul 04, 2005

The Indian IT services market has recorded the strongest growth at 26.7% in 2004-05 for the Asia Pacific region, according to a new research report issued by Gartner today.

The Asia Pacific IT services market will have a compound annual growth rate of 8.9% from 2004 through 2009, outpacing the global growth rate of 6.1%

The research firm sees emerging markets such as India and China as the main engines of growth across the region in the next few years. It also forecasts that professional services, led by development and integration, IT management and consulting, will be the region’s strongest performing IT services market segment.

“With business confidence continuing to improve across the region cost is still a key consideration in IT investment but the focus is shifting to business development in the improved economy,” said Rolf Jester, vice president of research, Gartner.

“While companies are more willing to spend, their requirements are also increasingly demanding and that drives down margins. They are also more careful in selecting service providers, which results in longer selling cycles,” added Jester.

While India has established as a leading destination for offshore IT and BPO services through the last 10 years, the domestic market demand has started picking growth very recently. While India has the strongest growth at 26.7% for 2004-05 it is on a smaller base as compared to the more developed markets.

Some of the key drivers for the increased domestic spending in India are the urgency to fulfill regulatory compliance requirements in the banking and financial services sector.

Deployment of IT to improve business efficiency, for better competitive capabilities against global competition in domestic and international markets is another reason.

Additionally, large scale IT deployment by the Indian central and state governments and public sector enterprises to reduce cost of governance, improve transparency and make the processes more user friendly for the citizens.

Banking and financial services and the telecommunications sector are the front-runners in IT spending followed by the manufacturing sector. Government spending is also growing rapidly, due to national and state governments moving ahead with their e-governance plans. This trend will continue during the next four to five years, says Gartner.