India’s strong IT growth potential may threaten US

by Sohini Bagchi    May 31, 2013


Increased investments, fast growing SMB base and skilled workforce are factors that are likely to boost the IT consumption of five emerging markets such as India, Indonesia, Malaysia, Philippines and South Africa, according to a recent study by market advisory firm Zinnov Consulting. According to the report, these E+ economies as they are touted, demonstrate a strong growth potential outpacing technology markets in the US.

 “There are over 90,000 large enterprises in these E+ countries compared to 41,000 in the US. These five markets are also home to 75 million SMBs which make them the largest SMB market globally, and the per capita GDP in these economies is growing 250 percent faster than the U.S,” states Praveen Bhadada, Director at Zinnov Consulting. He points out that these are great indicators why these markets are becoming a force in reshaping global industry across sectors. The Zinnov report highlights that over $50 billion spent in IT investments in the E+ economies demonstrate the fastest growth in IT across the world. Large enterprises and governments are key spenders on IT in these economies. India for example, showed the maximum increase in IT spend as compared to other E+ Economy in CY 2012.

According to the study, even though PC shipments are showing constrained growth, tablets and smartphones are expected to drive the computing future in these economies. “Multi-national IT vendors as well as local players are evolving their offerings and go-to-market models to aggressively serve these markets. Volume licensing deals with trade bodies, innovative financing models for SMBs, local talent development and evangelism are key initiatives taken by IT majors to win in these markets,” says Bhadada.

India growth trajectory

Taking specific example of India, analysts say that enterprises in this country are increasingly investing in technology for growth and efficiency and this growth will outpace larger economies such as the US and Western Europe, which is reeling under ongoing economic crisis. In an earlier report released in January this year, Zinnov revealed that the $30 billion Indian IT market is estimated to grow at 15-18 per cent in 2013 supported by increased adoption of technology by Indian companies. It reported that over 5,000 large enterprises and 10 million SMBs in the country are ready to adopt IT over the next one year.

Multi-national IT vendors as well as local players are evolving their offerings and go-to-market models to aggressively serve these markets.
-Praveen Bhadada, Director at Zinnov Consulting

The report noted that big data, with the potential to affect the $1 billion market in analytics software and computational platforms and services in India, will receive a boost from sectors such as telecommunications, manufacturing, BFSI and insurance sectors as well as non-traditional sectors such as energy and transportation. Digital marketing will also get a drive from trends such as increased adoption of mobile and social media.

Likewise, the increase in IT consumption among Indian companies has been further corroborated by research firm Gartner. In a report released this month, the analyst firm notes that India has the potential to lead the world in the adoption of the Nexus of Forces, which is the convergence and mutual reinforcement of social interaction, mobility, cloud and information. “Based on current forecasts, India will become one of the world’s biggest consumer economies during the next five years. By 2014, India will have more than 1 billion mobile subscribers. India will see a significant rollout of new IT infrastructure during the next five years in both the public and private sectors,” states Rakesh Kumar, Research VP at Gartner in the report pointing that the consumption rate will however depend on the pace in which new infrastructure will be built, besides, new types of servers, networks and even datacenters will be rolled out by private and public sector companies.

The other growth driver is the SMB segment, not only in India but all the E+ economies, who are increasingly adopting IT to automate their business. In India alone, SMBs will contribute to over one third of the total domestic IT spend by 2015, stated a related report Zinnov study. The study states that while the overall domestic IT spending is expected to grow at a CAGR of 12 per cent to reach $36 billion by 2015, SMBs at the same time will grow at a CAGR of 15 per cent contributing $15 billion by 2015.

The new report also highlights that IT companies will focus on mobile in these countries, where 50 per cent of Internet traffic is channeled through mobile phones. In comparison, in the US, 87 per cent of Web traffic comes from PCs, desktops and fixed line connections. As a result Bhadada notes that vendors are increasingly moving to mobile-enabled versions of their solutions to gain the trust of enterprise and end-customers in these markets.