IT Spends Expected To Rise After New Govt

by CXOtoday News Desk    May 13, 2014

indian IT

Organizations in India are likely to raise their IT spend after the election results are out and with the new government announcing its policies, predicts research firm IDC, which expects the market to rebound in the coming quarters. The domestic IT services market in India saw subdued growth in the second half of 2013, as enterprises spent less on infrastructure such as servers, storage systems and networking equipment, it says.

Growth slowed to about 6.5% in the second half of 2013 to $4.1 billion, it said, even though the market is expected to grow at the rate of 8.4% this year compared to last year, reaching $7.69 billion.

While the India IT services market in the second half of 2013 has seen a sluggish growth compared to same period in 2012, in the second half of 2014, 

Increasing infrastructure spend will drive the demand for related IT services such as consulting and system integration services, IDC said in a statement.

IT support services in particular, saw a quiet growth period, growing at 5.5% in the second half of 2013. System integration and IT consulting services also registered growths of 6.8% and 6.3%, respectively, which were a bit slower than the first half of 2013 owing to fewer infrastructure projects, it added.

Outsourcing services market, the leading segment in the IT services market, too saw a slight decline than the previous half of the year, growing to 7% in July-December 2013. According to the report, large outsourcing contracts are being replaced by smaller outsourcing deals, where the contract value and length of contract have come down to 3-5 years instead of 7-10 years.

The only area that picked up pace was the managed services market as businesses are looking for solutions which are efficient and cost effective. However, companies are getting selective about their vendors, and are increasingly looking for vertical specific applications, further limiting the overall scope of engagement, IDC said.

“The growing complexity of enterprise IT environments, combined with the challenge of availability of advanced technical skills, will push organisations to turn to outsourcing services,” says Sachin Chaturvedi IDC Senior Analyst - IT Services.

IBM command over 12% of the IT services market in India, followed by Wipro at 7.4% - emerged as the two leading players in this space. Others include, TCS at 1.87 %, and Hewlett-Packard and HCL Technologies at 2.40 %, said IDC.

According to Chaturvedi, the IT service providers landscape is set for the battle for dominance as the competitive landscape heats up with the continuing spend and increasing maturity in the India IT landscape.

He predicts key sectors like banking and financial services, manufacturing, telecom and government make up for a large portion of total IT services spend in India will raise their IT budgets in the next one year.