 "IDC India Domestic IT/ITeS Market Top 10 Predictions For 2009")
IDC India predicts that the domestic Indian IT/ITeS market will grow at 13.4 percent in 2009, the slowest since 2003. The much awaited annual IT/ITeS market forecast suggests that important structural changes, taking place on the back of a global economic meltdown, will propel a new ‘market order’ in the domestic Indian IT/ITeS industry.
This new ‘market order’, termed as Growth Phase 2.0, will be quite different from the earlier phase, Growth Phase 1.0 (2003-08), during which the domestic market witnessed unprecedented growth, nearly tripling the market size from Rs 34,000 crore in 2003 to Rs 1,01,031 crore in 2008, a CAGR of over 24 percent.
IDC’s report titled ‘India Domestic IT/ITeS Market Top 10 Predictions for 2009’ states that Growth Phase 2.0 will leverage the IT infrastructure built and consolidated during Growth Phase 1.0.
Growth Phase 2.0, expected to evolve 2009 onwards, will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services—infrastructure, applications and connectivity—will need to orchestrate and re-orient completely in order to support their mass adoption.
IDC expects the India domestic IT/ITeS market growth rate to come down from an average of 24.3 percent recorded during 2003-08 (Growth Phase 1.0) to 16.4 percent in the coming five years till 2013. This relatively slower growth will see enhanced competition leading to a rapidly changing strategy and continuous market re-alignment on the part of ICT market participants.
“It’s not only the end of another year; it’s also the end of a business cycle, that began in 2003,” says Kapil Dev Singh, country manager, IDC India.
“2009 shall herald the beginning of a new business cycle that will be marked by slow growth in 2009 but would eventually be the basis of a new phase of growth. The issues in the short run, more pronounced throughout 2009, will be productivity, cost savings and customer retention. This would eventually pave way for innovative services (for both consumers as well as enterprises) by leveraging the existing infrastructure built so as to align with emerging opportunities,” Singh adds.
2009 Domestic IT/ITeS Market Growth Predictions
The major product categories expected to grow at a rate higher than the industry average include Collaborative Applications (23 percent), Storage Software (19 percent) and System and Network Management Software (19 percent).
Within the ambit of IT services, segments reporting higher than average growth include Desktop Management (22 percent), Information Systems Outsourcing (32 percent), Network Management (23 percent) and Application Management (20 percent).
Among IT solution categories the faster growing ones would be virtualisation (28 percent), Unified Communications (25 percent) and Business Continuity Services (20 percent).
All these categories point towards the need for better management of IT infrastructure for their most optimal deployment and use in achieving enterprise business goals.
India Domestic IT/ITeS Market Top 10 Predictions For 2009
1. Slowdown to accelerate IT/ITeS market transformation
The market transformation of the India domestic IT/ITeS market has already started with market players preparing for a new landscape. As this new landscape is about a relatively lower growth rate regime, they need to innovate, leverage the existing infrastructure and align continuously to market opportunities.
Growth Phase 2.0 will be an era of following dynamic strategy as any existing strategy will not remain effective for long and would need to be re-constructed. The economic slowdown will only accelerate this transformation, which would manifest itself in terms of cost savings, productivity enhancement and customer retention in the short run, giving way to new engagement and delivery models in the long run.
2. India to be the fastest growing market in APAC
The top five growth markets in the APAC region are India, China, Vietnam, Thailand and Philippines. India will continue to lead the pack with 11.4 percent growth in domestic IT spending projected for 2009.
3. IT optimisation technologies adoption and usage to grow
IDC believes that the emerging IT optimisation technologies will move from ‘being at the tipping point’ to ‘being mainstream’ in 2009. On account of the slowdown, technologies that deliver significant cost savings such as virtualisation, unified communications, open source etc. will see heightened interest and adoption by enterprises in 2009.
Technologies that can deliver near-term cost savings will remain in focus while the larger capital-intensive green investments with longer payback cycles will move down the priority list.
4. Telecom sector IT spending growth will be fastest
As the economic meltdown forces enterprises to slash their IT budgets across industry verticals, the telecommunications sector would continue to grow at higher than average growth rate and will be the least impacted by the slowdown.
5. Outsourcing services market will move towards consolidation
IDC believes that the economic slowdown will further increase and accelerate the adoption of outsourcing services by Indian enterprises.
However, the two ends of the outsourcing services market i.e. low-end services like support services and high-end services like business transformation services will undergo consolidation. Low-end volume services, because of increased competition, will find margins coming down and larger players will acquire their counterparts.
6. Experimentation with ‘Cloud Computing’ model will increase but will not become mainstream
IDC India predicts that in 2009, IT ‘Cloud Computing’ service offerings–including software as a service (SaaS), hosted delivery model–will get tested and adopted on a larger scale and will perform even better than in 2008. The cloud model’s advantages of lower capital outlay and operating costs, coupled with the reassurance of more major players coming on board and building capabilities (including enabling and educating the channel), will encourage more customers at the margin to invest in cloud offerings.
Enterprises, which have been shying away on account of issues of security, connectivity etc., will be forced to re-evaluate the model. Organisations across verticals will evaluate different models with services delivered through the cloud, hosted and managed by suppliers (IT vendors), TSPs (Telecom Service Providers), System Integrators or pure-play hosting players.
7. New channel forms will evolve
The channel space had undergone shift during Growth Phase 1.0 (2003-08) with linear distribution models giving way to multiple types of channels. These multiple channels (like system integrators and ISVs) added more value to the technology adopted by the end user. Keeping the key attribute of ‘value addition’ intact newer forms of channels would emerge during Growth Phase 2.0, with the market transforming yet again.
The key differentiator for the new channel forms will be their ‘services’ play as compared to the ‘product’ play of the past. This services play will occur around the emergence of ‘Cloud Computing’ technologies and the need for reliable hosting and delivery channels.
8. Integration of content, convergence and connectivity
‘Consumer 2.0’ is not about connectivity, content and convergence in isolation, but their orchestration in an integrated fashion. Not only would the consumer spending on IT moderate (growth rate of 13.7 percent in 2009 compared to 23.6 percent in 2008), but the emergence of consumer 2.0 will also be affected by further delays in the 3G rollout and dismal performance on the broadband adoption front (subscribers expected to touch 9 million in 2009).
9. Enterprises to look at integrated security approach
As enterprises look at optimisation technologies like virtualisation, cloud computing, hosted delivery model, a key challenge will be information security. Keeping the entire data secure on the cloud while at the same time making it accessible remotely and addressing other vulnerabilities will force organisations to look at integrated security solutions.
The heightened security risk perception in view of the threat of terrorist attacks will force enterprises to look at business continuity services seriously. As a consequence, the security solutions space is expected to evolve and grow by 20 percent in 2009.
10. Global IT growth will be halved
Global growth will be cut in half and take three years to come back. Taking into account a dramatic slowdown of global GDP, IDC predicts that global IT spending will decrease to 2.6 percent in 2009 – half of 2008’s 5 percent and far below 2007’s 7 percent growth rate.