IT Services Market Expected To Grow At 8.3% YoY In CY 2013

The IT services market in India witnessed an year on year growth of around 7.6 percent in 1H CY 2013 over 1H CY 2012, to reach a value of INR 2,43,387 million (USD 4.4 billion) the exchange rate for 1H 2013 - 1USD= INR 55.04. The growth in the IT services market was slower than expected largely due to cautious spending by organisation amidst slowing economy. Sectors such as telecom, banking, transportation and 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 which contributed to a growth in IT Services spend in the public sector as well.

India remains a support and installation driven market as organisations continue to invest in infrastructure build-out. However Outsourcing services continued to lead the growth in the India IT services market in 1H 2013 with a growth of 10.8 percent 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.

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Sachin Chaturvedi, Senior Analyst for IT Services at IDC says “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.”

Spending on the system integration and IT consulting services also registered a growth of 8.4 percent and 9.2 percent 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 Datacenters, 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.

IDC forecasts IT services market to grow at the rate of 8.3 percent year on year in CY 2013 reaching a value of INR4,42,199 million (USD 7.97 billion).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 organisations 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.

In upcoming H1 CY 2014 organisations 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 3rdplatform 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” says Kavita Bhadauria, Research Manager, Software and IT Services at IDC.