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Mumbai:
The Indian IT services market has recorded the strongest
growth at 26.7 per cent in 2004-05 in the Asia Pacific
region, taking the expected APAC regional growth in
2004-09 to a CAGR of 8.9 per cent compared to a global
growth rate of 6.1 per cent, says global research firm
Gartner in a report released today.
The
report, Forecast: IT Services, Asia/Pacific, 2004-2009,
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.
"Improving
business confidence, a robust economy growing stronger,
improved availability and quality of infrastructure
at a lower cost, increasing MNC presence driving competition
and awareness about strategic benefits of IT deployment,
government initiatives as a facilitator for IT deployment
and as a user of IT and increasing business development
activities of global and local service providers in
the Indian market were the key factors that drew growth
in the Indian IT Services market, through a few large
deals and many smaller deals," Ravindra Datar,
Principal Analyst - Asia Pacific for IT Services and
BPO, Gartner. "Large number of captive and third
party offshore services facilities for IT and BPO being
set up in the country are also driving demand,"
added Datar.
According
Rolf Jester, vice president of Research, Gartner "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."
Jester
adds,"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."
Gartner's
overview of India:
While India is established as a leading destination
for offshore IT and BPO services for the last 10 years,
the domestic market demand has started picking growth
very recently. While India has the strongest growth
at 26.7 per cent 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:
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The
urgency to fulfil regulatory compliance requirements
in the banking and financial services sector
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Deployment
of IT to improve business efficiency, for better competitive
capabilities against global competition in domestic
and international markets
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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
-
Improving
infrastructure availability and quality coupled with
rapidly dropping costs
-
Rub
off effect of global successes of Indian IT Services
and BPO companies on the Indian market
Consulting
and development and integration are continuing to grow
with good demand, while IT management and process management
spending is rapidly growing, though over a much smaller
base. 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.
Forecast:
2004 - 2009:
The predicted strong growth across the Asia Pacific
region in development and integration services, at 9.7
per cent CAGR, mainly stems from rapid growth in China
and India, which need to build up capability to serve
their large domestic markets. Although India's total
IT services market will still be one-third smaller than
China's at $5.3 billion by 2009, its development and
integration size will be almost the same as China, at
around $3 billion.
"As
the Indian economy grows and merges further with the
global economy, the focus of demand for IT Services
will shift from large deals signed by large enterprises
to increasing number of mid-size and small enterprises
signing IT Services and BPO deals, which is expected
to drive the next phase of growth in the Indian IT Services
market," says Datar, explaining the future scenario
for the Indian IT Services market.
IT
management is a strong growth trend and key driver for
IT services for all markets in Asia Pacific with a CAGR
of 9.6 per cent. Consulting follows closely with a 9.5
per cent CAGR through 2009. Gartner says the comeback
of consulting shows that companies need to transform
their business, not only by cutting costs, but also
by learning how to better use IT resources and processes
to grow their business.
"Although
process management, with a 9.1 per cent CAGR, is an
important IT services driver, it still faces cultural
obstacles in some Asian markets such as China, South
Korea, Hong Kong, Taiwan and New Zealand," said
Jester. "It will be a few years before
the Asia/Pacific market fully accepts process management.
Product maintenance and support will continue to have
a steady demand, with a CAGR of 6.9 per cent through
2009."
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