The Hindu : Business : Indian firms' revenue up 29 p.c.

Online edition of India's National Newspaper
Wednesday, Jun 23, 2004

Business

Business

Indian firms' revenue up 29 p.c.

By Ramnath Subbu

MUMBAI, JUNE 22. While India-based IT service vendors represented a small segment of the worldwide market, with 1.4 per cent of total revenues, collectively their revenues increased 29 per cent in 2003 compared with only 4 per cent growth among U.S.-based vendors, according to preliminary results released by Gartner Inc. Further, the report says that India-based vendors depended almost entirely on exports with 92 per cent of their revenues coming from customers outside India and only 8 per cent within India.

The market for worldwide IT services grew 6.2 per cent to $ 569 billion in 2003; up from $ 536 billion in 2002, according to Gartner. Accelerating activity in offshore outsourcing in which companies shift jobs across national borders, contributed modestly to the overall growth.

The U.S.-based vendors continued to lead the worldwide IT services market, attracting 59 per cent of total spending. IBM remained the largest competitor, with revenue rising 6.2 per cent to $42.6 billion.

"Vendors based in the U.S. and India have been most successful at driving sales outside their native regions of North America and Asia Pacific,'' said Kathryn Hale, principal analyst for Gartner's worldwide IT services group, based in San Jose California. "Vendors based in other countries tend to sell primarily in their own country, then expand within their local region. As a result, vendors based in the U.S. and India are more experienced in global sourcing and best positioned for global expansion.''

"The gradual merging of the Indian economy with the global economy is opening up the Indian market for international competition,'' said Ravindra Datar, principal analyst for Gartner IT services research in India. "This encouraging enterprises in India to invest in technology and global best practices, further driving demand for IT services here in India.'' The effect of a weak dollar is evident in the growth rates of different regions in 2003. North America grew only 1.1 per cent while Western Europe reported growth at 11.8 per cent. However, measured in local currencies, IT services spending in many Western European countries actually declined affecting the growth rate of the overall Europe, Middle East and Africa (EMEA) region.

IT services revenue in Asia Pacific grew 10.3 per cent in 2003 with much of the growth in the latter half of the year as the global economy gradually improving and Asian countries recovering from the spring outbreak of SARS. However, the biggest contributor to growth was the strengthening of local currencies against the U.S. dollar. The Chinese IT services market grew 6.8 per cent with revenue at $ 3.7 billion and saw local consolidation. In Japan growth was at 11.3 per cent but much of the increase was currency related. In yen terms, revenue growth in Japan was 3.5 per cent.

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