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IT sector poised for slowest growth

CHENNAI: The domestic Indian IT/ITeS market is expected to grow at just 13.4 per cent in 2009 — the slowest since 2003. But the forecast for the year 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’ has been described to be ‘quite different’ from the earlier phase that lasted from 2003 to 2008, during which period, the domestic market recorded an unprecedented growth — tripling its size from Rs. 34,000 crore in 2003 to Rs. 1.01 lakh crore last year, meaning a CAGR of over 24 per cent.

According to an IDC forecast, the Indian domestic IT/ITeS market growth rate will come down from an average of 24.3 per cent in the earlier phase to 16.4 per cent over the next five years till 2013. “This relatively slower growth will see enhanced competition leading to a rapidly changing strategy and continuous market realignment on the part of the market participants.”

The IDC’s country manager Kapil Dev Singh says: “2009 shall herald the beginning of a new business cycle that will be marked by slow growth but would eventually be the basis of a new phase of growth. It is not only the end of another year, it is the end of a business cycle that began in 2003.” The projection is that the combined domestic IT/ITeS market will grow at a slower 13.4 per cent in 2009, to record a revenue of Rs. 1.15 lakh crore. The domestic IT market is expected to grow at 11.4 per cent in 2009 to post Rs. 1.05 lakh crore, while the domestic ITeS market will post revenues of Rs. 9,637 crore, a growth of over 40 per cent.

Some of the major product categories slated to grow at a higher rate than the average growth include desktop management (22 per cent), information systems outsourcing (32), network management (23), and application management (20). Among IT solution categories, the faster growing would be virtualisation (28 per cent), unified communications (25), and business continuity services (20).

The economic slowdown is expected to 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.” Noting that the outsourcing services market will move towdards consolidation in favour of larger players in 2009, the forecast says: “Low-end volume services, because of increased competition, will find margins coming down and larger players will acquire their counterparts, while at the same time accelerating their movement towards business transformation services in 2009.”

Organisations and companies, in view of the heightened security risk, will want to keep the entire data secure, while at the same time making it accessible remotely and addressing other vulnerabilities. This will make them look for integrated security solution. Consequently, the security solutions space is expected to evolve and grow by 20 per cent this year, the IDC projects.

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