Grow­ing Clout

The do­mes­tic IT ser­vices is a big piece of the over­all mar­ket in India— nearly one-thirds to twofifths of the over­all do­mes­tic IT mar­ket in India


The do­mes­tic IT ser­vices mar­ket crossed the 1000 Bn (one lakh crore) mark this year to touch 1,00,155 cr. (ap­prox $15B) grow­ing at 8% over the pre­vi­ous year as per DQ es­ti­mates. How­ever, go­ing by Nasscom’s fig­ure, it was a tad higher at Rs.1,01,840 cr., while Gart­ner has been more con­ser­va­tive with a do­mes­tic IT ser­vices

mar­ket size of 83,596 cr. (con­verted from $12.48 B). Nonethe­less, do­mes­tic IT ser­vices is a big piece of the over­all mar­ket in India— nearly one-thirds to two-fifths of the over­all do­mes­tic IT mar­ket in India.

“IT ser­vices spend­ing is pro­jected to have the high­est growth rates as com­pa­nies work to­wards cre­at­ing dig­i­tal ap­pli­ca­tions on which en­ter­prise or­ga­ni­za­tions’ dig­i­tal busi­ness mod­els are be­ing built,” ac­cord­ing to Partha Iyen­gar, Gart­ner Fel­low and head of re­search at Gart­ner India. Added to this is the im­pe­tus ex­pected from gov­ern­ment spend­ing on IT which would be a huge growth driver for over­all IT spend­ing and IT ser­vices in par­tic­u­lar.

The gov­ern­ment’s ex­pected in­vest­ments in dig­i­ti­za­tion, in­fra­struc­ture im­prove­ment, im­ple­ment­ing tech­nol­ogy in health­care, man­u­fac­tur­ing and agri­cul­ture sec­tors is ex­pected to pro­vide an op­por­tu­nity of around USD 5.9 bil­lion to the IT ser­vices sec­tor, states Strate­gic Re­view 2017 re­port from Nasscom. This trans­lates to nearly 39,500 crore (at cur­rent ex­change rate) for the next few years.

Ac­cord­ing to Gart­ner es­ti­mates, the gov­ern­ment in India is fore­cast to spend $7.8 bil­lion US dol­lars (USD) on IT in 2017, 7.5% in­crease from 2016. IT ser­vices (which in­cludes con­sult­ing, soft­ware support, busi­ness process out­sourc­ing, IT out­sourc­ing, im­ple­men­ta­tion, and hard­ware support) is ex­pected to grow 10.8% in 2017 to reach $2 bil­lion USD, mak­ing it the largest IT spend­ing cat­e­gory.

The key com­po­nents of gov­ern­ment’s dig­i­tal spend are e-gov­ern­ment ser­vices in­clud­ing au­to­mated work­flows, doc­u­ment repos­i­to­ries, in­te­gra­tion of UIDAI with other sys­tems, and pub­lic in­ter­face; elec­tronic ser­vice de­liv­ery in fi­nan­cial, ed­u­ca­tion, health, and GIS-enabled de­ci­sion support; and in­for­ma­tion avail­abil­ity through open data plat­form, on­line host­ing of doc­u­ments, and so­cial me­dia en­gage­ment. Added to this are pro­grams like smart cities ini­tia­tive that would cre­ate new ur­ban cen­ters of busi­ness ac­tiv­ity and em­ploy­ment through pub­lic-pri­vate part­ner­ships. For ex­am­ole, the Navi Mum­bai smart city pro­ject, which is one of the 90 odd smart city projects an­nounced, Cidco has teamed up with Ac­cen­ture, SAP, SHCIL, and Zen­sar at an ini­tial out­lay of 2033 crore.

The do­mes­tic IT ser­vices mar­ket growth is driven by sys­tems in­te­gra­tion, IS out­sourc­ing, cloud ser­vices, and dig­i­tal trans­for­ma­tion projects across var­i­ous ver­ti­cals.

Re­ports sug­gest that in the pri­vate sec­tor in­dus­try nearly 23% of the IT bud­get is al­lo­cated to dig­i­tal­iza­tion. The al­lo­ca­tion is ex­pected to go up to 35 per­cent by 2018. The bank­ing and fi­nan­cial ser­vices (in­clud­ing in­sur­ance) in­dus­try ac­counts for 54 per­cent of the do­mes­tic IT ser­vices spend fol­lowed by TMT (tele­com, me­dia, tech­nol­ogy) at 16 per­cent and the rest (man­u­fac­tur­ing, re­tail, util­i­ties, travel) with sin­gle digit shares.

Ac­cord­ing to Gart­ner, in the BFSI seg­ment which is ex­pected to have an IT spend­ing of $8.9 B in 2017, IT ser­vices will grow the fastest at 13.8% in 2017, as firms in the bank­ing and se­cu­ri­ties in­dus­try invest more in busi­ness pro­cesses, specif­i­cally in busi­ness process out­sourc­ing. The fo­cus is on out­sourc­ing the ac­tiv­i­ties to achieve op­er­a­tional ef­fi­ciency and re­duce costs in the bank­ing and se­cu­ri­ties in­dus­try in India. Said Mou­tusi Sau, prin­ci­pal re­search an­a­lyst at Gart­ner, “Banks are in­creas­ingly work­ing to en­hance their cus­tomer fac­ing plat­forms and in­vest­ing in pay­ment tools.”

The pub­lic cloud ser­vices mar­ket in India is on pace to grow 35.9% in 2016 to to­tal $1.3 bil­lion, ac­cord­ing to Gart­ner, Inc. The high­est growth will come from cloud sys­tem in­fra­struc­ture ser­vices (in­fra­struc­ture as a ser­vice [IaaS]), which is pro­jected to grow 45.5% in 2016, fol­lowed by plat­form as a ser­vice (PaaS) pro­jected to grow 33.5%

Cloud in­fra­struc­ture as a ser­vice will ex­ceed tra­di­tional data cen­ter out­sourc­ing (DCO) spend in India dur­ing 2017, ac­cord­ing to Gart­ner, Inc. In India, Tra­di­tional data cen­ter out­sourc­ing is fore­cast to reach $559 mil­lion in 2017, while cloud in­fra­struc­ture as a ser­vice spend­ing will to­tal $677 mil­lion this year.

Gart­ner an­a­lysts said that by 2021, cloud com­pute and stor­age as a ser­vice will be nearly three times that of tra­di­tional data cen­ter out­sourc­ing in terms of spend­ing in India. By 2021, the cloud IaaS mar­ket in India will ex­ceed $2.1 bil­lion in end user spend­ing, which will be nearly three times that of tra­di­tional DCO in India. End user spend­ing of tra­di­tional DCO in India will reach $693 mil­lion in 2021, and it will rep­re­sent more than half the over­all DCS spend­ing of ap­prox­i­mately $3.8 bil­lion. This means that by 2021 tra­di­tional data cen­ter ser­vices will co­ex­ist with a mi­nor­ity share along­side the in­dus­tri­al­ized and dig­i­tal­ized ser­vices, Gart­ner an­a­lyst said.

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