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.