IT Services Market in India Witnessed Growth of 6.5% in the Second Half of 2013, Says IDC
12 May 2014
The India IT services market in second half of 2013 has seen a sluggish growth compared to same period in 2012, as the dynamic market conditions compelled enterprises to take a cautious approach towards their technology budgets. According to the International Data Corporation (IDC) the IT services market in India witnessed an year on year growth of approximately 6.5% in 2H CY 2013 over 2H CY 2012, to reach a value of INR 2,56,452 million (USD 4.1 billion)[i]. The lower than expected growth in the IT services market is mainly attributed to the cautious approach in the market and a decrease in the infrastructure spend.
Several services markets fared better than others in this period:
- Support services saw a quiet period in terms of growth in 2H CY 2013 with organizations looking at cost cutting measures and holding off plans for hardware and software refresh. The support services market saw a growth of 5.5% over 2H CY 2012.
- System integration and IT consulting services also registered a growth of 6.8% and 6.3% respectively, which was a bit slower than the 1H 2013 owing to fewer infrastructure projects. Outsourcing services market though one of the leading segments in the IT services market saw a slight decline than the previous half of the year and grew by close to7.1% in 2H CY 2013 over 2H CY 2012. Large outsourcing contracts are being replaced by small discrete outsourcing deals, where the contract value, and length of contract have come down to 3-5 years instead of 7-10 years. Managed Services market has picked up pace as organizations are looking for solutions which are efficient and cost effective. However, concerns around providers’ capabilities to manage vertical specific applications remain high, which is limiting the kind of applications getting outsourced and the overall scope of engagement.
Sachin Chaturvedi, Senior Analyst for IT Services at IDC says "The growing complexity of enterprise IT environments, combined with the challenge of availability of advanced technical skills, will push organizations to turn to outsourcing services."
IBM managed to command almost 12.1% of the IT Services market in India in H2 2013. It has benefited from its long time presence in India and ability to execute a range of IT services, from software and hardware support installation to systems integration and information system outsourcing (ISO).
Wipro is second with 7.4% market-share in H2 2013, which is a noteworthy jump from a market-share of 6.9% in H1 2013. Wipro has won several strategic outsourcing contracts which has increased its revenue base.
"The service providers landscape is set for the battle for dominance as the competitive landscape heats up with the continuing spend and increasing maturity in the India IT Services space" says Chaturvedi.
Key sectors like Banking and Financial Services, Manufacturing, Telecom and Government make up for a large portion of total IT Services spend in India. In H2 2013, all these sectors put together constituted 82.5% of the total spend. Banks continue with their IT adoption, with a focus towards delivering value to their client and organizations by reducing cost and improving efficiency. They are automating their back end processes to offset the higher cost of financial inclusion, which involves large amount of manual intervention.
Although India’s manufacturing sector was plagued by high cost pressure, decreasing domestic demand, high inflation and unclear government policies, spend on IT Services continues as large and medium sized manufacturing firms prepare for the future.
IDC India Forecasts:
IDC forecasts IT services market to grow at the rate of 8.4% year on year in CY 2014 reaching a value of INR4,76,356 million (USD 7.69 billion). In upcoming H2 CY 2014, organizations are likely to increase their IT spend after the elections results are out and new government announces its policies. Increasing infrastructure spend will drive the demand for related IT services such as Consulting and System Integration services.
[i] the exchange rate for 2H 2013 - 1USD= INR 62.08
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