Indian IT services record the highest growth in Asia Pacific in 2004-05: Gartner
04 Jul 2005
Mumbai: The Indian IT services market has recorded the strongest growth at 26.7 per cent in 2004-05 in the Asia Pacific region, taking the expected APAC regional growth in 2004-09 to a CAGR of 8.9 per cent compared to a global growth rate of 6.1 per cent, says global research firm Gartner in a report released today.
The report, Forecast: IT Services, Asia/Pacific, 2004-2009, sees emerging markets such as India and China as the main engines of growth across the region in the next few years. It also forecasts that professional services, led by development and integration, IT management and consulting, will be the region's strongest performing IT services market segment.
"Improving business confidence, a robust economy growing stronger, improved availability and quality of infrastructure at a lower cost, increasing MNC presence driving competition and awareness about strategic benefits of IT deployment, government initiatives as a facilitator for IT deployment and as a user of IT and increasing business development activities of global and local service providers in the Indian market were the key factors that drew growth in the Indian IT Services market, through a few large deals and many smaller deals," Ravindra Datar, Principal Analyst - Asia Pacific for IT Services and BPO, Gartner. "Large number of captive and third party offshore services facilities for IT and BPO being set up in the country are also driving demand," added Datar.
According Rolf Jester, vice president of Research, Gartner "With business confidence continuing to improve across the region cost is still a key consideration in IT investment but the focus is shifting to business development in the improved economy."
Jester adds,"While companies are more willing to spend, their requirements are also increasingly demanding and that drives down margins. They are also more careful in selecting service providers, which results in longer selling cycles."
Gartner's
overview of India:
While India is established as a leading destination
for offshore IT and BPO services for the last 10 years,
the domestic market demand has started picking growth
very recently. While India has the strongest growth
at 26.7 per cent for 2004-05 it is on a smaller base
as compared to the more developed markets.
Some of the key drivers for the increased domestic spending in India are:
-
The urgency to fulfil regulatory compliance requirements in the banking and financial services sector
-
Deployment of IT to improve business efficiency, for better competitive capabilities against global competition in domestic and international markets
-
Large scale IT deployment by the Indian central and state governments and public sector enterprises to reduce cost of governance, improve transparency and make the processes more user friendly for the citizens
-
Improving infrastructure availability and quality coupled with rapidly dropping costs
-
Rub off effect of global successes of Indian IT Services and BPO companies on the Indian market
Consulting and development and integration are continuing to grow with good demand, while IT management and process management spending is rapidly growing, though over a much smaller base. Banking and financial services and the telecommunications sector are the front-runners in IT spending, followed by the manufacturing sector.
Government spending is also growing rapidly, due to national and state governments moving ahead with their e-governance plans. This trend will continue during the next four to five years.
Forecast:
2004 - 2009:
The predicted strong growth across the Asia Pacific
region in development and integration services, at 9.7
per cent CAGR, mainly stems from rapid growth in China
and India, which need to build up capability to serve
their large domestic markets. Although India's total
IT services market will still be one-third smaller than
China's at $5.3 billion by 2009, its development and
integration size will be almost the same as China, at
around $3 billion.
"As the Indian economy grows and merges further with the global economy, the focus of demand for IT Services will shift from large deals signed by large enterprises to increasing number of mid-size and small enterprises signing IT Services and BPO deals, which is expected to drive the next phase of growth in the Indian IT Services market," says Datar, explaining the future scenario for the Indian IT Services market.
IT management is a strong growth trend and key driver for IT services for all markets in Asia Pacific with a CAGR of 9.6 per cent. Consulting follows closely with a 9.5 per cent CAGR through 2009. Gartner says the comeback of consulting shows that companies need to transform their business, not only by cutting costs, but also by learning how to better use IT resources and processes to grow their business.
"Although process management, with a 9.1 per cent CAGR, is an important IT services driver, it still faces cultural obstacles in some Asian markets such as China, South Korea, Hong Kong, Taiwan and New Zealand," said Jester. "It will be a few years before the Asia/Pacific market fully accepts process management. Product maintenance and support will continue to have a steady demand, with a CAGR of 6.9 per cent through 2009."
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