IT industry looks inwards for growth

Domestic IT market expected to be worth around Rs 1,75,400 crore by 2016, from Rs 99,700 crore in 2011, a growth of 12%

In a change of tack, the $100 billion Indian IT industry is looking inwards to spur IT spend in the domestic market.

Riding on increase in government spend on IT, delivery of software products through a pay-per-use service model, and the need for companies to adopt to emerging technologies such as cloud, big data and mobility, Indian IT industry expects domestic IT market to be worth around Rs 175,400 crore by 2016, from Rs 99,700 crore in 2011, a growth of 12%.

”The domestic industry is at an inflexion point when it comes to IT adoption,” says Bhaskar Pramanik, chairman, Microsoft Corporation India, and head of CII’s National Committee on IT, ITeS & e-Commerce.

The next wave of technology–cloud, big data and mobility–will help Indian companies to leapfrog the technology adoption cycle, he said. The largely untapped SME market in India offers a huge opportunity for growth, he added.

According to a report released by BCG-CII on IT enablement of Indian business, IT-services, which are 50% of domestic IT spend, will drive the growth, ramping up from Rs 49,400 crore to Rs 96,600 crore by 2016, clipping along at 14%.

Software product sales is expected to grow from Rs 17,800 crore to Rs 34,400 crore in the same period, while hardware sales is projected to grow by 6%, from Rs 32,500 crore to Rs 44,400 crore.

“The government’s role as a buyer of IT can have an significant influence on accelerating the penetration of IT in India,” says Neeraj Aggarwal, partner and managing director, The Boston Consulting Group. Currently, as per industry estimates around 25% of domestic IT spend is government-related, including those by public sector enterprises. India spends only about 0.3% of the GDP on IT, as against 1.2% by UK, and 1.1% by the US.

The report highlighted that IT service providers may have to give up their global pricing model when tapping the domestic IT opportunity but look at offering value-added services through process improvement, and technology-led transformations. Sectors such as education, healthcare, retail and media–with relatively low IT spend–are expected to increase their expenditure in the coming years, the report added.

According to Kris Gopalakrishnan, president, designate CII, and co-founder & executive co-chairman, Infosys, effective IT adoption by Indian industry would help them improve their competiveness, grow faster and capture new markets. There is an opportunity for the IT sector to work closely with the government to kick-start the economy, Pramanik said.