India IT to cross $10 bn by 2011

The Indian information technology (IT) services industry is poised to touch $10.73 billion by 2011, predicts research firm Gartner.

Despite high attrition rates, the industry will grow at a five-year compounded annual growth rate (CAGR) of 23.2 per cent, says the study.

Agility, growth, cost takeout and innovation are some of the factors driving this growth. The key catalyst for this growth and for companies to consider external service providers (ESPs) is the continuous turnover rates of key IT staff in the range of 15"�20 per cent.

"Growth of the IT services market is driven by economic growth, high growth among the small and midsize enterprises (SMEs), government projects and increased customer focus. Many IT service providers, multinational companies (MNCs) and domestic have now recognised this potential and developed strategies exclusively for the domestic market," said Arup Roy, senior research analyst, Gartner.

IT consulting and management along with business process management (BPM) services are poised to be the strongest growing sectors in the next five years. Consulting revenues, although coming from a small base, grew 30.1 per cent to $340 million in 2006 and is expected to grow at a five-year CAGR of 28 per cent.

Increased adoption of remote infrastructure management (RIM) services has driven the development of network operation centres/security operation centres, and other managed service offerings from ESPs.

This, in turn, has led the IT management revenues to grow 27.3 per cent from 2005 to $549 million in 2006. It is pegged to record a CAGR of 23.8 per cent over the next five years.

IBM, Tata Consultancy Services (TCS) and Wipro Infotech, together accounted for 26.1 per cent of IT services vendor market share in 2006.

However, the Indian IT services market is still fragmented, with the majority of the market being serviced by smaller local players that account for close to 40 per cent of the IT services market.

Commenting on the vendor landscape, Roy said, " Vendors that are unable to find a niche for themselves, or smaller vendors with no real differentiators, will be acquired by larger, more-aggressive competitors. End-user IT organisations or captive unit spin-offs will have a difficult time in competing with well-established providers unless they also find their own niche."