IT revenue from retail to grow at CAGR of 44%: Research

The ongoing retail rush in the Indian economy is proving to be a good revenue generator for the IT sector. According to an independent report from Springboard Research the IT revenue from the retail segment measured $253 million in 2006 and is expected to grow to $1.07 billion by 2010, with a compound annual growth rate (CAGR) of 44 per cent.

The Indian retail industry is one of the fastest growing sectors of the Indian economy and has been traditionally dominated by small, family-owned retail shops which is taking steps to a more modern and organised retail industry structure. Thanks to a healthy economy and rising household incomes, organised retail is emerging as a rapid growth industry in India, the report noted.

"As the current economic boom in India spreads to Tier II and Tier III cities and towns, reaching out to prospective consumers in these cities is high on the agenda of most retail companies," said Nilotpal Chakravarti, Market Analyst for Springboard Research. "Retailers consider market presence in these cities and towns key to their growth and profitability. As such, many retail companies are investing in technology that will help support their expansion into these new markets."

In its report, "India's Retail Industry: IT Market Trends and Opportunities, 2006-2010," Springboard Research concludes that after real estate and human resources, IT is the highest investment area for most large- and medium-sized retailers. Report data also showed that retailers consider supply chain management (SCM) and inventory management their top strategic focus areas. This is driving the demand for enterprise resource planning (ERP) systems, with 35 per cent of the report's retail respondents saying that they have deployed ERP as their largest IT solution in the past 24 months and a further 38 per cent of retailers sharing that they will invest in ERP in the next 12 months.

Springboard also found that retail firms consider strong service and support (22% of respondents) and price (17%) as key factors in IT vendor selection. These were followed by strength in a particular solution area (15%), knowledge of the retail business (13%) and knowledge of the retail industry (12%).

"Many Indian retail firms have traditionally focused on service and support as a key factor in choosing a vendor. We expect this to continue and to also see more significance placed on an IT firm's industry knowledge, expertise, and ability to provide retail-focused solutions. Price has been a key factor in the past and will always be a factor, but we expect industry knowledge to advance to play a very primary role in vendor selection," Chakravarti explained.