Small firms to drive IT services growth: Gartner

The increasing number of mid-size and small enterprises signing information technology (IT) services and business process outsourcing (BPO) deals would drive the next phase of growth in IT services market, according to global research and analysis firm Gartner Inc.

Ravindra Datar, principal analyst (Asia Pacific for IT Services and BPO), said in a statement: "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 small enterprises."

On the growth in the Asia Pacific market, he said it was expected to grow at around 9.7 per cent annually. This would be owing to a rapid growth in China and India, which needs 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 at $5.3 billion by 2009, its development and integration size will be almost the same as China, at around $3 billion, Garter said.

The research firm sees emerging markets like 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. Meanwhile, the domestic information technology (IT) services market grew by 26.7 per cent in 2004-05, the strongest in Asia Pacific.

An improvement in business confidence, a robust economy, improved availability and quality of infrastructure at a lower cost and an increase in MNC presence were the drivers for the growth, the statement added.

Competition in the sector and awareness about strategic benefits of IT deployment, government initiatives as a facilitator for IT deployment and increasing business development activities of global and local service providers in the Indian market were the other factors that propelled growth in the sector, Datar said.