Government spending and companies looking to adapt to the latest technologies such as cloud computing and data analytics will help spur India's IT growth in 2013.
Last year, many markets were impacted by the global economic slowdown and India was not spared. However, the local IT and IT-enabled services (IT-ITES) sector showed resilience and managed to generate US$100 billion in revenues, with exports amounting to between US$75 billion and US$77 billion.
Looking ahead, Sunil Bhave, vice president of Fujitsu Consulting, said the local tech industry is at a crucial juncture given that economic uncertainties continue to loom over the Eurozone and United States. This has led to the slowdown in growth of India's GDP from 9 percent two years ago to today's 5.5 percent to 6 percent, he noted.
"Most businesses are in the waiting mode before they make investments," Bhave noted.
Arup Roy, principal research analyst at Gartner, had a more positive outlook though. He said: "Although India's GDP growth has slowed, the growth fundamentals are on a relatively solid footing, driven primarily by growing domestic consumptions. For this reason, GDP growth is expected to remain steady in the longer term."
This was corroborated by Rajesh Subramaniam, CEO and managing director of Firstsource Solutions, who noted that as the industry matures, there will be continuous process efficiency and value additions for customers by means of reducing cost to serve and improve customer service. These are key drivers in most outsourcing relationships, and will generate more business for the local outsourcing giants, he noted.
"We expect growth rates of 10 percent to 12 percent for India's IT industry in 2013," Subramaniam forecasted.
Gartner had earlier said continued investments in telecommunications will drive a 7.7 percent growth in IT expenditure for India to US$71.5 billion this year.
Government spending critical
The government will play a key role in spurring spending growth in the local tech industry, given that the Lok Sabha--or the lower house of India's parliament--will be gearing up for elections scheduled in 2014. Roy said he expects more spending on transparency- and efficiency-related projects such as e-governance initiatives.
Bhave added: "With general elections in India about a year away, government policies and priorities are likely to be swayed by populist measures."
Sanketh Arouje, leader of the economy analysis group at Dun & Bradstreet India also said higher technology adoption by the Indian government and corporate sector will drive the domestic market.
In the private sector, companies face challenges such as competition from low cost economies, continuous cost pressures and pressure from clients to provide more value and higher productivity. Under these circumstances, IT companies that adopt lean processes, derive maximum operational efficiencies, and make an impact on client businesses are likely to benefit, said Bhave.
"Most businesses and CIOs are likely to invest in technologies that have direct business benefits and add value to business programs," he added. "Flexibility, agility, and understanding of client businesses will be required for organizations to survive and prosper in this marketplace."
Time for reinvention
The executive said with regard to technology, "social computing, big data, analytics and CRM (customer relationship management) are likely to be at the forefront and will see more penetration". As such, companies that dare to transform themselves will prosper, he said.
Sanjay Deshmukh, area vice president for India subcontinent at Citrix, agreed. "Given that the business environment is expected to remain volatile, uncertain, complex and ambiguous, businesses will be under pressure to reinvent the way they work," he said.
Cloud computing and other pay-for-use models of IT procurement will gain in popularity in this landscape, noted Arouje.
"Many corporate houses are expected to explore new opportunities which require lesser capital especially in a cost-conscious environment. This new trend, which is expected to grow manifold, will drive more deals in the cloud segment in the coming year," he said.
The business transformation will also help local Indian companies to better compete with other emerging locations such as China, Philippines, Vietnam, Poland, Hungary, Mexico, Brazil and Egypt, the analyst said.
"While India still remains the preferred destination for outsourcing activities, many other countries have started providing similar types of services and are fast emerging as competitive locations," Arouje noted.