India will still enjoy IT growth this year

India's IT industry will show "strong resilience" in spite of the current economic climate, with spending projected to grow 14.1 percent this year.
Written by Eileen Yu, Senior Contributing Editor
India's IT industry will show "strong resilience" in spite of the current economic climate, with spending projected to grow 14.1 percent this year.

According to a Springboard Research report released Tuesday, the Indian IT market will not be as severely affected by the downturn as economies in North America, Europe and Asia-Pacific markets such as Japan and Korea.

In fact, IT spending in India will still expand by 14.1 percent in 2009, albeit at a slower rate than the 18.1 percent growth it clocked last year, the research firm predicted.

Verticals such as retails and real estate will see the largest cuts in IT budgets, Springboard noted, while telecommunications will see some growth from the anticipated arrival of 3G this year.

After a series of delays, India is expected to conduct its first 3G spectrum auction this year, though the country's Cabinet last week said a ministerial panel is currently looking to resolve several related issues, such as deciding on the base auction price.

However, Mahanagar Telephone Nigam Ltd. (MTNL) and Bharat Sanchar Nigam Ltd. (BSNL), which are both India state-owned enterprises or Public Sector Undertakings (PSUs), were given 3G spectrum last year ahead of private telecommunication services providers. Both operators will be required to pay the same license fee when the auction is finalized.

MTNL recently launched its 3G mobile services in selected areas in New Delhi.

Not as affected
Government initiatives to bolster economic growth, increased spending on public security and national defense, as well as IT initiatives in rural India, will pave the way for new technology, Springboard said.

"With the economic crisis expected to further worsen, we will see IT spending affected in India--although not to the same degree as in North America, Europe and other Asia-Pacific markets like Japan, Australia and Korea", said Manish Bahl, research manager at Springboard.

"[India] had delivered impressive growth and profits to both leading multinational and domestic vendors last year, and for many of these vendors, their Indian revenues grew more than 50 percent in 2008," Bahl said.

According to the analyst, local enterprises will focus more on their core business in a bid to build specialization. This will increase their dependence on technology to reduce operational expenditure.

"Albeit in a slow pace, SMBs (small and midsize businesses) will also play their part to drive the market and this is well supported by the changing attitude of Indian companies to view IT as an investment," Bahl noted.

Springboard expects the economic downturn to "trigger a new kind of competition", driving businesses to closely focus on returns on investment calculations, improve their planning and deepen the involvement of IT vendors.

"While major multinational vendors continue to view India as a critical growth market, we expect other U.S.-based firms to amplify their resource influx into the region and set up special teams to focus only on emerging markets such as India," Bahl said.

The top 10 trends Springboard believes will shape India's IT market this year:

1. Arrival of 3G will unlock enormous opportunities for IT vendors.

2. Cost concerns will drive key focus on IT infrastructure consolidation.

3. Economic pressures will drive SMBs toward outsourcing and software-as-a-service.

4. Startups and smaller businesses will become more important accounts for IT vendors.

5. Virtualization will gain traction in medium- and large-sized enterprises.

6. IT outsourcing will be seen as a catalyst to HR (human resource) retention and cost reductions during this economic downturn.

7. The media and entertainment industry will transform further with new technologies.

8. Online advertising markets to gain momentum with the emergence of niche social networking sites and regional portals. 9. The public sector will buoy IT spending.

10. Green IT will be fueled by cost-efficiency benefits.

Editorial standards