India's IT services tipped for 'robust growth'

Led by strong performance in various segments, the country's IT services market will reach US$8.1 billion in 2011 and be a regional "epicenter of growth", says new study.

Healthy growth in various segments of India's IT services market over the next few years will propel the country to be the "epicenter of growth" in the Asia-Pacific IT services marketplace, according to a new study by Springboard Research.

In a statement Thursday, Springboard said that the IT services market in India will grow to US$8.1 billion in 2011, from US$4.1 billion in 2007. The analyst house also predicted that the market will achieve a compound annual growth rate (CAGR) of 18.6 percent between 2006 and 2011--nearly double that of the Asia-Pacific region, which is expected to register a CAGR of 10.5 percent.

"India is the epicenter of growth in the Asia-Pacific IT services marketplace," said Sanchit Vir Gogia, Springboard's senior research analyst for services. "Not only is the India IT services market forecast to be the fastest growing in the region, the country also has a rather unique position in the worldwide outsourcing arena through a well-educated and language-proficient workforce, that sets it apart from other Asian competitors."

Phil Hassey, Springboard's vice president of services research, added that healthy growth in the various IT services categories contributed to the overall growth momentum. "Not only are these robust growth figures indicative of a vibrant marketplace, they also reflect the fast maturing mindset of Indian enterprises, which are now looking at IT as a business enabler or a growth engine rather than a means to cut costs."

India's IT services market, according to Springboard, is divided into three segments--infrastructure services, application services and IT consulting.

The infrastructure services segment currently dominates the Indian IT services market with a share of 54 percent, and is expected to reach nearly US$4.3 billion in 2011. Springboard counts enterprise IT outsourcing, network management and infrastructure hosting, as categories in the infrastructure services segment.

The fastest growing segment, however, is application services, with a forecast CAGR of 19.6 percent. Within this segment, infrastructure application integration services is expected to be contribute 17 percent to the overall IT services market pie, making it the largest category of the IT services market. Enterprise application integration services will also reach US$1 billion by 2011, said Springboard.

With a CAGR of 16.4 percent, IT consulting will grow to US$404 million by 2011, to match Korea in terms of contribution to the region's market, said Springboard.

According to Springboard, the top five IT services categories in India are:

1. Infrastructure application integration,
2. Enterprise IT outsourcing,
3. Enterprise application integration,
4. Custom application development, and
5. Network integration.

Challenges ahead
While the outlook for the Indian IT services market looks rosy, some challenges lie ahead, according to the Springboard report. One area is human resources--the demand for skills and a resultant skills gaps will likely see vendors pushing into tier two and three cities.

The industry, noted Springboard, will also have its share of mergers and acquisitions. Companies are already seeking niche companies to boost specific IT services, such as emerging technologies, storage, security and consulting.