India Sees 6.5% Growth In IT Services Market In 2013

The India IT services market in second half of 2013  has  seen  a  sluggish growth compared to same period in 2012, as the dynamic market conditions compelled enterprises to take a cautious approach towards  their  technology  budgets.  According  to  the International Data Corporation (IDC) the IT services market in India witnessed an year on year growth  of  approximately  6.5%  in  2H CY 2013 over 2H CY 2012, to reach a value  of  INR 2,56,452 million (USD 4.1 billion)  the exchange rate for 2H 2013  -  1USD= INR 62.08. The lower than expected growth in the IT services market  is  mainly  attributed to the cautious approach in the market and a decrease in the infrastructure spend.

Several services markets fared better than others in this period:

 * Support services saw a quiet period in terms of growth in 2H CY 2013 with  organizations  looking at cost cutting measures and holding off plans for  hardware and software refresh. The support services market saw a growth of 5.5% over 2H CY 2012.

* System  integration  and  IT  consulting  services also registered a growth of 6.8% and 6.3% respectively, which was a bit slower than the 1H  2013 owing to fewer infrastructure projects. Outsourcing services market  though  one of the leading segments in the IT services market saw  a  slight decline than the previous half of the year and grew by close  to7.1%  in  2H  CY  2013  over  2H  CY 2012. Large outsourcing contracts  are  being  replaced  by small discrete outsourcing deals, where  the  contract  value, and length of contract have come down to 3-5  years  instead of 7-10 years. Managed Services market has picked up  pace  as  organizations  are  looking  for  solutions  which  are efficient  and  cost  effective.  However, concerns around providers’ capabilities  to  manage  vertical specific applications remain high, which is limiting the kind of applications getting outsourced and the overall scope of engagement.

Sachin  Chaturvedi, Senior Analyst for IT Services at IDC says "The growing complexity  of  enterprise  IT environments, combined with the challenge of availability  of advanced technical skills, will push organizations to turn to outsourcing services.

IBM  managed  to command almost 12.1% of the IT Services market in India in H2 2013. It  has benefited from its long time presence in India and ability to  execute  a  range  of  IT  services, from software and hardware support

installation  to  systems  integration  and  information system outsourcing (ISO).

Wipro  is  second  with 7.4% market-share in H2 2013, which is a noteworthy jump  from  a  market-share  of  6.9%  in  H1  2013.  Wipro has won several strategic outsourcing contracts which has increased its  revenue base.

            

"The service providers landscape is set for the battle for dominance as the competitive  landscape  heats  up  with the continuing spend and increasing maturity in the India IT Services space" says Chaturvedi.

Key sectors like Banking and Financial Services, Manufacturing, Telecom and Government make up for a large portion of total IT Services spend in India. In  H2  2013, all these sectors put together constituted 82.5% of the total spend.  Banks  continue  with  their  IT  adoption,  with  a  focus towards delivering  value to  their  client and organizations by reducing cost and improving  efficiency.  They  are  automating  their  back end processes to offset  the higher cost of financial inclusion, which involves large amount of manual intervention.

Although  India’s  manufacturing  sector was plagued by high cost pressure, decreasing domestic demand, high inflation and unclear government policies, spend  on  IT  Services  continues  as large and medium sized manufacturing firms prepare for the future.