Indian IT services market to attain $9.5 billion in 2011

Indian Information Technology (IT) services market is expected to register a growth of 18% to $9.5 billion in 2011 from $7.6 billion in 2010, according the research firm Gartner. India’s domestic IT services market ranks third in Asia-Pacific. The market is forecast to grow to $15 billion by the end of 2014.

'India's domestic IT services is a large emerging market in high growth mode. Coupled with other factors such as openness to adopt technology, and a maturing sourcing approach, it represents an attractive target potential for providers of all sizes. The top 10 providers have a cumulative market share of just 42%, indicating a highly fragmented market served by many small players with no large, dominant, well-entrenched player. However, this scenario varies widely by submarket such as by industry vertical' Arup Roy said.

Currently, only four industry verticals make up the bulk of the market (85% of all IT services spending). Those four industries are banking, financial services and insurance; telecommunications; manufacturing; and government. This means that other industry verticals offer a good opportunity of growth as they start opening up and start engaging with external service providers (ESPs), said the Gartner report.

The Indian IT service providers both national and multinational corporations (MNCs) have almost equal market share, six of the top ten IT service providers are Indian companies and account for almost 22.3% of market and four MNCs account for 19.7% of market share, and rest of the 60% of market is with small and medium size companies, which shows that the IT sectors still has place for new players and hence Indian market presents huge opportunity to grow and to consolidate its position and grab big market share.  From last few years, cost of labour and infrastructure in metro cites are increasing, however, still lowest in the world and cost of inputs like infrastructure and labour differ, and service provider can offer extremely competitive rates.  

Compared to other developed markets, Indian IT sector is quite small; however it also provides opportunity to service providers due to favorable market conditions. The market has a critical mass that is worth tapping and has the potential to expand further with 'as a service'-type service offerings.

'With a historic focus on cost, rather than on value for money, of services, as well as a propensity for scope creep in Indian services deals, new market entrants must be careful about the opportunities they target. These providers should consider providing as-a-service/pay-as-you-go offerings to counter some of these market challenges,' Arup Roy added.