Goa: IT spending in India will touch $71.3 billion in 2014, up nearly 6% from the $67.4 billion forecast for the current year, global technology research firm Gartner said on Tuesday, adding to the cheer of the street which is already celebrating the second quarter of good results.
Of this total spend, IT services will record the strongest revenue growth at 12.1%, followed by software revenue at 10% and the telecom services segment (that accounts for 42.1% of the Indian information and communication technologies market) at 2% in 2014, it said.
The IT market in India is the third-largest among emerging economies and the fourth-largest among developing and mature Asia-Pacific countries.
"The long-term growth projections of the Indian market continue to be positive. India is still a vastly underpenetrated market and growth within smaller towns and cities will continue to provide growth for IT vendors across categories, with the consumer market and the small business segment driving this. Rising disposable income and greater consumer awareness are other factors driving the growth of the Indian IT market," said Partha Iyengar, country manager for Gartner, India, said at the Gartner IT Symposium.
Globally, while the IT industry is set to grow at a modest 3.2% in 2014, and by 2020, the IT spend from various industries, like banking, financial services and insurance (BFSI), manufacturing, healthcare, agriculture, real estate, transportation and more, is expected to total $1.9 trillion.
"As recently as five years ago, the leaders in areas such as cloud and mobile were not on many CIOs' radar. What many traditional IT vendors sold you in the past is often not what you need for the digital future. Their channel strategy, sales force, partner ecosystem is challenged by different competitors, new buying centers, and changed customer business model."
This means that leading IT vendors like SAP, Oracle, IBM, and Microsoft are also now struggling with increasing competition from Amazon, Google, Apple, as well as a host of smaller service providers who score higher on mobility than the top IT players, who still have traditional architecture, which needs to scale up from just pure IT services offerings to an integrated IT services approach which includes advanced business and sales and marketing capabilities.
"This scenario applies for Indian IT players as well, who in the next 4-5 years need to rapidly upgrade to grab a share of the huge emerging IT spend opportunity in 2020 and present themselves as partners, instead of mere IT services suppliers," added Iyengar.
Interestingly, Gartner expects the troubled telecom segment to soon turn a corner and exceed IT services spending as well. "In 2013, telecom is the biggest spending segment followed by devices. The annual spending of devices will be four times that of government spending, and 80% of that will be contributed by mobiles and tablets by 2017. In fact, by 2017, 50% of all new purchases will be tablets, and the global telecom revenues should grow by $309 billion per year by 2020. This is because mobile will become the destination platform for all applications, driven by digitisation," said Peter Sondergaard, senior vice-president and global head of research, Gartner.
For India, too, the telecommunications services market, which includes fixed and mobile data and voice services, will continue to be the largest IT segment in India with spending forecast to reach $30 billion in 2014. The devices market, which includes mobile phones, PCs, tablets and printers is expected to total $23.5 billion in 2014, a 6% increase from 2013.
"This presents a new opportunity for VAS (value added services) revenue generation, especially relevant for India, from collaboration with various industries," said Iyengar.
The Indian devices market will emerge as the largest segment of IT spend in India by 2017. Growth within this segment will be driven by the sale of mobile phones which will be amongst the fastest growing sub segments within the Indian IT industry. Mobile phone revenue will total $26 billion in 2017 and will account for 76.4% of device revenue and 28% of overall IT spend in India in the year 2017.