India's IT/ITeS market to grow at a slower 13.4 per cent in 2009

The IT/ITeS market in the country will grow at 13.4 per cent in 2009, the slowest since 2003, information and communications technology market intelligence firm IDC India said in report published on its website.

The IDC forecast suggests that important structural changes, taking place on the back of a global economic meltdown, will propel a new 'market order' in the domestic Indian IT/ITeS industry.

This new 'market order', termed as Growth Phase 2.0, will be quite different from the earlier phase, Growth Phase 1.0 (2003-08), during which the domestic market witnessed unprecedented growth, nearly tripling the market size from Rs34,000 crore in 2003 to Rs1,01,031 crore in 2008, a CAGR of over 24 per cent.

Growth phase 2.0 will leverage the IT infrastructure built and consolidated during growth phase 1.0, it said.

''It will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services - infrastructure, applications and connectivity - will need to orchestrate and re-orient completely in order to support their mass adoption,'' the report said.

IDC expects the domestic IT/ITeS market growth rate to come down from an average of 24.3 per cent recorded during 2003-08 to 16.4 per cent in the coming five years till 2013.

''This relatively slower growth will see enhanced competition leading to a rapidly changing strategy and continuous market re-alignment on the part of ICT market participants,'' it noted.

"It's not only the end of another year; it's also the end of a business cycle, that began in 2003", says Kapil Dev Singh, country manager, IDC India.

"2009 shall herald the beginning of a new business cycle, that will be marked by slow growth in 2009 but would eventually be the basis of a new phase of growth. The issues in the short run, more pronounced throughout 2009, will be productivity, cost savings and customer retention. This would eventually pave way for innovative services (for both consumers as well as enterprises) by leveraging the existing infrastructure built so as to align with emerging opportunities,'' Singh added.

The combined domestic IT / ITeS market grew 17.3 per cent in 2008 to touch revenue of Rs1,01,031 crore (over Rs86,101 crore recorded in 2007). The domestic IT market (excluding domestic ITeS) grew at 15.4 per cent in 2008 over 2007 to report revenue of Rs94,185 crore. Revenue from the domestic ITeS market grew 53.2 per cent in 2008, recording revenues  of Rs6,846 crore (from Rs4,468 crore in 2007).

IDC expects the combined domestic IT/ITeS market to grow at a slower 13.4 per cent in 2009 with revenue of Rs1,14,574 crore. The domestic IT market is expected to grow at 11.4 per cent in 2009 to post Rs1,04,937 crore revenue, while the domestic ITeS market will post revenues of Rs9,637 crore, a growth of 40.8 per cent.

However, the two ends of the outsourcing services market, ie, low-end services like support services and high-end services like business transformations services will undergo consolidation. Low-end volume services, because of increased competition, will find margins coming down and larger players will acquire their counterparts, while at the same time accelerating their movement towards business transformation services in 2009.

The top 5 growth markets in the APAC region are India, China, Vietnam, Thailand and Philippines. India will continue to lead the pack with 11.4 per cent growth in domestic IT spending projected for 2009.