BANGALORE: For India's top technology firms focused on the markets of US and Europe, the country's $15-billion-plus domestic market for IT services is the latest battleground. In a year when top markets for software exports are recovering and expected to grow at less than 5%, India's domestic market for IT is set to grow three times faster, mainly on the back of higher government spending on IT and new outsourcing projects from local banks.
"We will be looking at IT to aid customer acquisition and financial inclusion. The attempt will be to take banking to remote areas using technology services," says Pushpinder Singh, DGM-IT, Bank of India, which plans to spend Rs 600 crore on technology this year. "For some of the contracts, we will continue with existing vendors. We will be evaluating others for new projects," he added.
Indian government departments and public sector units are going to spend the most on IT this year. The biggest driver for higher government spending on IT and related areas is India's UID project, which according to CLSA Research will lead to $10 billion worth of investments in IT consulting, system integration, and computer hardware over the next five to six years. CLSA sees an $1-billion business opportunity for consultants in the first five years and a need to raise manpower by 15% for their services. Some 18,000 systems specialists and programmers will drive a $2.4-billion pie for integration of UID into existing software systems.
"As this sets in, business process re-engineering (BPR) activities should pick up, as the full benefits of UID for businesses become clear. We expect 36,000 people to join the BPR wave around UID, creating a $6-billion market over the first five years," CLSA researchers said in their report last year. "Apart from UID, IT hardware growth will get a fillip with $1.1 billion worth of equipment sold to the government and another $1.8 billion of incremental demand from the private sector and government-owned companies," the report adds. What's critical is that vendors like IBM, TCS, Infosys and Wipro see newer opportunities emerging even during a global slowdown in software spending because state-owned enterprises like BSNL and ONGC — and other ministries too — seek to become more efficient.
Experts tracking this sector say India Post, Indian Railways and LIC will spend $3 billion on information technology this year, and the government's share of total IT spend in India will cross 10% over the next two years from 6% right now. Praveen Bhadada, manager-consulting, Zinnov Management Consulting says: "In the 10th five-year plan (2002- 2007) 0.3% was spent on IT. In the 11th five-year-plan , IT spend increased to 0.5 %. If we extrapolate this, government is going to spend about 2 % on IT. If today, $1.5 billion is spent annually, it could easily go up to $ 7-8 billion over the next three to five years."
For one, India's department of posts (DoP) is set to spend up to $1 billion on its IT-led business revamp over the next five years with top tech firms like IBM, TCS, Infosys and Wipro pursuing several outsourcing contracts for helping the postal department automate and integrate its business processes with a standard software solution. Accenture is in the process of developing a plan for this revamp. DoP's IT revamp is a classic example of old, legacy systems and software applications being unable to cope with rising operational pressures and newer business models. The department has been using software applications such as Meghdoot — developed in-house — for over a decade.
With the government seeking to evolve DoP into a well diversified services provider offering postal, insurance and financial solutions across remote parts of the country, there is a need to upgrade the systems. "Indian IT companies will have to improve focus on the domestic market because other markets are slowing down and there are opportunities here," points out Bhadada. Driven by higher IT needs in banks, telecom, education, healthcare and public sector, domestic IT demand is likely to grow almost three times faster than the global IT demand.
While global IT spend is expected to grow at 5.5- 6 % in FY 2011, the domestic spend is likely to grow at 15- 16% during FY 2011 as against FY 2010. For companies aiming to be more competitive — and those who take on global competitors — the spend on technology locally will expand. Rajesh Uppal, chief general manager, Maruti Suzuki India — who not only oversees IT operations of 15,000-20 ,000 users but also for 1,200 dealer locations and customer-facing IT applications — says that their IT strategy will focus on enabling business goals. "We are in a growth mode. The idea is to ensure all business goals get help from IT. Customer analytics help identify new opportunities with existing customers while finding new customers will be a priority," said Uppal.
The company, needless to say, has a huge customer base of over 8 million. Nasscom pegs the growth of domestic IT-BPO revenues (excluding hardware) at 16%. According to the recent report, IT services will be one of the fastest growing segments in the Indian domestic market rising by 16.8% to reach Rs 501 billion. Meanwhile, the domestic BPO segment is seen to grow by 16.9 % in FY 2011 to reach Rs 127 billion. The software product segment is estimated to grow by 14% to reach Rs 157 billion, fuelled by replacement of in-house software applications to standardised products. Tamal Chakravorty, CIO, Ericsson India, says the company's IT strategy will be to reduce costs and try out different innovations like extending collaboration leveraging IT and social networks .
"We will also look at promoting unified communication and trying out some open source platforms in the business process management space," said Chakravorty. Industry watchers say the company, which has about a thousand IT users, two data centres and server farms in India, is expected to spend $30 million this year. Springboard Research predicts that the Indian IT market will grow at a compounded rate of 13.2% between 2010 and 2015, 1.6 times the pace of the GDP growth in the same period.
"The demand will be driven by banking, manufacturing, telecom, education, healthcare, public sector, energy and utilities ," said Manish Bahl, director India & research operations, Springboard Research. "In terms of size of spending, public sector and banking are quite lucrative. Energy, utility and logistics will see faster growth as they are growing from a smaller base," he added.
"We will be looking at IT to aid customer acquisition and financial inclusion. The attempt will be to take banking to remote areas using technology services," says Pushpinder Singh, DGM-IT, Bank of India, which plans to spend Rs 600 crore on technology this year. "For some of the contracts, we will continue with existing vendors. We will be evaluating others for new projects," he added.
Indian government departments and public sector units are going to spend the most on IT this year. The biggest driver for higher government spending on IT and related areas is India's UID project, which according to CLSA Research will lead to $10 billion worth of investments in IT consulting, system integration, and computer hardware over the next five to six years. CLSA sees an $1-billion business opportunity for consultants in the first five years and a need to raise manpower by 15% for their services. Some 18,000 systems specialists and programmers will drive a $2.4-billion pie for integration of UID into existing software systems.
"As this sets in, business process re-engineering (BPR) activities should pick up, as the full benefits of UID for businesses become clear. We expect 36,000 people to join the BPR wave around UID, creating a $6-billion market over the first five years," CLSA researchers said in their report last year. "Apart from UID, IT hardware growth will get a fillip with $1.1 billion worth of equipment sold to the government and another $1.8 billion of incremental demand from the private sector and government-owned companies," the report adds. What's critical is that vendors like IBM, TCS, Infosys and Wipro see newer opportunities emerging even during a global slowdown in software spending because state-owned enterprises like BSNL and ONGC — and other ministries too — seek to become more efficient.
Experts tracking this sector say India Post, Indian Railways and LIC will spend $3 billion on information technology this year, and the government's share of total IT spend in India will cross 10% over the next two years from 6% right now. Praveen Bhadada, manager-consulting, Zinnov Management Consulting says: "In the 10th five-year plan (2002- 2007) 0.3% was spent on IT. In the 11th five-year-plan , IT spend increased to 0.5 %. If we extrapolate this, government is going to spend about 2 % on IT. If today, $1.5 billion is spent annually, it could easily go up to $ 7-8 billion over the next three to five years."
For one, India's department of posts (DoP) is set to spend up to $1 billion on its IT-led business revamp over the next five years with top tech firms like IBM, TCS, Infosys and Wipro pursuing several outsourcing contracts for helping the postal department automate and integrate its business processes with a standard software solution. Accenture is in the process of developing a plan for this revamp. DoP's IT revamp is a classic example of old, legacy systems and software applications being unable to cope with rising operational pressures and newer business models. The department has been using software applications such as Meghdoot — developed in-house — for over a decade.
With the government seeking to evolve DoP into a well diversified services provider offering postal, insurance and financial solutions across remote parts of the country, there is a need to upgrade the systems. "Indian IT companies will have to improve focus on the domestic market because other markets are slowing down and there are opportunities here," points out Bhadada. Driven by higher IT needs in banks, telecom, education, healthcare and public sector, domestic IT demand is likely to grow almost three times faster than the global IT demand.
While global IT spend is expected to grow at 5.5- 6 % in FY 2011, the domestic spend is likely to grow at 15- 16% during FY 2011 as against FY 2010. For companies aiming to be more competitive — and those who take on global competitors — the spend on technology locally will expand. Rajesh Uppal, chief general manager, Maruti Suzuki India — who not only oversees IT operations of 15,000-20 ,000 users but also for 1,200 dealer locations and customer-facing IT applications — says that their IT strategy will focus on enabling business goals. "We are in a growth mode. The idea is to ensure all business goals get help from IT. Customer analytics help identify new opportunities with existing customers while finding new customers will be a priority," said Uppal.
The company, needless to say, has a huge customer base of over 8 million. Nasscom pegs the growth of domestic IT-BPO revenues (excluding hardware) at 16%. According to the recent report, IT services will be one of the fastest growing segments in the Indian domestic market rising by 16.8% to reach Rs 501 billion. Meanwhile, the domestic BPO segment is seen to grow by 16.9 % in FY 2011 to reach Rs 127 billion. The software product segment is estimated to grow by 14% to reach Rs 157 billion, fuelled by replacement of in-house software applications to standardised products. Tamal Chakravorty, CIO, Ericsson India, says the company's IT strategy will be to reduce costs and try out different innovations like extending collaboration leveraging IT and social networks .
"We will also look at promoting unified communication and trying out some open source platforms in the business process management space," said Chakravorty. Industry watchers say the company, which has about a thousand IT users, two data centres and server farms in India, is expected to spend $30 million this year. Springboard Research predicts that the Indian IT market will grow at a compounded rate of 13.2% between 2010 and 2015, 1.6 times the pace of the GDP growth in the same period.
"The demand will be driven by banking, manufacturing, telecom, education, healthcare, public sector, energy and utilities ," said Manish Bahl, director India & research operations, Springboard Research. "In terms of size of spending, public sector and banking are quite lucrative. Energy, utility and logistics will see faster growth as they are growing from a smaller base," he added.
Source: The times of India, February 24, 2011
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