IT/ITeS market may grow 13.4% in '09: IDC

Hit by the global economic meltdown, the country's IT/ITeS market is expected to grow by 13.4 per cent in 2009 to achieve revenue of Rs 1,14,574 crore (Rs 1,145.74 billion), but the growth will be the slowest since 2003, says a report by global market research firm IDC.

According to IDC report 'India Domestic IT/ITeS Market Top 10 Predictions for 2009', the country's IT/ITeS market growth rate is expected to fall to 16.4 per cent in the coming five years till 2013 from an average of 24.3 per cent during 2003-08.

This slower rate of growth will see enhanced competition leading to a rapidly changing strategy and continuous market re-alignment on the part of players, IDC said in a statement.

"2009 shall herald the beginning of a new business cycle that will be marked by slow growth 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," IDC India country manager Kapil Dev Singh said.

"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," he added.

The realignment of businesses and the structural changes will propel a new 'market order', which will be quite different from the earlier phase.

The domestic market had witnessed unprecedented growth, nearly tripling the market size from Rs 34,000 crore (Rs 340 billion) in 2003 to Rs 1,01,031 crore (Rs 1,010.31 billion) in 2008, a CAGR of over 24 per cent.

IDC also predicts the global IT spending to decrease to 2.6 per cent in 2009 against five per cent in 2008 and seven per cent in 2007.

The combined India domestic IT/ITeS market grew by 17.3 per cent in 2008 to touch a revenue of Rs 1,01,031 crore (Rs 1,010.31 billion) against Rs 86,101 crore (Rs 861.01 billion) in 2007.

The domestic IT market (excluding domestic ITeS) grew at 15.4 per cent in 2008 over 2007 to report a revenue of Rs 94,185 crore (Rs 941.85 billion) , while the ITeS market grew 53.2 per cent in 2008 to report a revenue of Rs 6,846 crore (Rs 68.46 billion) from Rs 4,468 crore (Rs 44.68 billion) in 2007, the report said.

The domestic IT market is expected to grow at 11.4 per cent in 2009 to post a revenue of Rs 1,04,937 crore (Rs 1,049.37 billion), while the domestic ITeS market will post revenue of Rs 9,637 crore (Rs 96.37 billion), a growth of 40.8 per cent.

The major product categories expected to grow at a rate higher than the industry average include collaborative applications (23 per cent), storage software (19 per cent), system and network management software (19 per cent).

The report forecasts India to continue to be the fastest growing market in the Asia Pacific region.

"The Top five 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," the report said.

IDC expects that the economic slowdown will further increase and accelerate the adoption of outsourcing services by the Indian enterprises.

However, low-end services like support services and high-end services like business transformations will undergo consolidation, the report said.

With security risk perception increasing in view of the threat of terrorist attacks, enterprises will be forced to look at business continuity services seriously and the security solutions space is expected to evolve and grow by 20 per cent in 2009, it added.