According to a report by Icra, IT services spending is likely to be driven by strong forecast GDP growth of 3.5 per cent in the US, moderate increase in IT spending in the US, and strong growth in IT spending in emerging markets.
For Indian companies, growth is expected at around 28-30 per cent in the medium terms, driven more by reallocation of corporate budgets from internal to external spending rather than growth in aggregate IT spending.
Growth is also expected to be driven by the expansion of service portfolio to lower-cost, remote/virtual delivery models, thereby increasing and addressable market for service providers.
Domestic IT demand is likely to increase at a high rate of 25 per cent per annum in the medium term driven by increased investments by Indian firms in enhancing their network infrastructure.
Also, there is likely to be a significant increase in companies reporting IT budget allocations.
More Indian firms - especially in manufacturing - are likely to initiate IT spending, while many others - especially in finance and insurance - are likely to report higher IT spending growth.
IT spending growth by domestic firms is likely to focus on ERP implementation and infrastructure investment.
Software products are also likely to increase at a high rate with increased IT usage and penetration, launch of localised/lower priced software versions, and development of software products in regional languages.
With high growth of the IT/software services and IT-enabled services (ITES)/business process outsourcing (BPO) sector, export revenues from software services sector have increased rapidly from $9.7 billion in financial year (FY) 2004 to $17.1 billion in FY2006, and to an expected $22 billion in FY2007.
According to data released by the World Trade Organisation, India's exports of commercial services (including computer and information services) increased from $10.59 billion in 2000 to $16.14 billion in 2003, and $28.55 billion in 2004.
According to the World Information Technology and Services Alliance, the global information and communications technology market is expected to increase from $3 trillion in 2006 to around $4 trillion in 2009.
Although communications products and services represent the largest single category of ICT spending in 2006 with $1.57 trillion, software is the fastest growing category with annual growth of 10 per cent.
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