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Spending in domestic IT/ITES grows, despite global market slump

Radhika Nallayam | Aug. 12, 2013
Growing domestic market and vigorous recruitments plans of the IT companies breathe in new life into the market.

Growing domestic market and vigorous recruitments plans of the IT companies breathe in new life into the market.

A relatively vulnerable market, India's IT/ITES sector seems to have shown resilience to challenging market conditions. The IT spend of this sector continues to rise, as existing players expand aggressively and newer players break into the market.

Manish Bahl, VP and country manager, Forrester India, believes IT spend in this sector will grow at 8 percent, at least, for the next year. IT/ITES is clearly a mature user of technologies and seems to be making wise investments in IT. The buying behavior and consumption methods of customers are also changing.

Mumbai-based Galaxy Office Automation has witnessed a two-digit growth in its business from this sector. So has Bangalore-based 3in Solutions, which is already driving more than 50 percent of its top line from the IT/ITES sector. What's more, the company's forecast for next quarter projects a whopping 40 percent growth from this vertical.

A combination of multiple factors appears to drive this growth. First, the domestic market for IT is growing fast. As a result, most IT companies have aggressive expansion and recruitment plans in place for next year. "Many of our customers in this space, especially global technology companies, are investing heavily on R&D, testing, and QA. That's a big opportunity for us. India is being looked at as a global destination for R&D initiatives, " says Galaxy's Dhungat. Consequently, the SI's end-user computing business has seen a quantum leap.

Arun S.G., director, 3in Solutions, adds that India is gradually becoming the preferred location to set up headquarters for companies in the APAC region. Here, companies are trying to consolidate their IT buying decisions. "India is relatively cheap, has quality man power, and is more IT-savvy," says Arun. It also helps SIs that customers in this sector have moved to the next level of IT consumption. Private cloud adoption, for instance, is quite high, with IT companies consolidating multiple projects.

"Purchases are based on projects. Earlier, these companies bought applications, hardware and software for every project they took up. But now, they give priority to factors such as resource utilization and provisioning," says Dhungat. While this means that customers would logically buy less hardware than before, it also means that they are looking for quality investments. For partners that means greater profitability. Galaxy's virtualization business, for example, has shot up in the last year. Desktop virtualization, especially, has been a cash cow for the company. "IT companies are looking at virtualizing compute, storage, applications, and desktops. They are making wise infrastructure investments to increase scalability and flexibility," says Dhungat. 3in Solutions has also widened its services portfolio to cash in on new opportunities.


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