The Hindu Business Line : Gartner urges tech cos to tap domestic market

WITH the outsourcing backlash against India continuing unabated, the Indian IT industry would do better to ramp up capability to capture a sizeable chunk of a lucrative domestic market where IT spends are currently pegged at $1.6 billion.

The Indian market is forecast to grow at a CAGR of 17.3 per cent by 2008, compared to the US and European markets which are likely to grow at the rate of 6 per cent and 8 per cent respectively.

"Going forward, the APAC region, especially countries like India, China, Malaysia, Hong Kong and Australia are the markets that Indian (IT) service providers should look at. By 2008, the Indian market will be almost 1.5 times the size of the Singaporean market and this growth will primarily be driven by Government contracts, banking financial services industry and the manufacturing sector," Mr Craig Baty, Group VP and Chief of Research, Gartner, said.

Speaking at the Gartner annual summit 2004, Mr Baty said factors such as mass computerisation across various areas, including Railways, agriculture and the BFSI segments, along with globalisation would push India and domestic companies into implementing IT on a larger scale. According to Gartner estimates, the Indian market ( domestic IT spend) would touch $2 billion by 2004 and $7 billion by 2008.

On US firms outsourcing to India, Mr Baty said even though less than 2 per cent of the US services market "actually outsources work to India, there is a backlash that would continue for some time. This is mainly because of the hype and inflated expectations created about cost savings and emotions."

To counter this, Indian firms need to look beyond the US market and move up the value chain, both in the IT and ITES industries.

While Japan is the single largest market, Indian firms can also look towards Eastern Europe, Latin America and APAC geographies, averred Mr Baty. The global IT services market is estimated to touch $762 billion by 2008.