The Hindu Business Line : `Domestic spending on outsourced IT services may touch Rs 23,800 cr'

Upward curve
Spending on outsourced ITservices is expected to more than double.
Domestic ITES-BPO market is likely to cross Rs 6,600 crore in 2006-07.
The mature user segments are increasing spending on IT services by moving towards holistic IT services.

New Delhi , March 22

With increase in IT adoption in telecom and banking sectors, and the projected IT uptake in airlines, insurance and manufacturing industries, the domestic spending on outsourced IT services is expected to more than double to over Rs 23,800 crore in 2009 from Rs 10,300 crore in 2004.

"The liberalisation of Indian economic policy, de-regulation of key sectors and progressive moves towards further integrating India with the global economy have been key drivers of increased IT adoption in the country. This is best reflected in the fact that most indigenous players in telecom and banking, two key sectors with significant multinational corporation (MNC) participation, have upgraded their levels of IT adoption to offer best-in-class services comparable to those offered by the global competition. These two sectors together account for approximately 35-40 per cent of the domestic spend on IT services," said Nasscom-IDC study on the domestic services (IT and ITES) market opportunity.

The study said that similar competitive pressures in other more recently deregulated service sectors such as airlines and insurance, and the uptake in the manufacturing and industrial sectors; as well as several large e-governance initiatives launched by the Government under the National E-Governance Plan (NEGP) were expected to provide sustained growth in domestic demand for IT services over the next few years.

The survey also predicted that the domestic ITES-BPO market is likely to cross Rs 6,600 crore in 2006-07 from about Rs 3,800 crore in the 2005-06.

Commenting on the findings of the study on the domestic IT services market, Mr Kiran Karnik, President, Nasscom, said "Increasing use of IT within the country will help to enhance the competitiveness of the Indian economy and of the companies and sectors that use IT. We believe high maturity IT user segments like Banking, Insurance, Telecom, Automobile will increase spending on IT services to integrate businesses with IT."

The study found that though IT services form 27 per cent of the total domestic IT spending, its share was significantly higher in segments such as banking financial services and insurance (BFSI), telecom, automotive and manufacturing. In terms of split by industry vertical spending, BFSI, manufacturing and communications accounted for 77 per cent of the overall spend on IT services in 2004.

On the one hand, the mature user segments are increasing spending on IT services by moving towards holistic IT services contracts, while on the other hand, emerging segments such as healthcare, the Government and small & medium businesses are also deploying IT services as a means of productivity enhancement, competitive advantage and value addition.

From the user - side perspective, the survey revealed that price, quality of service and lack of people with suitable skill sets were the top three concerns.

On the domestic market, it said, "The ITES-BPO space has been associated only with export, but there is huge opportunity waiting to be tapped as globalisation demands higher efficiencies and competitiveness from Indian businesses. Unlike the IT services exports market where price arbitrage plays an important role, the domestic market will be driven more by access to specialist skills and helping businesses to free up their scarce resources for focusing on core business areas."

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