• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Moumita Bakshi

How will 2005 be for the Indian IT industry? Will the IT market see growth or decline? Read on for some predictions.

THE Indian IT market seems all poised to make the most out of the year 2005. Going by recent statistics and predictions, India would not only achieve a robust growth rate for itself this year, but also spur the Asia-Pacific performance. Sample this. According to global research firm IDC's prediction, that coincides with roll over to 2005, India, together with its neighbour China, is expected to enable the IT market in Asia-Pacific to achieve a growth rate of 10 per cent in 2005, despite an anticipated slower economic growth in the region. Thus the IT market in Asia-Pacific will surge to $97 billion, while the total telecom services market in the region would grow by 11 per cent to $163 billion. This growth will be driven primarily by growth in Internet Protocol (IP), broadband and wireless services.

Markets in comparison

A comparison of various markets within Asia-Pacific shows that India would clearly lead the region in terms of growth in IT spending in 2005, displaying a growth rate of 21.7 per cent, ahead of Vietnam (16 per cent) and China (14.9 per cent). In absolute numbers the IT spending in India was pegged at $5,738 million in 2003, rose to $6,973 million in 2004 and is expected to touch $8,484 million in 2005, with a 21.7 per cent growth projected for this year. The growth in 2005 would be on account of rising corporate profits, improvement in macroeconomic parameters (both globally and domestic), and heightened business confidence.

China, on the other hand, boasted of an IT spending of $24,248 million in 2003, $27,968 million in 2004 and is poised to touch $32,126 million this year. "Total IT spending in the region will reach $97 billion in 2005, driven by a healthy 15 per cent growth in China (excluding Hong Kong) and 22 per cent growth in India. These two countries will account for 42 per cent of total IT spending in Asia-Pacific (excluding Japan) in 2005, with China being the more dominant market with 33 per cent share of total IT spending in the region," says IDC.

The high-growth product/service market segments in 2005 fuelling the performance would be smart handheld devices, IT planning and implementation services, IT training and education, application software, and system infrastructure software. In addition to the three countries mentioned above, Indonesia and Philippines complete the list of top five markets on growth parameters for IT spending. While Indonesia is projected to achieve a 13.6 per cent growth in IT spending, Philippines would see a growth of 11.7 per cent in 2005. Amongst other nations, Australia will display 4.2 per cent growth, Hong Kong 4.4 per cent, Korea 6.9 per cent, Malaysia 11.6 per cent, New Zealand 3.3 per cent, Singapore 3.5 per cent, Taiwan 2.2 per cent, Thailand 11.1 per cent, and the rest of Asia-Pacific an average 12.1 per cent growth.

A year of convergence

The study foresees 2005 as a year of convergence, consolidation, innovation and realignment. "The current ICT industry structure is inefficient and highly fragmented with numerous players competing in each market segment. At the same time, disruptive innovations continue to shift and re-define competitive markets. Given the imminent pressures on profits due to a combination of moderating industry growth worldwide, and intense global competition, industry consolidation will accelerate over the coming years as the industry evolves towards an optimal competitive structure in each major market segment. Companies that emerge successfully through the structural transformation underway will be the big winners in the coming decade," says Piyush Singh, Managing Director, IDC Asia/Pacific.

Stating that mobility, convergence and IT management would drive growth in 2005, it said that the high growth categories this year will be notebooks, smart handheld devices, inkjet multi-functional devices (MFDs), security software, network and system management software, information access and delivery software, and IT outsourcing, with all these categories witnessing over 30 per cent growth over 2004.

In the domestic ICT spending arena, BPO and IT Services will be the highest growing verticals. Government and Education will emerge on the technology horizon and BFSI will continue its strong run. The study noted that the mobile wireless telephony has grown over 100 per cent in subscriber base during 2004. "In 2005, the wireless phenomenon will touch the lives of the common person and the action will shift towards more untouched regions of the country," it said. Wireless telephony will clearly be the flag bearer of the nation's drive to meet the objective of the National Telecom Policy — a phone within every person's reach. The research firm has also predicted that the Internet access market will undergo structural shift in 2005, and that despite the emergence of broadband, its usage will be confined to basic access. "With the entry of Reliance Infocomm, other players such as BSNL, Tata and Bharti intensified their broadband projects in 2004. Large-scale launch and expansion of broadband services by major telecom companies will bring about a structural change in the Internet industry in 2005. Triple play offerings, that promise data, voice and video services through a common broadband connection will start surfacing in the market, but will not go mainstream," it added.

moumita@thehindu.co.in

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Thumbs-up

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line