Research and forecast firm, International Data Corporation (IDC), has estimated the India software market to surpass $8.2 billion by the end of 2021. The market was pegged at $4.0 billion in 1H21, registering a growth of 15.9 per cent year-over-year (y-o-y) compared to 1H20.

India accounted for 18.3 per cent of the overall Asia-Pacific, excluding Japan and China (APeJC) region software market during 1H21. Microsoft, Oracle, and SAP maintained their leadership position in the India market during the first half of the year.

Hemanth Gudiwada, Associate Market Analyst at IDC India, said, "Indian enterprises are continuing their digital transformation initiatives with a clear focus on scalable, secure, and agile frameworks. They ramped up investments on cloud for scalability, AI to leverage data accurately and serve the clients more efficiently, and security to protect their network & systems with greater emphasis on SASE & Zero Trust frameworks, identity management solutions, among others."

Accelerated growth

As a result, the corresponding software markets are experiencing accelerated growth, and the growth in these markets is expected to continue for the next couple of quarters. Tech providers are continuing to invest in India to fully utilise the opportunity and explore untapped potential across Indian enterprises, he added.

IDC classifies the software market into three primary categories — applications, application development and deployment (AD&D), and systems infrastructure (SI) software. Applications contributed 60.9 per cent to the overall market revenues, followed by AD&D and SI software with shares of 21.0 per cent and 18.1 per cent, respectively, in 1H21.

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As per IDC’s current estimates, collaborative applications, engineering applications, content workflow andmanagement applications, customer relationship management (CRM) applications, and enterprise resource management (ERM) applications are leading the software segment in terms of revenue. The collaborative applications market witnessed the highest growth of 40.1 per cent during 1H21, followed by system and service management software and artificial intelligence platforms at 31.8 per cent and 30.7 per cent, respectively.

India Market Forecast

IDC estimates India’s overall software market to grow at a compound annual growth rate (CAGR) of 14.0 per cent between 2020 and 2025. Cloud has become a critical element of enterprises' digital strategy, with cloud migration becoming a priority. IDC estimates the contribution of platform-as-a-service (PaaS) and software-as-a-service (SaaS) markets to the overall software market to increase from 37.1 per cent in 2020 to 59.0 per cent in 2025, growing with a CAGR of 25.1 per cent with more emphasis on PaaS solutions.

IDC expects acceleration in demand for technologies such as robotic process automation (RPA) software, artificial intelligence (AI) platforms, conferencing and collaborative applications, IT service management (ITSM) software, and digital commerce applications, among others.

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Shweta Baidya, Senior Research Manager at IDC India, said, "The India software market continued to display the strongest growth trajectory with the highest growth across the APeJC region. The pent-up demand culminated in a sharp spike in the market growth during the first half of 2021, compared to 2020. Most of the enterprises have already reached the pre-pandemic normalcy levels, while some organisations expect operations to normalise by the end of 2021 or first half of 2022."

Collaborative applications, artificial intelligence platforms, system and service management and security witnessed the strongest growth during the period due to the adoption of cloud-based solutions, she said. "Software vendors have been re-aligning their portfolios and offerings to cater to the evolving requirements of their clients. There is a strong push towards solutions that are agile, scalable and secure, and enterprises are clearly prioritizing vendors with platform offerings over point solutions," Baidya added.