Indian IT services to reach $14B by 2010: Gartner

Growth in its internal market will be a factor, research firm says

India's IT services market is forecast to grow to US$10.73 billion (NZ$14.3 billion) by 2011, at a five-year compound annual growth rate of 23.2%, as outsourcing emerges as a more favoured option for companies in India, according to research firm Gartner.

As companies are finding it more difficult to hire and retain their own IT staff, they are looking at external service providers as an option, hoping to also cut down costs, and better manage growth in the process, Gartner says.

Indian user companies compete for staff with Indian outsourcing companies and Indian operations of multinational companies, which hire new staff by the thousands each quarter.

Staff attrition is, however, not the key reason why companies are outsourcing, says Arun Gupta, chief technology officer at Shopper's Stop, a top Indian retail chain. Driving outsourcing in India is a growing demand for new technologies and applications. Shopper's Stop has six IT projects in progress with another 12 projects planned for the next six to 12 months.

Rather than creating and managing a large IT organisation in-house, the company is working with service partners to support its 45 IT staff, Gupta says. Some of the functions it outsources are network maintenance, desktop and server maintenance, monitoring ERP applications, and software development, he says.

A number of large banks and telecommunications service providers are already outsourcing key IT operations, though the key winners so far have been multinational services companies. Many Indian outsourcing companies have neglected the Indian market in favour of exports, according to a survey last year by Gartner. But that may be changing as the weakening US dollar puts pressure on rupee realisation from exports.

IBM, Tata Consultancy Services (TCS) and Wipro together accounted for 26.1% of IT services vendor market share in India last year, according to Gartner. IBM was the top vendor, with 11.2% market share. TCS and Wipro occupy the second and third positions with 10.9% and 4.1% market shares, respectively.

However, the Indian IT services market is still fragmented, with the majority of the market being serviced by smaller local players that account for close to 40% of the IT services scene, according to Gartner.

"We have looked at smaller players for very small and specific jobs, but for larger jobs, running into a number of years, and which require a variety of skills, we look at large Indian companies or multinational services companies," Gupta says.

The key segments of the Indian IT services market are hardware maintenance and support, software support, consulting, development and integration, IT management, and process management, according to Gartner.

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