India’s domestic IT growth now beats exports: survey

August 10th, 2008 - 12:04 pm ICT by IANS  

New Delhi, Aug 10 (IANS) India’s booming IT market has seen the domestic demand growth outstrip exports for the first time in over a decade, thanks to the maturing outsourcing market, says a new survey. The domestic IT demand grew 34 percent in 2007-08, compared with 27 percent for exports, which is the opposite of what happened the last fiscal, says the annual IT industry survey of Dataquest - the flagship publication of CyberMedia Group.

“Finally, the day of reckoning has come,” says the soon-to-be-released survey. “And what a convincing difference it has been - 34:27,” say the findings of its 25th annual edition.

In value terms, exports, at Rs.1,897.92 billion ($47.45 billion), still account for two-thirds of total revenues while the domestic sales were estimated at Rs.990.18 billion ($24.75 billion).

The jury is still out on the actual reasons behind the remarkable reversal, and the sceptical IT industry honchos offer several - like small base for the domestic market and the appreciation of the rupee that has slowed down export growth.

“Interestingly all this is true. But that does not take away from the creditable performance of India’s domestic IT market,” it says, while attributing the trend reversal to a 65 percent growth in business process outsourcing (BPO) industry.

The value of outsourcing depends largely on the structure of the relationship. This is where Indian domestic transactions in the BPO space underwent a major shift in fiscal 2007-08, the survey says.

“At $24.5 billion, the Indian domestic IT market is not exactly a small market. Yet, in dollar terms, it grew 50 percent. In other words, it added half of itself to it.”

The survey also finds that some interesting trends in the outsourcing industry - where the players are evolving from short-term, project-driven deals to longer-term, comprehensive outsourcing initiatives - will help the IT industry.

“Over the next few years, staff augmentation and project-based deals would gradually dwindle to be replaced by more comprehensive outsourcing engagements,” the survey adds.

During the year, the market saw IT services companies bag multi-million dollar deals for periods ranging from 5 to 10 years, apart from large outsourcing deals in the e-governance and e-procurement space.

IBM Global Services bagged the accounts of Vodafone, Idea Cellular and IGI. HP secured Bank of India and Britannia orders. TCS clinched a huge passport-processing contract.

“This change has been an eye-opener of sorts because, for the first time, people seem to have woken up to the potential of the domestic (BPO) market,” the survey says while pointing towards other reasons for the domestic IT growth.

It says the demand for mobility drove notebook sales by 59 percent while the need to save on electricity made many users dump cathode ray tube monitors and switch to liquid crystal display (LCD) monitors - a trend that resulted in the non-bundled monitors market growing by 71 percent.

Another small segment also saw magnificent growth. Automated teller machines, or ATMs deployed by banks grew by 150 percent to emerge as the only sub segment within the domestic market to witness a three-figure growth, the survey says.

In fact, the overall hardware market including systems, peripherals, and other products expanded by 35 percent over last year.

Much of this growth can be attributed to the spread of computing to smaller towns and cities of India and, of course, the growing clout of the small and medium businesses (SMBs), the survey says.

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