Domestic IT market to grow 21.5% in '07

DQW News Bureau New Delhi, Jan 12

IDC (India), announced its top 10 IT market predictions for the
year 2007. Most of these predictions are concerned with domestic IT market.
However, there is a reference to those trends in the global market, which will
have deeper implications for the domestic market.

The domestic IT market in India grew by 22.4 percent in 2006
(preliminary estimates) and is expected to keep the momentum up in 2007. The
estimated YoY growth in 2007 is estimated to be 21.5 percent, making it the
fastest growing market in the Asia-Pacific region.

"The domestic IT market has posted impressive growth in the
last three years and is expected to continue the momentum in 2007 also, which
only means the domestic market has come of age," commented Kapil Dev Singh,
Country Manager, IDC (India).

From a global perspective, 2007 will be a year of intense 'hyper
disruption' in the IT industry, with major structural changes taking place
along different industry vectors at once-all interacting with each other and,
more importantly, accelerating each other. In 2007, small businesses will become
big, more software become services, more services become software, business IT
players become more 'consumer-ish', and consumer players become more
business like. These disruptions, and others, will force most market leaders out
of their comfort zones and open up new opportunities to those that choose to
surf these disruptions rather than stand against them.

Top 10 predictions

1. India continues to soar. South Asia's largest economy
will continue to lead the pack as the next IT market opportunity. The economy
posted a strong

8.5 percent real GDP growth in fiscal 2006 and it continues to grow. One major
challenge right away is that the IT infrastructure of the incumbent companies,
lags behind these foreign entities. Consequently, a major wave of IT investments
has started to take place across banks, financial services institutions (FSI),
telecom, manufacturing, government, resource, education, and other industries.
This is probably why India is the fastest-growing country by IT spending in 2006
(22.4 percent) and is forecast to remain so in 2007 (21.5 percent) when it
reaches Rs 75,891 crore.

2. Dynamic IT to enter phase two in 2007. From consolidation
to virtualization and service oriented architecture (SOA). Enterprises in India
have matured to the extent of consolidating their IT infrastructure acquired
over the years. Cost pressures are forcing large enterprises to evaluate and
closely assess the utilization and productivity of these IT assets. At the same
time, as business has become more dependent on IT, organizational goals have
started to get linked to the IT roadmap of the enterprise more intimately than
ever before.

The key technology components that would come to the fore would
be virtualization, SOA and application integration.

3. Disruption to set in for small and medium business (SMB)
focused go-to-market strategies-new delivery and usage models will evolve in
2007. The new year will mark the beginning of an aggressive focus from all major
vendors to broaden and deepen their coverage of the SMB sector. Vendors will
experiment with new models like on-premise hosted applications, hardware on
lease and software as a service (SaaS).

IT services vendors will also bring to market packaged services
that are pre-scoped, pre-priced, pre-quality assured, shrink-wrapped offerings,
ready to be implemented at the client site. The focus will be midsize
enterprises, which require speedy implementations and target a reasonably quick
return on their IT investments. The one-to-many hosting model put forth by
hosted application management (HAM) vendors would create a new profitable
delivery model for application outsourcing services to mid-market customers. HAM
will grow at a growth rate of

33 percent in 2007.

4. Connectivity, content and convergence will run parallel
courses, but their real orchestration into a fully evolved 'digital home'
phenomenon will remain elusive in 2007. IDC expects the Internet subscriber base
in the country to grow at 50 percent in 2007, with broadband subscribers
accounting for 30 percent of the total.

Service providers, content companies (media, news, gaming,
services) and device manufacturers are also expected to team up in a big way to
provide services like IPTV, online music, online gaming, online shopping, online
banking and other public utility services.

Home and SOHO customers in India are also expected to continue
to lap up more and more lifestyle and entertainment IT products such as
multimedia desktops, notebooks, mobile phones/PDAs, MP3/DVD players, digital
cameras and broadband connections.

These developments around the three themes of connectivity,
content and convergence will accentuate and define the lines around which the
digital home of the future will emerge.

5. Vendors will adopt a 'productized services' delivery
model in 2007 to achieve standardization and enhance profitability. In 2007,
system integration (SI) partners will aim to minimize costs by breaking down
activities into smaller modules. With the creation of 'services products',
vendors would be in a better position to evaluate the feasibility and margins of
contracts.

The next level of maturity would come from the conversion of
services into standalone standard product modules. Vendors will be able to
replicate the services products across multiple clients, which traditionally had
been highly customized for specific clients. Vendors like IBM have already come
to market with such offerings. TCS, Wipro and HP are expected to follow suit in
2007 and this trend is expected to gain further momentum through the year. The
market spending on SI services in India for 2007 is expected to be around $872
million growing at 19 percent and contributing to 21 percent of the total IT
services market.

6. Internal security concerns will drive the enterprise
security solutions market in 2007. IT managers have long realized that
enterprise wide security is not a one-time, single-point activity; rather it
needs to be continually evolved by pro-actively visualizing and nullifying
future threats and intimidations.