IDC's top 10 predictions for 2009

IDC India predicts that the domestic Indian IT/ITeS market will grow at 13.4
percent in 2009, the slowest since 2003. The much awaited annual IT/ITeS market
forecast suggests that important structural changes, taking place on the back of
a global economic meltdown, will propel a new 'market order' in the domestic
Indian IT/ITeS industry.

This new 'market order', termed as Growth Phase 2.0, will be quite different
from the earlier phase, Growth Phase 1.0 (2003-08), during which the domestic
market witnessed unprecedented

growth, nearly tripling the market size from Rs 34,000 crore in 2003 to Rs
1,01,031 crore in 2008, a CAGR of over 24 percent.

The report titled 'India Domestic IT/ITeS Market Top 10 Predictions for 2009'
states that Growth Phase 2.0 will leverage the IT infrastructure built and
consolidated during Growth Phase 1.0.

Among IT solution categories the faster growing ones would be virtualization
(28 percent), Unified Communications (25 percent) and Business Continuity
Services (20 percent).

All these categories point towards the need for better management of IT
infrastructure for their most optimal deployment and use in achieving enterprise
business goals.

Top 10 predictions for 2009:

1. Slowdown to accelerate IT/ITeS market transformation from Growth Phase
1.0 to Growth Phase 2.0

The market transformation of the India domestic IT/ITeS market has already
started, with market players preparing for a new landscape. As this new
landscape is about a relatively lower growth rate regime, they need to innovate,
leverage the existing infrastructure and align continuously to market
opportunities.

Growth Phase 2.0 will be an era of following dynamic strategy as any existing
strategy will not remain effective for long and would need to be re-constructed.

2. India to be the fastest growing market in APAC

The Top 5 growth markets in the APAC region are India, China, Vietnam,
Thailand and Philippines. India will continue to lead the pack with 11.4 percent
growth in domestic IT spending projected for 2009.

3. IT optimization technologies adoption and usage to grow

IDC believes that the emerging IT optimization technologies will move from
'being at the tipping point' to 'being mainstream' in 2009. On account of the
slowdown the technologies that deliver significant cost savings such as
virtualization, unified communications, open source etc. will see heightened
interest and adoption by enterprises in 2009.

Technologies that can deliver near-term cost savings will remain in focus
while the larger capital-intensive green investments with longer payback cycles
will move down the priority list.

4. Telecommunications sector IT spending growth will be fastest

As the economic meltdown forces enterprises to slash their IT budgets across
industry verticals, the telecommunications sector, would continue to grow at
higher than average growth rate and will be the least impacted by slowdown.

5. The outsourcing services market will move towards consolidation in
favor of larger players in 2009

IDC believes that the economic slowdown will further increase and accelerate
the adoption of outsourcing services by the Indian enterprises.

However, the two ends of the outsourcing services market i.e. low-end
services like support services and high-end services like Business
Transformations services will undergo consolidation. Low-end volume services,
because of increased competition, will find margins coming down and larger
players will acquire their counterparts, while at the same time accelerating
their movement towards Business Transformation Services in 2009.

6. Experimentation with 'Cloud Computing' model will increase but will not
become mainstream in 2009

IDC India predicts that in 2009, IT 'Cloud Computing' service
offerings--including software as a service (SaaS), hosted delivery model--will
get tested and adopted on a larger scale and will perform even better than in
2008. The cloud model's advantages of lower capital outlay and operating costs,
coupled with the reassurance of more major players coming on board and building
capabilities (including enabling and educating the channel), will encourage more
customers at the margin to invest in cloud offerings.

Enterprises, which have been shying away on account of issues of security,
connectivity etc., will be forced to re-evaluate the model. Organizations across
verticals will evaluate different models with services delivered through the
cloud, hosted and managed by suppliers (IT vendors), TSPs (telecom service
providers), system integrators or pure-play hosting players.

7. The stage would be set in 2009 for new channel forms to evolve

The channel space had undergone shift during Growth Phase 1.0 (2003-08) with
linear distribution models giving way to multiple types of channels. These
multiple channels (like system integrators and ISVs) added more value to the
technology adopted by the end user. Keeping the key attribute of 'value
addition' intact newer forms of channels would emerge during Growth Phase 2.0,
with the market transforming yet again.

The key differentiator for the new channel forms will be their 'services'
play as compared to the 'product' play of the past. This services play will
occur around the emergence of 'Cloud Computing' technologies and the need for
reliable hosting and delivery channels.

8. Consumer 2.0 Elusive! Delay in orchestration of Content, Convergence
and Connectivity

'Consumer 2.0' is not about Connectivity, Content and Convergence in
isolation, but their orchestration in an integrated fashion. Not only would the
consumer spending on IT moderate (growth rate of 13.7% in 2009 compared to 23.6%
in 2008), but the emergence of Consumer 2.0 will also be affected by further
delays in the 3G rollout and dismal performance on the broadband adoption front
(subscribers expected to touch 9 million in 2009).

9. Enterprises to look at an Integrated Security approach, revamp their
Business Continuity plans

As enterprises look at optimization technologies like virtualization, cloud
computing, hosted delivery model, a key challenge will be information security.
Keeping the entire data secure on the cloud while at the same time making it
accessible remotely and addressing other vulnerabilities will force
organizations to look at integrated security solutions. The heightened security
risk perception in view of the threat of terrorist attacks will force
enterprises to look at Business Continuity services seriously. As a consequence,
the Security Solutions space is expected to evolve and grow by 20 percent in
2009.

10. Global IT growth will be halved

Global growth will be cut in half and take three years to come back. Taking
into account a dramatic slowdown of global GDP, IDC predicts that global IT
spending will decrease to 2.6 percent in 2009-half of 2008's five percent and
far below 2007's seven percent growth rate.