Gartner paints a rosy future for Indian IT industry

Bangalore: As user organisations continue to grapple with challenges of higher attrition rate in internal IT departments, the Indian IT services market is pegged to grow to $10.73 billion by 2011 at a five year compounded annual growth rate (CAGR) of 23.2 per cent, according to Gartner Inc, leading IT research and advisory company.

Key factors driving this growth are agility, growth, cost takeout and innovation. But a factor which is acting as a prime impetus for companies to consider external service providers (ESPs) is the continuous turnover rates of key IT staff in range of 15-20 per cent, said the Gartner study.

Growth of the IT services market is primarily being driven by economic growth, high growth among the small and midsize businesses, government projects and increased customer focus.

Many IT service providers, MNCs and domestic have now recognised this potential and developed strategies exclusively for the domestic market, said Arup Roy, senior research analyst, Gartner.

"Many IT organisations are planning to spin off their IT organisations into an independent entity to capture the growing opportuniites", added Roy.

The market segments that are expected to witness strongest growth are consulting, IT management and business process management (BPM) services with five year CAGRs of 28.1, 23.8 and 27.1 per cent respectively.

Consulting revenue, although coming from a small base, grew 30.1 per cent to $340 million in 2006 compared to 2005. IT management revenue grew 27.3 per cent from 2005 to $549 million in 2006.

Top three vendors IBM, Tata Consultancy Services and Wipro Infotech together accounted for 26.1 per cent of IT services vendor market share in 2006.

IBM surpassed TCS to become the top vendor, taking a 11.2 per cent market share.

TCS and Wipro occupied the second and third positions with 10.9 and 4.1 per cent market shares respectively, the study said.

However, the Indian IT services market is still fragmented, with the majority of the market being services by smaller local players that account for close to 40 per cent of the IT services market.