India’s ICT industry at crossroads

Indian Information & Communications Technology (ICT) companies may be missing a significant opportunity by concentrating their efforts on India’s much-hyped export market and failing to capitalise on the country’s burgeoning domestic market, warns Gartner.

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By  Angela Prasad Published  August 31, 2005

Indian Information & Communications Technology (ICT) companies may be missing a significant opportunity by concentrating their efforts on India’s much-hyped export market and failing to capitalise on the country’s burgeoning domestic market, warns Gartner. Speaking at the Gartner Summit India 2005 in Mumbai, analysts said India continued to have the fastest growing ICT market in the world, and predicted a combined annual growth rate (CAGR) of 19% from 2004 through 2008. Though starting from a much smaller base, this is significantly faster growth than the second fastest growing ICT market, which is China. Gartner estimates the ICT spending in India will surpass US$54.8 billion by 2008, a rise from US$29.5 billion in 2004. “India is one of the few countries in the world where the impact of the services export oriented business far outweighs that of the domestic side,” said Partha Iyengar, research vice president at Gartner. “The overall impact of ICT development in the country is skewed heavily around the unique dynamics of this services export trend, often to the detriment of the domestic opportunity.” While some Indian service providers are making a name in certain global markets, such as IT services and business process outsourcing (BPO), it is the global players that are firmly entrenched in the Indian domestic market. Domestic vendors currently account for only 42% of total ICT spend in India. “The dominance of foreign providers in India is driven by a combination of a lack of credible domestic ICT infrastructure providers - other than in the telecom space - and the benign neglect of the emerging and growing domestic services business by the major Indian service providers. Unless action is taken now, domestic providers could see their share of the Indian market slip further,” he warns. Iyengar further commented that India’s much prized export-focused industry, currently estimated to be worth $16.5 billion, could ultimately be under threat if local providers fail to gain ground in the domestic market. According to Gartner, Indian businesses are increasingly turning to multinational brands in the outsourcing of high-profile contracts. Gartner believes that if Indian technology providers have no standing in the local market and are thus unable to compete for these higher-end (transformation oriented) deals, it will hamper their future prospects in pursuing similar deals in international markets. “This scenario creates an interesting range of possibilities on how India’s ICT business may unfold over the next few years,” Iyengar adds. “The possible paths will be predicated by a complex combination of vendor, government and end user behaviour over the next few years. The impact of outside forces in the form of global treaties or national trade barriers could also have a profound impact on the future growth of ICT in India. So, in a manner of speaking, India is not completely in control of its own destiny with regard to its domestic ICT industry.” According to Gartner, the ICT industry in India stands at a crossroads. If technology providers, end users and government can work together to pursue the path outlined in the first scenario then India will not only prosper, but also serve as a model for market development in other emerging countries.

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