Domestic IT Market

The Domestic IT Market in the year 1997-98 had a landmark achievement when it crossed Rs 10,000 crore mark and aggregated revenues of Rs 11,272 crore. However, it fared equally well in 1998-99 when it grew by more than 20.37% to Rs. 13,568 crore.

The size of the domestic market during the period 1993-2001 is depicted in the following chart:

The domestic IT industry in India earned revenues of Rs. 13,568 crore and grew by 20.37% in the year 1998-99 over the revenues in 1997-98 of Rs. 11,272 crore. Therefore, even as other industrial sectors saw single digit growth, the IT industry continued to experience high double digit growth rates. In the current year, IT industry is expected to receive a stronger thrust on the back of government as well as industrial purchases. The domestic software and services market continued to post strong performance in 1998-99 with revenues of Rs. 4,950 crore growing at more than 41% over revenues of 1997-98.

However, moderate performance of 1998-99 year-on-year with 1997-98 was the result of cut throat competition, margins coming under pressure and Indian customers increasingly becoming value conscious. Therefore, even as hardware (Servers and PCs) volumes went up, the value of their sales experienced a downturn and were found to be at Rs. 3716 crore at the end of 1998-99. However, this aspect was more than compensated by strong buoyancy in networking as well as peripherals segments. The domestic peripherals segment (including networking) earned revenues of Rs.1,360 crore compared to Rs. 833 crore of revenues during 1997-98. This was largely helped by strong demand for non impact printers and rich multimedia capabilities. The networking segment scored strong buoyancy with a virtual boom in demand for networking solutions. The above numbers of domestic IT industry are pointers towards trends that are in sync with global movements.

Some of the major trends of the domestic IT market during the period 1998-99 were:

• Growth in demand for personal computers along with the rising popularity of the Internet are two major forces driving the growth of the domestic IT industry. PC (including PC servers) sales in the country in the year 1998-99 were more than 820,000 units aggregating revenue of over Rs 3,100 crore. However, the industry also witnessed an accelerating paradox of increasing unit sales and constrained revenues.

• The installed base of PCs in the country was 3.2 million as on 31 March 1999. Thus, the PC penetration rate in the country translates to about 3.2 computers for every 1000 people. However, India has 37 million cable TV connections.

• Y2K bug or Year 2000 solutions emerged as an important driver of domestic IT market during 1998-99. Although Indian organizations were late to give due importance to this immoveable deadline, they were responsive enough to take a head-on course of action and achieve high levels of Y2K compliance within a relatively short period of time. Government sector further received a thrust for Y2K compliance through setting up of sub-Ministry Y2K Action Forces chaired by senior Secretary level functionaries in respective Ministries / Departments. With the Task Forces being made strongly accountable for Y2K compliance of their respective sectors, this led to greater appreciation of problem on hand and thus reflecting upon stronger demand for new systems, software and services.

• IT users in India are already having a marked preference for open platforms that can be implemented at low cost. Popular platforms such as Intel / Windows NT / Unix emerged as popular choices of users for integrating all functions and departments of organizations, while also promising extremely high transaction processing rates.

• Open platforms such as Linux, Pearl and Apache are gaining increasing acceptance amongst large software developers and major IT users. However, this trend is even more marked amongst Small and Medium Enterprises (SMEs) as it brings near zero cost purchase / support coupled with functionality that is as good as in priced products of similar genre. This is expected to help drive IT penetration in SME sector.

• ERP implementations, systems integration and SOHO (Small Office Home Office) continued to be at the forefront of IT growth in India.

• Government markets emerged as one of the strongest drivers. These were not relegated to Y2K related purchases only, constituting 28.4% of total expenditure by this segment. In fact, an entire gamut of projects envisaged in Central and governments’ policies are being initiated.

• Companies are beginning to look at E-commerce as a viable option. 

• Middle level enterprises are beginning to procure mid-range systems.

• Large sectors but with low IT penetration, such as textiles and healthcare are receiving strong thrust from government as well as private sector to adopt IT.

• Users are wiling to pay premium for quality value added services. Workgroup solutions are on the agenda of FTUs as well as those who are upgrading their systems.

• The year 1999-2000 is expected to post enhanced performance aided by streamlined public procurement procedures. This would be helped by infrastructure, telecom, government and Finance sectors.

• SME (Small and Medium Enterprises) and SOHO market would continue to be major drivers of domestic market in the year 1999-2000.

• The vertical segment contributions to the total domestic IT market pie may be fragmented as below: