Revival Of The Indian IT Industry

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Dec 03, 2014

Post the '90s, the major driver of Indian economy has been the IT and ITES sector which also gets the credit of highlighting India on the global IT platform. IT sector played the important role of changing the Indian economy from an import oriented economy to an export oriented economy. Slowly but surely it evolved with time and became one of the major FOREX earners in the Indian economy. But post-recession even though the world economy made a stark recovery the Indian IT industry started seeing stagnancy and lost its shine.

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Unfinished projects and unsealed deals plagued the industry of late due to the looming political uncertainties and economic volatility. But post mid-2014, the industry has again sprung to action, and a lot is happening in the sector resulting in a lot of global activity in the boardrooms of the world IT honchos. Let us take stock of how the IT sector is panning out in the lights of the newfound revival spree in the wake of current political and economic stability in the sub-continent.

Show time for the Indian IT sector

Due to political stability and economic revival, India's software market witnessed an improved first half (1H) in 2014 compared to a slow 1H 2013. According to IDC, the India software market registered a year-on-year growth of 10.7 percent during the first half of 2014.

The first half of 2014 culminated in IT investments by major verticals like BFSI, manufacturing, retail and ecommerce, the market analyst firm said.

“Few big vendors closed major deals which were in the pipeline since early 2013 but did not materialize owing to economic and political uncertainties. This led to overall growth of the market during 1H 2014.”

IDC expects the software market to grow at a stable pace in the next five years (2014-2018) with a healthy CAGR of 10.5 percent.

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According to market reports the areas which look more promising and are supposed to steer the IT sector growth will be mobile application development and mobile device management, security software working on 3rd Platform, system software, analytics and engineering applications.

The IT sector is also expected to see a paradigm shift in focus towards virtualization and in this race the cloud majors such as VMware (VMW, Financial), Salesforce (CRM, Financial) and Red Hat (RHT, Financial) will be the front liners who have already established their presence by generating considerable size of deals in cloud computing and cloud analytics. while database and analytics players such as Teradata (TDC, Financial), Informatica (INFA, Financial), Oracle (ORCL, Financial), Qlik (QLIK, Financial) and others registered strong double-digit growth due to widespread demand for customer insights and analytics.

Banking, finance, securities & investment services (BFSI), manufacturing and communication and media were the major players who invested in upgrades and new licenses. It would also be worth keeping a close watch on the sectors like entertainment, retail and ecommerce, education, hospitality, etc. IT investments are now made not only for process improvements but also for growing business opportunities and improving customer experience, IDC added.

IT sector boosters

After a couple of dull years the IT sector started looking up since Q2 2014. The new uptrend can be attributed to the success of a few new dimensions in the global IT industry and India’s prowess in the evolving dimensions. The new dimensions now driving the world's IT sector are customer analytics, mobile solutions, Cloud solutions, customer management solutions, omni-channel management systems, data loss prevention, etc.

Government initiatives such as Mobile Seva, Digital India, Pradhan Mantri Jan Dhan Yojana and the likes will be instrumental in triggering adoption of software solutions in the coming years.

The new government’s initiative to boost the IT industry in India through various schemes and policies has acted as a catalyst in mobilizing production in the sector and encouraged its adoption across different business arenas ranging from manufacturing to retail to travel and BFSI which is expected to fuel the growth of the IT sector in India in the long run.

“Large as well as SMB customers are looking at ways to curb their capital expenditure and are keen to embark on the cloud journey. This has led the vendors to make their licensing policies more flexible and easier so that existing customers could smoothly transition to a cloud environment,” Shweta Baidya, Senior Market Analyst, Software, IDC India, was quoted as saying.

“Some vendors are offering exchange schemes to their customers to buy back their hardware in exchange of a Cloud setup which is resonating very well with the SMB market,” added Baidya.

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Open source software has found new patrons among the small and medium business enterprise since they want to optimize the value of their limited cash in hand and do not want to lock them away into acquiring expensive proprietary software.

Small and Co-operative banks, Retail and Telecommunication sectors are now looking at customized solutions based on open source platform for greater flexibility and cost efficiency. The evolution of 3rd platform is expected to fuel the uptake of open source solutions further in the future course of time.

Our take

The future prospects of the Indian IT industry are looking quite promising in the wake of the current events. Also last month in one of our article titled: ‘The U.S. Retail Giants Head For Bangalore In India we had pointed out how the retail giants of the west are flocking to India to setup their technology centers owing to the talent pool of the country. Hence the future of the Indian IT companies like Tata Consultancy Services, Infosys (INFY, Financial), Cognizant (CTSH, Financial) and those of the global IT giants having operations based in India like Oracle, IBM (IBM, Financial), SAP (SAP, Financial), Salesforce and Google (GOOG) looks quite promising. As an IT investor it would be wise to keep an eye on the companies based in India and build positions in them in order to encash their success runs on a mid- to long-term basis.