Global Woes, India’s Domestic IT Resilience
India's domestic IT market has displayed remarkable resilience and growth in recent years, defying macroeconomic uncertainties and global economic slowdown. Driven by digital transformation initiatives and increased investments by enterprises, the market has continued to expand, leveraging key technologies like cloud computing, analytics, AI/ML and security.
Steadfast Growth and Digital Transformation Initiatives
Despite the prevailing uncertainties, the Indian domestic IT & Business Services market exhibited robust growth. According to IDC's Worldwide Semi-annual Services Tracker, the market reached a value of USD 13.87 billion in 2022, recording a remarkable 7.4 per cent year-over-year growth. Harish Krishnakumar, Senior Market Analyst, IT Services, IDC India, highlighted the market's resilience.
He said, "The Indian IT services market remained resilient, with enterprises investing in digital transformation amidst macroeconomic uncertainties."
IT Services and Market Segments
The IT Services market, which contributes 78.1 per cent to the overall IT & Business Services market, experienced significant growth of 8.1 per cent in 2022. The market is divided into three primary segments: Project-Oriented, Managed Services, and Support Services.
Among these segments, project-oriented services witnessed the highest growth rate at 8.0 per cent, followed by managed services at 7.2 per cent and support services at 6.4 per cent. Enterprises exhibited an increasing demand for network consulting and integration services, as well as system integration services driven by the adoption of cloud, AI/ML, and analytics technologies.
“As organisations seek to efficiently manage their hybrid infrastructures, we foresee a substantial increase in the adoption of cloud services, fueled by the benefits of agile and scalable pricing structures like consumption-based and outcome-based pricing models," said Neha Gupta, Senior Research Manager, Software and IT Services Market, IDC India.
Future Projections and Market Opportunities
The Indian IT & Business Services market is projected to grow at a compound annual growth rate (CAGR) of 8 per cent between 2022 and 2027, reaching a value of USD 20.42 billion by the end of 2027. Despite concerns about an impending recession and high inflation, these factors are not expected to significantly impact the market in the near term. However, certain segments may experience a slight slowdown due to cutbacks in discretionary spending and delayed decision-making.
Vinay Gupta, Research Director, IT Spending Guides, IDC Asia/Pacific, emphasised the importance of consumption-based models and long-term solutions. He said, "Enterprises still face challenges impacting their business and will look at consumption-based models to drive their focus on transformation."
Challenges and Opportunities
The Indian IT services industry encountered some challenges due to macroeconomic headwinds in the US and Europe, impacting revenue generation. Concerns about rising interest rates and the mortgage market affected growth in the BFSI segment, while the retail segment faced inflationary headwinds that decelerated growth, noted ICRA in its report. Nonetheless, companies like Tech Mahindra highlighted the importance of customised solutions and acquiring competencies to overcome challenges.
Speaking with BW Businessworld, Rohit Anand, Chief Financial Officer, Tech Mahindra said, "The first strategy is to work closely with customers, understand how their market base or demand is changing, and then see how we can partner with them to make them successful... For instance, over the last 18-24 months, we acquired competencies in cloud-native technologies and experienced design services. This helped us to offer a more differentiated offering to our customers."
India's domestic IT market has showcased remarkable growth and resilience, driven by enterprises' digital transformation initiatives. Despite challenges such as inflation, staffing shortages, and global economic slowdown, Indian IT services companies have navigated these headwinds by closely collaborating with customers, providing customised solutions, and investing in building competencies.
