Indian IT services market to grow to $10 bn by 2011

Indian IT services market is pegged to grow to $10.73 billion by 2011...

Indian IT services market is pegged to grow to $10.73 billion by 2011 with anticipation of more contracts from firms, which are grappling with high attrition of IT staff, IT research company Gartner Inc said. Key factors driving this growth are agility, growth, cost takeout and innovation, it said.

But a prime reason 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 a Gartner study.

Growth of IT services market is primarily being driven by growth of the economy, 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 at Gartner.

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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, coming from a small base, grew 30.1 per cent to $340 million in 2006 as compared to 2005. IT management revenue grew 27.3 per cent from 2005 to $549 million in 2006. Increased adoption of remote infrastructure management services has driven the development of network operator centres/security operation centres, remote management centres and other managed service offerings from ESPs.

BPM in India is a high growth area that is moving beyond traditional customer relationship management (CRM) services. The primary challenges that are driving organisations to be engaged in BPO are cost, growth and business innovation. 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.

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.