IT Scan

January 24, 2005
Indian enterprises to spend US $22.88 billion on ICT in 2005: Gartner

BANGALORE -- In a series of regional forecasts focusing on hot trends for 2005 and beyond, Gartner predicted that the next few years would present some of the greatest challenges and opportunities of their careers to CIOs and those responsible for IT planning and operations.

Sujay Chohan, VP and research director, Gartner India, said: "Enterprise spending on information communications and technology (ICT) in India is likely to grow at 16.6 percent to US $22.88 billion as compared to the Asia Pacific growth at 7.6 percent in 2005. For vendors, the stakes couldn't be higher; especially local vendors, who have long ignored the local market, cannot afford to miss this transition.

"The future is very exciting and in just five years, the IT industry will have little resemblance to that of today, yielding extraordinary benefits with network security, convergence, IP telephony, software and services, and instant messaging - all maturing within 36 months. Utility computing and WLANs would also become more established while we will also begin to experience the value of RFID tags, grid computing, Web conferencing and real-time infrastructure during the next three years."

Enterprise spending in APAC on hardware next year will rise 6.3 percent to US $36.9 billion, with software increasing 12.4 per cent to US $5.6 billion, while telecom will grow 7.5 per cent to US $132.5 billion and IT services will gain 8.4 percent to US $33.6 billion.

In India, of the US $22.88 billion spend in 2005 on enterprise ICT, US $3.34 billion is the projected spend on hardware, an increase of 21.1 percent over 2004; US $0.52 billion (16.4 percent increase) on software; US $16.7 billion (15.5 percent increase) on telecom and US $2.32 billion (18.3 percent increase) on IT services. According to Gartner, India will remain the highest growth market for telecom with around 35 million new subscribers in 2005, an 18 percent increase from 2004, with the growth occurring in selected technologies, mainly mobile. This accounts for almost one-fourth of the new subscribers forecasted in the Asia Pacific region.

The consumer segment is rapidly gaining in importance, driven by the adoption of mobile services. This is reflected in their increased contribution toward spending for telecom services, from 35 percent in 2002 to 43 percent in 2005. By 2008, the consumer segment will account for more than half of telecom spending.

Gartner added that open source software and offshore IT services will continue to grow, while it warned global IT vendors to take emerging competition from China seriously with at least three Chinese IT companies becoming significant global competitors by 2010.

Chohan said: "With the confidence growing in the government circles about the capabilities of open source software, along with the increasing numbers of announcements about open source initiatives, we believe that 60 percent of large and mid-size government agencies in the Asia Pacific will use open source software for applications in their core business processes by 2010. That compares with less than 15 percent today."

According to Gartner, the hype of offshore IT services is real and reflects a dramatic uptake in global sourcing of these services. When compared with the total IT services market, less than 3 percent of spending (US $606 billion) was attributable to sourced services in 2004. By 2007, the globally sourced component of IT services spending will be about US $50 billion, or 7 percent of a total of US $728 billion.

The growth in offshore BPO services outpaced the growth in global sourcing of IT services. The offshore component of the global BPO services spend is likely to grow from US $3 billion (2.4 percent of the total market spend of US $124 billion in 2004) to US $24 billion (15 percent of the total market spend of US $161 billion in 2007).

The following are a series of other predictions Gartner forecasted globally:

• Gartner expects the PC vendor market to experience at least three lean years after 2005 with three of the top 10 vendors exiting the market by 2007.

Chohan said: "Unit growth will fall below the double-digit rates that the market is accustomed to, and revenue growth will come to a standstill. Price competition will intensify as vendors struggle to maintain growth in an austere market environment, characterized by a weak replacement activity and the growing importance of emerging markets." Currently, the top 10 worldwide PC vendors, by unit shipment, are Dell, HP, IBM, Fujitsu, Fujitsu Siemens, Toshiba, NEC, Apple Computer, Lenovo Group and Gateway. Of the top 10 worldwide vendors, only Dell has consistently been profitable in the past several years. Gartner said the PC divisions of HP and IBM were vulnerable to being spun off if their drag on margins and profitability is deemed too great by their parent companies.

• IT services will continue to grow in Asia Pacific, where mission-critical services are in high demand.
• Micro-commerce will emerge as a major new business opportunity and there will be a fundamental change in the way software is built and used with the continuing development of Web services.

He added: "The changing business paradigm will force vendors and organizations to take tough decisions. Going forward, in the short term, there will be complexities arising from the transition, as organizations migrate keeping the 'old way', while simultaneously embracing whole new architectures, skills and technologies."

Contact:
Gartner
www.gartner.com