India Information Technology Report Q3 2009
by ReportLinker.com on Dec 23, 2010
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2009 is set to be a difficult year for India's potentially vast IT market, as the country is buffeted by strongeconomic headwinds. BMI has downwardly revised its five-year IT spending projections. The ...
2009 is set to be a difficult year for India's potentially vast IT market, as the country is buffeted by strongeconomic headwinds. BMI has downwardly revised its five-year IT spending projections. The total sizeof the IT market is now projected to increase from US$14.5bn in 2009 to US$24.4bn by 2013. ITspending growth slowed significantly in Q408 and was estimated to be down year-on-year (y-o-y) inQ109, but a recovery is expected to begin in the second half of the year.Sales of both desktops and notebooks recovered somewhat in Q109 to record sequential quarterly growth,but sales were still down y-o-y. Multinational and domestic companies were deferring spending, and themalaise spread to the consumer segment, where layoffs and a negative wealth effect from lower assetvalues affected spending. BMI expects the Indian IT market to improve by the last quarter of 2009,but margins for sales of IT products and services will remain under pressure.The long-term potential of India's IT market is plain: less than 3% of people in India own a computer(about one-fifth of the level in China), meaning particular potential in the lower end productrange. However, realisation of this long-term growth potential depends on fundamental drivers such asraising India's low computer penetration, rising incomes, falling computer prices and the government'sambitions to connect the vast rural areas to the outside world.Industry DevelopmentsA key driver of informatisation in the government sector is likely to be the e-ID card programme, whichtook a step forward in June 2009 when the government announced a new head for the Unique IdentityAuthority of India. After repeated delays, the project is still at a very early stage. However, it has beenestimated that the total cost of the project could be at least INR1.5bn lakh crore. The project received aboost in January when a court suggested that national ID cards should be made mandatory for allcitizens.Faced with a sharp slowdown in global and domestic computer sales, in 2009 the India governmentannounced a series of measures to support the market. Service tax was cut from 12% to 10% and exciseduty from 10% to 8%.The measures were intended to provide relief to domestic consumers, while alsoproviding some support to IT exporters. However, there were questions about how much effect themeasures would have on both scores.Meanwhile, the Indian IT industry was calling for the 2009 Federal Budget to offer relief in variousforms. A key demand of the IT industry was for an extension of the tax exemption on software companiesoperating from special economic zones. The exemption is currently due to expire in March 2010, andindustry representatives had asked for the government to remove uncertainty by using the budget tosignal an extension.Competitive LandscapeIn early 2009 several brand PC vendors came under pressure as a result of the negative market trends.Dell and Lenovo were reportedly among vendors who saw market share slippage in Q1. Much of thegrowth is now being fuelled by notebooks, with notebook shipments now level or slightly surpassingdesktops. The popularity of netbooks has the potential to stimulate further evolution in the competitivelandscape in 2009.PC market leader HP announced plans that deepened its commitment to the Indian market, with anaggressive concentration on the retail segment, despite the economic slowdown. HP said that it wouldexpand its retail footprint across 650 cities this year, while growing its retail partner network to over10,000 by the end of 2009. HP also said that it was moving towards a different method of segmentation ofthe Indian PC market, based more on lifestyle and 'psychological' categories.Despite the economic slowdown, IT services vendors continued to find opportunities in key IT spendingverticals, particularly telecoms. In May 2009, Wipro signed a INR2,200 crore nine-year contract withUnitech Wireless. Wipro will integrate the company's enterprise resource planning (ERP) sys
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