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June 29, 1999
Despite a small dip in overall growth rate in 1998-99, the information technology industry in India has shown tremendous resilience and remained one of the fastest growing industries in the country.
In 1998-99, the total IT market amounted to Rs 127.24 billion and it is expected to grow 19.7 per cent in 1999-2000.
With 52.5 per cent share, hardware was the single largest contributor to IT revenues in 1998-99. The services component was next, with 26.1 per cent share, followed by packaged software with 10.5 per cent. Other segments, including consumables and training contributed to the remaining 10.9 per cent.
IDC (India) Limited, which is an affiliate of US based International Data Corporation, in its recent survey, said that while the continuing trough in the economic graph has also affected the IT industry, the industry has shown remarkable resilience against all odds.
The IT industry showed only a marginal dip in the annual growth rate from 18 per cent in 1997-98 to 17.8 per cent in 1998-99, giving a clear indication of the sustaining power of the industry.
The performance of the IT market has, until recently, been strongly dependent on economic and political factors because corporate and government spending accounts for a major share of the IT market.
Furthermore, these are the segments that tend to be affected by economic downturn and political turmoil in any country much earlier that the other segments.
IDC believes that in the future, the performance of the Indian IT industry may not be closely linked to the overall economic performance, as it has been in the past.
Strong growth in the home segment, together with the realisation among corporations that IT is a powerful strategic initiative would bring about this trend, the survey said.
It said that personal computers formed the largest chunk of total hardware market in 1998-99, growing at an annual growth rate of 20 per cent. This marked an improvement of almost 7 percentage points over the previous year.
Strong demand for PCs in hitherto untapped segments like home, small office and small business will continue to fuel growth of the PC market.
However, the market for servers, other than PC servers, declined by 13 per cent in revenue terms, even though unit shipments went up by a little over 5 per cent.
The size of the Indian datacom market during 1998-99 was Rs 9.13 billion, which represents a healthy 34 per cent growth over 1997-98. A major share, about 43 per cent, of this revenue came from LAN products like network interface cards, hubs, switches and routers.
It was an exceptionally good year for LAN products, which grew by 45 per cent over 1997-98.
The Indian datacom market seems to be coming of age. Excitement is building up in the WAN and remote connectivity areas. The remote access server market got a shot in the arm with the opening up of the Internet in November 1998. The RAS hardware revenues jumped up more than six times in 1998-99. The market for WAN switches also looked promising in terms of revenue growth rate, although their overall value is still very small, the survey said.
The Indian packaged software market grew 14 per cent in 1998-99, with revenues crossing Rs 13 billion. Elimination of duties, increased usage of legal software, growth in usage of ERP solutions and increased adoption of suites and RDBMS were the main drivers for growth in the packaged software market.
Growing at over 20 per cent in 1998-99, the Indian IT services market is slowly gaining momentum. Nevertheless, most Indian corporations continue to be slow at changing their attitude towards IT services.
Many users continue to take services for granted and are unwilling to pay for them. IDC believes that attitudes of users are slowly but surely changing the survey added.
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