idc's india top10 it market predictions 2007

7/30/2019 IDC's India Top10 IT Market Predictions 2007

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Filing Information: January 2007, IDC #, Volume: 1

India IT and Telecommunications Markets: Top 10 Predictions

T O P 1 0 P R E D I C T I O N S

I D C ' s I n d i a T o p 1 0 I T M a r k e t P r e d i c t i o n s 2 0 0 7

Kapil Dev Singh Parijat ChakrabortySanjit Sinha Deepak KumarShailendra Gupta Parishesh MishraPiyush Pushkal Shiladitya SarkarMadhan Dhandhayutham Naveen MishraPraveen Sengar Diwakar SrivastavaMrydul Vats Vishaal Bhatnagar

P R E D I C T I O N S

Another great year for the Indian domestic IT market is over and as we enter the New

Year, the only question in our minds is how will 2007 shape up? To answer this

question, as per regular practice, IDC (India) Limited announced its Top 10 IT Market

Predictions for the year 2007. Most of these predictions are concerned with domestic

IT market. However, there is a reference to those trends in the global market, which

will have deeper implications for the domestic market.

The domestic IT market in India grew by 22.4% in 2006* and is expected to keep the

momentum up in 2007. The estimated year-on-year growth in 2007 is estimated to be

21.5%, making it the fastest growing market in the Asia-Pacific region.

The domestic IT market has posted impressive growth in the last three years and is

expected to continue the momentum in 2007 also, which only means the domestic

market has come of age, commented Mr. Kapil Dev Singh, Country Manager, IDC

(India) Limited.From a global perspective, 2007 will be a year of intense hyper disruption in the IT

industry, with major structural changes taking place along different industry vectors at

once, all interacting with each other and, more importantly, accelerating each other. In

2007, small businesses will become big, more software will become services, more

services will become software, business IT players will become more consumer-ish,

and consumer players will become more business-like. These disruptions, and others,

will force most market leaders out of their comfort zones and open up new

opportunities to those that choose to surf these disruptions rather than stand against

them.

These deep shifts in the global market place will surely have their implications on the

Indian market, which when coupled with its high speed growth, will pose unique

challenges. These challenges will be around managing the twin play of IT going

deeper into already penetrated market segments and simultaneously exploring newer

segments for growth to be sustained, Mr. Singh stressed.

*Preliminary estimates

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U p d a t e o f 2 0 0 6 P r e d i c t i o n s

T A B L E 1

2 0 0 6 P r e d i c t i o n s U p d a t e

S. No. Prediction 2006 Current Status

1. India to continue to be the fastest growing

domestic IT market in the A/P region, to continue

to grow at 19% in 2006 with the other Asian giant

China growing at 12%.

The Indian domestic IT market is expected to grow

over 22% in 2006 over 2005, while the China

domestic IT market would actually end up recording a

growth of over 21% during the same period, beating

earlier forecasts.

2. Servers, the fundamental building block of IT

infrastructure to cross 100,000 shipments in

2006: Need to deliver higher performance across

business functions and consolidation to pave

the road to dynamic IT.

The server market has crossed shipments of 85,000

units in the first nine months of 2006 and is on target

to meet the prediction. India also witnessed huge

traction for high-performance computing (HPC)

servers during the year. India has become the thirdlargest market in server unit shipment terms in the

Asia-Pacific region, though it could not surpass the

Australia market size. This was achieved in spite of

the fact that 64-bit and two-way became the mainstay

in the X86 server market.

3. Outsourcing services to outgrow technologyproduct services (standalone) in 2006: To

contribute largest chunk of 24% of Indian IT

services market.

Outsourcing services contributed to 23% of the total IT

services market in 1H 2006. End-to-end outsourcing

deals saw major traction in 2006 in sectors beyond

telecom and BFSI. The year 2006 witnessed more

than eleven outsourcing deals of significant value. Of

this, more than 4 deals were signed in the

manufacturing sector alone. This signaled the

increasing maturity of Indian enterprises in embracing

outsourcing services, in line with the trend in more

mature and developed markets.

4. Anytime, anywhere information availability to

drive shift towards policy-based security

administration and management in 2006, lay

roadmap for federated security environments.

The identity and access management (IAM) market is

expected to grow by 33% year-on-year in 2006 over

2005, as against the total security software market

growth estimate of 25% for the same period. The IAM

market witnessed consolidation and entry of multiple

players offering network access control (NAC)

security solutions. Organizations started adoption of

electronic exchange of data between partners, and

deployed IAM solutions at centralized locations.

Banks, telecom service providers and the ITeS sectorhave launched projects on process and security audit

and integrated security implementation. For these

initiatives to succeed in the long run, it will be very

important that due priority is accorded to security

policy management by enterprise IT and line-of-

business (LOB) heads. However, there is a still a long

way to go for federated security to become

mainstream.

5. 2006 - The year of the digital home revolution:

100% growth expected in digital camera

shipments, home Internet connections to grow

more than 100%.

Unit shipments of digital cameras (through official

channels) grew 89% in 2006 over 2005, while home

Internet connections grew more than 100%. This

clearly signals the healthy and vibrant

SOHO/consumer IT market in India.


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T A B L E 1



6. Unrestricted IP telephony will boost IP-PBX

shipments to 25% of total PBX line shipments by

end-2006, but low PSTN tariffs will constrain

VoIP usage.

Growth in IP-PBX shipments has been over 30 per

cent. However, due to restrictions on terminating

computer-originating calls over a PSTN network, the

growth of VoIP has been restricted. Low PSTN tariff

too discouraged PSTN operators from investing

significantly in VoIP carrier equipment.

7. Verticals orientation to speed up internal

organization restructuring and change go-to-

market strategies of IT vendors: Industry-specific

solutions to be major driver of corporate IT

spending in 2006 and beyond.

Verticalization was on in full swing in 2006 in terms of

solutions and delivery channels. All major enterprise

vendors aligned their solutions and go-to-market

teams to the important verticals. Delivery channel

partners also developed and tried to align with the

important industry verticals to be able to provide morevalue-added deliveries to large enterprise and SMB

end-users.

8. Application integration, consolidation with

business analytics will gain momentum in 2006.

Centralization was clearly noticed in 2006 and most

new application rollouts happened from centralized

locations. The application integration middleware

market is expected to grow 21% year-on-year (2006

over 2005). In order to have better manageability

enterprise CIOs are driving integration and

consolidation at an enterprise level. At the same time,

application integration also aids line-of-business

(LOB) executives in increasing their business

productivity and in taking more informed decisions.

Multiple tenders inviting datawarehousing solutionvendors to bid for projects that were floated in 2006

further confirms that business analytics is gaining

momentum among Indian enterprises.

9. Cost no more the key factor in color adoption:

Quality, availability and competitive need to

witness color laser shipments growing by 50% in

2006 over 2005.

IDC market estimates indicate that adoption of color

printing in the laser space has indeed taken off

strongly during 2006. Shipments made during the first

three quarters of 2006 have grown by a whopping

86.8 percent year-on-year. The year 2006 witnessed

an increased adoption of color lasers in offices, both

in large as well as mid-size businesses, thereby

helping increase the installed base. The market also

witnessed the launch of new, entry-level color laserprinter models during the year 2006. Realizing the

growing need for color printing in the laser space,

leading vendors such as HP, Samsung and Xerox are

continuing to launch new models, thereby increasing

the range of choices for the end customer. According

to IDC data, an important factor responsible for this

growth has been the falling average sale value (ASV)

of colour laser printers; ASVs have dropped from Rs.

27,000 in the JFM quarter of 2005, to Rs. 16,000 in

the JAS quarter of 2006. This value is further

expected to decline in the OND quarter of 2006 with

the launch of new models. The factors that will

continue to drive the adoption of color printing include:

i) Wider choice of models and features, ii) Furtherreduction in product prices, iii) Provision of network-


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T A B L E 1



ready features, even in low-end color laser printer

models, iv) Latent need of business enterprises for

color printing and strategic benefits thereof.

10. Worldwide IT and business services: Focus on

SMEs, global assets, global sourcing for

innovation, and industry focused BPO.

The worldwide IT services and BPO industry

continued to evolve and offer increasingly niche and

specialized services to both large enterprise and SME

customers. Consolidation of IT infrastructure,

virtualization of hardware and applications to provide

a seamless environment to business users,

customers and partners continued on a strong footing

to register healthy growth levels.

Source: IDC India, 2007

S u m m a r y o f T o p 1 0 P r e d i c t i o n s

1. India continues to soar. South Asias largest economy will continue to lead the

pack as the next IT market opportunity.

2. Dynamic IT to enter Phase 2 in 2007, from consolidation to virtualization and

service oriented architecture (SOA).

3. Disruption to set in for small and medium business (SMB) focused go-to-market

strategies. New delivery and usage models will evolve in 2007.

4. Connectivity, content and convergence will run parallel courses, but their real

orchestration into a fully evolved digital home phenomenon will remain elusive in

2007.

5. Vendors will adopt a productized services delivery model in 2007 to achieve

standardization and enhance profitability.

6. Internal security concerns will drive the enterprise security solutions market in

2007.

7. Despite huge investments slated for telecom network infrastructure, 2007 will be

a year of buildouts rather than rollouts for 3G and WiMAX services.

8. IT retailing to gain momentum, but 2007 will be remembered more as an year of

experimentation.

9. Emerging Asia will approach BRIC-like performance

10. Worldwide IT spending will be marginally higher in 2007, driving vendor risk

taking


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D e t a i l e d P r e d i c t i o n s

1 . I n d i a c o n t i n u e s t o s o a r . So u t h A si a s l a r g e st e c o n om y w i l l co n t i n u e

t o l e a d t h e p a ck a s t h e n e x t I T m a r k e t o p p o r t u n i t y .

The Indian economy posted a strong 8.5% real GDP growth and even this could havebeen a percentage point higher had it not been for rising oil prices, felt the Indian

finance minister. What is required to abate this is a continuous stream of foreign

direct investment (FDI), sustained domestic demand, growth across all major sectors,

notably agriculture and exports, as well as a strong supportive infrastructure. The

Indian government recognizes the drawbacks, and is committing funds to reduce

these logistical challenges. Better connectivity among major cities and from important

ports, improvement of international airports through privatization, and greater outlay

to make India more attractive for foreign investments are all steps in that direction.

In addition to China, the world is paying more attention to India because of its rapid

growth. The Brazil, Russia, India, and China (BRIC) phenomena has forced most

multinational companies (MNCs) and leading governments to explore what business

opportunities can be availed from being present in these markets. This has led to the

entry of many global giants in different industries, putting immense pressure on the

domestic enterprises to stay competitive. One major challenge right away is the IT

infrastructure of the incumbent companies, which lags behind these foreign entities.

Consequently, a major wave of IT investments has started to take place across

banks, financial services institutions (FSIs), telecom, manufacturing, government,

resources, education, and other industries. This is probably why India is the fastest-

growing country by domestic IT spending in 2006* (22.4%) and is forecast to remain

so in 2007 (21.5%) when it reaches Rs. 75,891 crores.

Apart from enterprise spending, rising affordability is resulting in consumers also

spending on more ICT products and services. PCs, mobile phones, printers, digital

cameras, and broadband are all gaining increasing penetration in this rapidly

expanding market.

In 2007, IDC feels that the IT market will continue to be driven mainly by hardware

spending across consumer and enterprise segments. India will remain the fastest-

growing country by hardware spending in the world in 2007. Below are some of the

major drivers of IT spending in India in the coming year:

y Infrastructure spending by leading industries that are fast expanding business

y IT devices purchased by consumers with growing disposable income levels

y Availability of broadband and IT products at more affordable prices

y Improvement in awareness of IT benefits to the more interior parts of India

y The rise of medium-scale enterprises in this burgeoning economy, which will

require more strategic IT

It will be increasingly important for IT vendors to understand the sub-regional

dynamics within the country to better leverage growth opportunities.

*Preliminary estimates


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2 . D y n am i c I T t o e n t e r P h a s e 2 i n 2 0 0 7 : F r om Co n s o li d a t i o n t o

V i r t u a l i za t i o n a n d Se r v i c e O r i en t e d A r c h i t e ct u r e ( SOA) .

Enterprises in India have matured to the extent of consolidating their IT infrastructure

that they have acquired over the years. Cost pressures are forcing large enterprises

to evaluate and re-evaluate the utilizations and productivity of their IT assets. At the

same point of time, as business has become more dependent on IT, business goalshave started to get linked to the IT roadmap of the organization.

2007 will witness Indian enterprises graduate to the second level of dynamic IT

infrastructure, where IT infrastructure would be able to effect changes instantaneously

and dynamically in response to the changing business scenario. The key components

that may come to the fore to attain this state would be virtualization, SOA and

application integration.

Virtualization will be adopted by enterprises at all layers to achieve the true

return/benefit of consolidation that they have already undertaken. Virtualization

across multiple hardware platforms will provide additional capacity to enterprise CIOs,

which would provide a better RoI on their IT investments. On the other hand,

virtualization will also help enterprises to attain better utilization of the multi-core,

multi-processor servers that are going to become mainstream in 2007.

The move to SOA infrastructure will gather much-needed momentum in 2007. Going

forward, IDC envisions that these end-users will require much help from vendors and

systems integrators to establish processes to aid their business process re-

engineering (BPR) in the near term. It is also clear that this identification work is a

necessary aspect of the work involved in IT infrastructure management and in

bettering business process governance.

Application integration will continue in 2007 with enterprises reducing the number ofapplications wherever possible and rolling out applications on a centralized

architecture, reducing the computing at peripherals to minimum. Data warehousing

will witness multiple implementations in 2007.

3 . D i sr u p t i o n t o s et i n f o r Sma l l a n d M ed i um B u s in e s s ( SMB ) f o c u s ed

g o - t o -m a r k e t s t r a t e g i e s. N ew d e l i v e r y a n d u s a g e mod e l s w i l l ev o l v e i n

2 0 0 7 .

2007 will mark the beginning of an aggressive focus from all major vendors to

broaden and deepen their coverage of the SMB sector. We have already witnessed

the launch of SMB specific products and micro-verticalized solutions for SMBs with

special delivery through specialized partners. SMB offerings will witness further microvertical customization.

Vendors will experiment with new models like on-premise hosted applications,

hardware on lease and software as a service (SaaS). In the application software

world, 2007 will be a period of continuing radical change, with major expansion of

SaaS as a way to accelerate SMB penetration. Major application vendors like SAP,

Oracle and Microsoft will expand their SaaS offerings with a broader range of

applications and greater scalability, setting the stage for more partners delivering

complementary solutions via the SaaS model. Application vendors will work closely

with help of telecom service providers to drive this trend. SMBs will contribute almost

50 per cent to the enterprise applications market in 2007 in India.


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2007 IDC #

SMB enterprises will experiment with different paths towards adopting the

applications on offer, starting with standard packages like Payroll, HR and CRM.

Local ISVs with standardized applications for SMBs can redefine the whole market if

they are successful.

IT services vendors will also bring to market packaged services that are pre-scoped,

pre-priced, pre-quality assured, shrink-wrapped offerings that are ready to be

implemented at the client site. The focus will be midsize enterprises, which require

speedy implementations with a reasonable return on their IT investments. Hence,

going forward all major vendors would be on the lookout for higher levels of expertise

from partners to implement and maintain these solutions.

The one-to-many hosting model put forth by hosted application management (HAM)

vendors would create a new profitable delivery model for application outsourcing

services to mid-market customers. HAM will grow at a CAGR of 38 per cent over the

period 2005-10, with a year-on-year growth rate of 33 per cent in 2007.

4 . Co n n e ct i v i t y , C o n t e n t a n d Co n v e r g e n c e w i l l r u n p a r a l l e l co u r s e s,

b u t t h e i r r e a l o r c h e st r a t i o n i n t o a f u l l y e v o l v e d d i g i t a l h om e

p h e n om en o n w i l l r em a i n el u s i v e i n 2 0 0 7 .

Connectivity. According to the Telecom Regulatory Authority of India (TRAI), the

overall Internet subscriber base has grown at around 45 per cent over the previous

year and stood at nearly 7.7 million in June 2006. Around 20 per cent of this number

was broadband subscribers.

IDC expects the Internet subscriber base to grow at 50 per cent in 2007, with

broadband subscribers accounting for 30 per cent of the total. Thus, the number of

broadband subscribers can be expected to touch around 3.6 million by June 2007,

and cross 5 million by December 2007.

Even though bandwidth tariffs have come down significantly and the availability of

bandwidth in the access part of the network is improving, the high total cost of

ownership (TCO) for a broadband subscription will not permit the 9 million Internet

subscriber-mark to be reached in 2007. Unlike in the case of a cellular service

subscriber, a broadband user needs to invest in a PC before he/she can put the

broadband connection to use. In cellular services, bundling of the device (mobile

phone) and the service (mobile telephony), along with a large number of promotional

free minutes have boosted the subscriber base. Such growth accelerators are found

to be sorely absent, especially in the case of fixed-line broadband services.

On the other hand, the mobile subscriber base in India is expected to cross 220

million by December 2007

Content. In 2007, service providers, content companies (media, news, gaming,

services) and device manufacturers are expected to team up in a big way to provide

services like IPTV, online music, online gaming, online banking, online shopping, and

other public utility services. This would also include a variety of regional language

content in the form of music, TV programming and web portals.

Convergence. Customers in India would continue to lap up more and more lifestyle

and entertainment IT products such as multimedia desktops, notebooks, mobile

phones, MP3/DVD players, digital cameras and broadband connections. This would

accelerate the establishment of a wider ecosystem of digital entertainment/lifestyle IT


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stores, e-zones in shopping malls, local digital photography bureaus, DVD rental

chains et al.

These developments around the three themes of Connectivity, Content and

Convergence will accentuate and define the lines around which the digital home of

the future will emerge. However, in 2007 the digital home will remain just that a fast

approaching, though yet not fully developed market segment, where the seamless

confluence of product, content and connectivity heralds a tantalizing promise for the

future.

5 . V e n d o r s w i l l a d o p t a p r o d u c t i z e d s er v i c e s d e l i v e r y m o d e l i n 2 0 0 7

t o a c h i e v e s t a n d a r d i z at i o n a n d e n h a n c e p r o f i t a b i l i t y .

Standardization of IT Services Offerings. To standardize or to achieve 75%

repeatability of services deliverables has always been a sought after objective for IT

services vendors. The major pain point of SI vendors remains consistent and quality

delivery of IT services across diverse customer sets and in line with the distinct nature

of their businesses. As the market evolves, vendors are aiming to achieve greaterstandardization in terms of their services offerings. This trend is linked closely to the

deployment of standardized software packages.

SI partners will aim to minimize costs by breaking down activities into smaller

modules. With the creation of services products, vendors would be in a better position

to evaluate the feasibility and margins of contracts. In this way, they would be in

better control of their own profitability as well as better at managing expectations in

the minds of their customers.

Productization leading to emergence of a new services delivery model. The next

level of maturity would come from the conversion of services into standalone standard

products/modules. Vendors will be able to replicate the services products acrossmultiple clients, which traditionally had been highly customized for specific clients.

Delivery of these productized services will continue to be based on fixed service-

level agreements (SLAs) between the primary vendor and the end customer.

Developing an overall activity matrix will help identify the activities to subcontract as

well as define back-to-back functional level SLAs with the partners. Going forward,

vendors would require higher levels of expertise from partners to implement and

maintain the solutions. Internally, this change in the delivery model will also help the

vendor in developing metrics for more effective services delivery, besides providing

implementation teams the ability to react faster to changes in client requirements.

The focus of this new productized services strategy will be midsize enterprises,

which require speedy implementations with a reasonable return on their IT

investments within a stipulated time-frame. Vendors like IBM have already come to

market with such offerings. TCS, Wipro and HP are expected to follow suit in 2007

and this trend is expected to gain further momentum through the year.

The market spending on SI services in India for 2007 is expected to be around US$

872 million growing at 19 per cent and contributing to 21 per cent of the total IT

Services market. This change in the delivery model will not have a huge impact on

spending, but will definitely improve vendor earnings and client confidence from the

standardized services deliverables.


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6 . I n t e r n a l s e cu r i t y c o n c er n s w i l l d r i v e t h e e n t e r p r i s e se c u r i t y

s o l u t i o n s m a r k e t i n 2 0 0 7 .

Until recently, enterprise networks were bounded, users were internal and there were

isolated islands of IT infrastructure. Therefore, enterprises deployed only perimeter

security to protect their assets. And security was all about anti-virus solutions and at

best a firewall. IT security was not tightly coupled to the business processes andsystems. Traditionally, security was never seen from an enterprise-wide business

approach and rather had always taken a discrete, isolated approach.

However, IT managers and experts have realized that enterprise-wide security is not

a one-time activity; rather it needs to be continually evolved by pro-actively visualizing

and nullifying future threats and intimidations. It also has to be integrated and made

holistic while moving ahead with the business plans and goals of an enterprise.

Thus, security is no longer a discrete function and is slowly moving towards the

concept of end-to-end security, closely and intimately integrated to the business

processes of an organization.

With changing nature of threats being faced, organizations need to lay equally strong

emphasis on all the three critical elements of business, i.e., People, Process and

Technology, to achieve the state of a truly resilient enterprise.

Figure A.

Source: IDC, 2007

2007 will witness enterprises defining their internal processes in detail and having

proper policies in place to protect the core business operation.

The identity and access management (IAM) market will continue to grow at 31% in2007. Security solution vendors will focus on management and optimization of their

offerings and developing an ecosystem of partners to provide deeper services and

help their customers manage their security environment. The success of any IAM

solution implementation will depend on service partner capabilities in analyzing the

process and integrating solutions in accordance with the same.

Security vendors will focus on pro-active security with strong focus on manageability

and an integrated view of the whole security environment. Process automation,

workflow and information management vendors will strengthen their security

offerings, while closely integrating them with the internal processes of an

organization. New vendors will enter the markets with security offerings specific to

application vendors.


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7 . Des p i t e h u g e i n v e stm e n t s sl a t e d f o r t e l e com n e t w o r k

i n f r a s t r u c t u r e , 2 0 0 7 w i l l b e a y e ar o f b u i l d o u t s r a t h e r t h a n r o l l o u t s f o r

3G and W iMAX s e r v i c e s.

Mobile subscriber additions and network expansion: India is expected to add

around 85 million new mobile subscribers in 2007. For the first time, India is expected

to beat China in mobile subscriber additions for a full year. China is likely to addaround 75 million subscribers in 2007.

This sharp growth in subscriber additions would call for a huge network expansion

drive, which is expected to result in investments of the order of US$ 10 billion or

more. Around US$ 8.5 billion of this would be investments flowing into mobile service

networks alone. Broadband, IP VPN and others would account for another US$ 2

billion of investments. This huge capital investment, equivalent to the total domestic

IT market of India, will be second only to that of China. China will spend even higher

than India, though marginally, on network expansion and modernization due to the

ongoing rollout of 3G services there.

3G and WiMAX: There will be big marketing buzz around 3G and WiMAX, as each

lobby works hard to prove its superiority over the other.

Initially, 3G operators are expected to position 3G mobile telephony as a premium

service to boost their ARPUs (average revenue per subscriber) and focus on its

adoption in urban areas. Also, seamless roaming across circles and geographies will

work to their advantage.

WiMAX operators, on the other hand, could be selling the service as a means to

boost broadband usage in smaller towns and even in remote rural areas.

Handset vendors will also bring in 3G-ready handsets to the market, while Intelthe

biggest proponent of WiMAXcould be launching WiMAX-ready laptops in 2007.

Operators will test 3G and WiMAX on a much wider scale, but may have to delay their

commercial rollouts until early 2008, when the spectrum-availability issues are ironed

out. The Department of Telecom (DoT) is engaged in separate dialogues with the

Ministry of Defence and the Department of Space for freeing up spectrum for 3G and

WiMAX, respectively.

Optical Fibre Cable links may replace some of the existing Defence wireless links with

an objective to release additional spectrum in the relevant frequency bands. This

means that wireless frequency will not be available in all telecom circles

simultaneously, but rather in phases. Consequently, a pan-India mega rollout of 3G isquite unlikely. Instead, IDC expects a phased rollout of 3G in a few states/telecom

circles.

8 . I T r e t a i l i n g t o g a in m ome n t um , b u t 2 0 0 7 w i l l b e r em em b e r e d m o r e

a s an y e a r o f e x p e r i m e n t a t i o n .

IT retailing will undergo extensive experimentation in 2007. The year will see IT

vendors trying out many new approaches in product retailing. The efforts will focus on

wooing SOHO and individual customers for converting them into impromptu buyers.

Experimentations will be seen in retail formats, in-store and on-site promotions,

product bundling, and alternative payment options. This will require efforts on the

parts of vendors for backward and forward integration with other vendors, retailers


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2007 IDC #

and service providers within or outside the organization. Some of the existing

alternate payment options will be extended to new product categories during 2007.

Retailing from exclusive retail outlets in malls or retail stores and from branded IT

product stores will be under the IT vendors scanner for experimentation. The year will

see emergence of several single brand or multiple brand IT stores offering a bouquet

of IT products. Multi-brand IT product retail stores like HCL Digi-Life stores, Saharas

IT Junction initiative, Pantaloon Retails e-zone, etc. are already functional. Other

big Indian retail players will follow suit. Such retail outlets will try to re-define value

offerings to customers by segmentation and competitive offerings.

2007 will witness a variety of in-store and on-site promotions for IT products. While

not all of these experiments are expected to be successful, these promotions would

be the harbingers of future trends.

Vendors will try to offer compatible digital products of their own brands or brands of

partner vendors to engage and familiarize home and SOHO users with

complementary technology products. Such experiments are likely to result in a hugechoice of entertainment, lifestyle and convenience products for personal and home

use through the year.

With the evolution of IT retailing, Indian retail chain managers will have many

challenges to address the right inventory mix, innovative and attractive bundling

schemes/offers, financing options, adequately trained manpower to cater to and

convert the casual walk-throughs into real buyers. Addressing these challenges

adequately would be pre-requisites to achieving success in the IT retailing sphere in

India.

Organized format retailing, which accounted for around 23 per cent of desktop market

shipments in India during the April-June 2006 quarter (Source: IDCs India QuarterlyIT Hardware Retail Program 2006, 2Q 2006, August 2006 release) is therefore

expected to witness experimentation with the evolution of a whole new set of go-to-

market routes in 2007.

Note: As per IDC India, an IT retail outlet is qualified as one having total floor area

greater than or equal 200 sq. ft., total display area greater than or equal to 75 sq. ft,

and proportion of sales from walk-in customers as 40% of total sales.

9 . Em e r g i n g A s i a a p p r o a c h e s BR IC - l i k e p e r f o rm a n c e

While Asia is home to India and China, two of the dynamic BRIC economies, the

region contains a number of other countries with potential to outpace the BRICeconomies in the coming years. These Emerging Asian Countries (EACs) include

Pakistan, Sri Lanka, Bangladesh, Thailand, Malaysia, Vietnam, Indonesia, and the

Philippines. The GDP of this massive region contains almost 800 million people and

is expected to reach US$ 912 billion in full-year 2006.

Within these EACs, overall GDP growth is expected to flatten through 2010 to a rate

of around 5.4 per cent. Stellar markets, however, exist among the rapidly growing

EACs. These are Pakistan, Sri Lanka, Bangladesh, and Vietnam, which together are

expected to clock a GDP rate well above 5.4 per cent in full-year 2006.

As GDP growth levels off through 2010, IT spending will expand dramatically, with a


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# 2007 IDC

Market-wide compound annual growth rate (CAGR) of 12.5 per cent over the same

period, or 80 per cent growth over the market size in 2005. In addition, the higher

growth in Pakistan, Sri Lanka, Bangladesh, and Vietnam are expected to account for

a combined 16.1 per cent of the US$ 15.6-billion IT market in 2007 (see Figure B).

Figure B. Asia/Pacific (excluding Japan) Emerging Asian Countries IT Market

Spending by Country, 2007

Source: IDC India, 2007

Are these countries poised to out-BRIC the IT spending of the powerhouse BRIC

nations? Not quite yet, but it is a possibility if these stellar EACs make significant

increases in infrastructure development and spending power. IDC predicts that EAC

markets will grow a very strong 12% in 2007.

1 0 . Wo r l d w i d e I T sp e n d i n g w i l l b e ma r g i n a l l y h i g h e r i n 2 0 0 7 , d r i v i n g

v e n d o r r i s k t a k i n g

In the past two IDC Top 10 Predictions documents, we predicted mid-single-digit

growth for the worldwide market as a whole. We'll see the same pattern in 2007.

Worldwide IT spending will grow 6.6 per cent in 2007, up from 6.3 per cent in 2006.

Below this top line, IDC predictions for spending in the three major product/service

categories are as follows:

y Software will lead growth again, with 8% spending growth in 2007. Among the

major software categories, infrastructure software will stand out with continued

strength (over 9%).

y Services will remain stable, with 6% growth. Among the major services sectors,

outsourcing will be particularly strong, accelerating to 7.5% growth.

y Hardware will bounce back in 2007, where we predict 6.5% growth, up from

about 6% growth in 2006. Networking equipment (almost 7%), PCs (6.4%), and

volume servers (6.5%) will be among the hot spots in the coming year. Part of

the PC uplift will be due to the Vista delay, shifting some PC demand into 2007.

Asia Pacific (excluding Japan) Emerging Asian

countries IT market spending by country, 2007

Indonesia18%

Malaysia29%

Philippines

11%

Thailand

26%

Bangladesh3%

Vietnam5%

Pakistan6%

Sri Lanka2%

Bangladesh

Pakistan

Sri Lanka

IndonesiaMalaysia

Philippines

Thailand

Vietnam


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2007 IDC #

The bottom lineworldwide IT markets continue to be in a long-term period of almost

boringly moderate IT market growth. But this does not mean that 2007 will be a

boring, "mature" year within the IT market. On the contrary, IDC predicts that this cap

on total market growth is, once again, setting the stage for vendors' relentless hunt for

growth pockets and accelerating their adoption of new disruptive business models.


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2007 IDC # 1

R e l a t e d R e s e a r c h

y IDC's India Top 10 IT Market Predictions 2006 (January 2006)

C o p y r i g h t N o t i c e

This IDC research document was published as part of an IDC continuous intelligence

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idc's india top10 it market predictions 2007

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