Thursday, 01 September 2005 11:02

Indian local ICT Industry ignored by offshorers

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Indian ICT companies who focus solely on India's much-hyped export market may be putting the countries growing ICT industry at risk by ignoring the country's burgeoning domestic market.

Speaking at a conference in Mumbai, analysts from global research group Gartner said that India continued to have the fastest growing ICT market in the world, and predicted a combined annual growth rate of 19% from 2004 through 2008. Though starting from a much smaller base, this is significantly faster growth than the second fastest growing ICT market in the world - China. Gartner estimates that ICT spending in India will surpass US$54.8 billion by 2008, a rise from US$29.5 billion in 2004.

"India is one of the few countries in the world where the impact of the services export oriented business far outweighs that of the domestic side," said Partha Iyengar, research vice president at Gartner. "The overall impact of ICT development in the country is skewed heavily around the unique dynamics of this services export trend, often to the detriment of the domestic opportunity."

Whilst some Indian service providers are making a name in certain global markets, such as IT services and business process outsourcing, it is the global players that are firmly entrenched in the Indian domestic market. Domestic vendors currently account for only 42% of total ICT spend in India. Iyengar said, "The dominance of foreign providers in India is driven by a combination of a lack of credible domestic ICT infrastructure providers - other than in the Telecom space - and the benign neglect of the emerging and growing domestic services business by the major Indian service providers. Unless action is taken now, domestic providers could see their share of the Indian market slip further."

Iyengar further counseled that India's much prized export-focused industry, currently estimated to be worth around $16.5 billion, could ultimately be under threat if local providers fail to gain ground in the domestic market. According to Gartner, Indian businesses are increasingly turning to multinational brands in the outsourcing of high-profile contracts. Gartner believes that if Indian technology providers have no standing in the local market and are thus unable to compete for these higher-end deals, it will hamper their future prospects in pursuing similar deals in international markets.

"This scenario creates an interesting range of possibilities on how India's ICT business might unfold over the next few years," said Iyengar. "The possible paths will be predicated by a complex combination of vendor, government and end-user behaviour over the next few years. The impact of outside forces in the form of global treaties or national trade barriers could also have a profound impact on the future growth of ICT in India. So, in a manner of speaking, India is not completely in control of its own destiny with regard to its domestic ICT industry."

Gartner has defined three potential scenarios for India's ICT industry in 2010. Each scenario highlights six parameters: Domestic ICT Industry, ICT Export Industry, Social Impact, Political Impact, Overall Economy and ICT Standards.

Gartner's first scenario, 'Global ICT Superstar' is characterised by balanced development of both the domestic ICT industry and export strength. It assumes a high level of government support with the India ICT industry driving policy as well as defining new global standards. It would lead to a strong economy and a large majority of the population would stand to benefit.

In the second scenario, the domestic ICT industry would continue to be dominated by foreign multinationals and the export market would struggle for survival. According to Gartner, in this scenario, dwindling government interest in the ICT industry would lead to a re-focus on other industries and the country's digital divide would be pronounced.

In the third and final scenario, India would cease to be a global ICT player, largely ignoring global standards and protocol. Gartner predicts that this scenario would lead to economic malaise in IT-centric states as the focus on the ICT industry rapidly evaporated.

Iyengar concluded, "Clearly the ICT industry in India stands at a crossroads. If technology providers, end-users and government can work together to pursue the path outlined in the first scenario then India will not only prosper but also serve as a model for market development in other emerging countries."

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Stan Beer

 

Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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