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IT's set for government, BFSI deal boom

Tuesday, 25 February 2014 - 6:00am IST | Place: Mumbai | Agency: dna

Share of domestic business of top Indian IT firms total revenues is likely to rise to 8% from the current 5% this year on award of banking licences and.

Despite software industry body, Nasscom, chopping the domestic IT growth forecast for the next fiscal to 9-12% from its earlier projection of 13-15%, experts are upbeat on India growth.

The optimism stems from the steady domestic growth for most leading IT firms in the last two-three quarters, a slew of large projects from the Indian government and the banking sector, and the current social, mobile, analytics and cloud (SMAC) revolution in the country.

Currently, the India market contributes 5% to overall revenues of top Indian IT firms.

This share is expected to go up to 8% in the next two years, according to some estimates.

As per Nasscom, the IT-BPM market is expected to grow by $13-14 billion in fiscal 2015 from the current $118 billion.

Sanjoy Sen, director, Deloitte, said, "With elections around the corner, there are predictions that the economy will turn around in the next one year. Two sectors where the maximum investment will be made are government – where there is a huge pressure on leaders to get a value for what they're spending --and BFSI as the Reserve Bank of India awarding banking licences. The third sector where this may happen is the life sciences and healthcare sector."

Sen said while it will take some time before the investments start bearing the fruit, the Indian domestic market share will increase from 5-7 or 5-8% in the next two years, in certain sectors.

Echoing the view, Gartner on Monday in a report said that the government IT spending in India will reach $6.4 billion in 2014, which includes spending on internal IT (including personnel), hardware, software, external IT services and telecommunications. ICT service providers will benefit from eGovernment projects and citizen participation, aided by expansion of affordable broadband connectivity and mobile solutions, it said.

Anurag Gupta, research director at Gartner, said, "IT services are expected to grow 3.8% to reach $1.46 billion in 2014, up from $1.37 billion in 2013 – with the business process outsourcing segment growing 16.3% in 2014."

Two examples of IT companies which are now focusing increasingly on the domestic market are Steria and Xchanging.

Sachdev Ramakrishna, director, marketing, Steria, said, "In the last couple of years India has become as important as our key market Europe, especially due to large deal opportunities from the government."

Nimish Soni, executive director – Enterprise Sector & BPS, Asia said, "Xchanging is one of the first multinational companies to set up operations in a Tier-III (Shimoga and Solan) region apart from centres in Gurgaon, Mumbai, Bangalore and Chennai. We will continue to focus on the domestic market to grow our revenue from this region."

Sid Pai, partner in research and consulting firm, Information Services Group (ISG), said, "In the last 4-5 years, we have seen all the Indian providers focus seriously on the India market, despite the fact that the India market is volatile, given to sudden mega deals, and lack of forex benefit. The amount of activity we are seeing by firms in APAC is significantly greater. Going forward, two of the largest geographies with respect to demand are India and Australia."

SMAC is also expected to be a major driver of Indian IT transformation, going forward.

K K Natarajan, chairman, Nasscom and MD, Mindtree, said, "The Indian IT industry has transformed itself in emerging areas like software products, internet and mobile services, R&D, business process management, and SMAC to stay ahead in a global context. This will enable us to become a $300 billion industry by 2020, from the current $118 billion it is today."

All this has the potential to drive up revenue margins from 15-50% – on a project-specific basis, said Deloitte's Sen.

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