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Transcript of IDC's India Top10 IT Market Predictions 2007
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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
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
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
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
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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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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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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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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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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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
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