Amid crisis, IT gets government lifeline

Written by Surabhi Agarwal | New Delhi | Updated: Dec 10 2008, 06:10am hrs
As the economic meltdown forces corporates to slash their IT budgets in a big way, it is the recession proof government sector that is emerging as the life saving boat for the $23-billion domestic IT industry. Not long back, the government vertical was branded as full of red tape and non-responsive when it came to deployment of technology.

However, the government spending on IT hardware, services and software is expected to continue irrespective of how the market scenario pans out. According to market analysts, this sector is being pegged large enough to even offset some of the losses from the corporate side. The untapped potential in the segment seem to be spurring IT companies to look at this vertical with renewed aggression.

This sector will remain largely insulated from the economic scenario as whatever projects have already been announced on e-governance will definitely happen. So, government spending on its existing projects which are almost on the execution stage now will not take a backseat, said Arpan Gupta, assistant manager, industry vertical research, IDC India.

Consider this: IT spending by Indian government departments and ministries is estimated to be of the order of Rs 6,800-6,900 crore during 2008 (calendar year) and will grow at a CAGR of 15% till 2012 according to research agency IDC. With the spread of Internet and mobile phones, the government has realised the need to put itself on the net, creating a lot of opportunity for IT vendors, said Girija Pande, executive vice-president and head, Asia Pacific operations, Tata Consultancy Services (TCS).

While there are no estimates available, the opportunity in the government sector could be to the tune of 10s of billion dollars. The digitisation of the education system, centralised vehicle licensing and registration system, the common identity programme for all citizens along with creating potent citizen-government interface are some of the key areas that will witness huge investment from the government in the future, said Rajdeep Sahrawat, vice-president, Nasscom, the IT industry body.

Voicing a strong opinion against the projects that have been on the table for a long time, Tanmoy Chakrabarty, vice-president, global government business group, TCS said that the biggest bail-out package for the Indian IT industry (if ever there is a need for one) would be to bring all the digitisation projects on the floor.

According to experts, there are major projects waiting to happen in the defence and power sectors. The Accelerated Power Development and Reforms Programme (APDRP) is pegged to be worth 10,000 crore and its second phase could be in the range of Rs 20,000-30,000 crore. The most recent IT project awarded by the ministry of external affairs was the Passport Seva Project (PSP) to Indias largest IT services company TCS. The project has been valued at over Rs 1,000 crore and will speed up the process of issuing the passport to three working days.

In fact, TCS is one of the largest players in the government sector on the service side with Wipro also being big on that front. According to Chakrabarty, the government sectors contribution to the companys revenues is in single digits right now.

But, we plan to double that number by 2011, he said. HCL Infosystems, HP, IBM have major plans in the government sector on the hardware side, which constitutes for 60% of the total government spending.

According to George Paul, executive vice-president, HCL Infosystems, the company derives around 70% of its revenues from the government sector (including the PSUs) catering to its hardware and system integration (SI) needs and expects this part of the business to be insulated from the downturn.