'Need to develop domestic IT market to halt China surge'

Hyderabad, March 29 | Updated: Mar 30 2006, 05:54am hrs
India is currently the leader in outsourcing and IT services. However, studies show that China is expected to lead the pack much earlier than 2015.

The factors that would be working against India would be its under-developed domestic market with very little access to capital and support infrastructure and probably the biggest sore spot of all being not geared towards entrepreneurship.

According to the NASSCOM-IDC 2005 report, IT service vendors need to develop domain skills and offerings as verticalised solutions which are becoming increasingly important. "Though cost effectiveness is a crucial pitch for Indian IT and outsourcing needs continued support, there should be more focus on product development. The mantra is to add and not shift focus to product development," Karl Schubert, CTO, Xiotech Corporation said.

Speaking at the NASSCOM-ISB conference "An ecosystem for a vibrant domestic IT industry", here on Wednesday, Mr Schubert pointed out that the Indian talent in IT has to further develop.

Moreover, innovations are being considered as the drivers for the Indian IT market. "The domestic IT market is price sensitive and there are many small companies which need application, products and hardware specific to their needs. We need to look at alternative business models," said Kiran Karnik, president, NASSCOM.

Also, the e-governance segment in India has immense potential with scope for an estimated 4.58 million transactions worth $123 billion over a period of time. This opportunity, though, rests on the domestic IT industry, which had a market size of $6 billion in 2005-06.

With an expenditure of less than 0.13% of the GDP, which is half of what China spends, the domestic IT industry, especially the SME sector needs serious initiatives to leverage Indian business and economy.

The report further adds that network integration would make up a high growth-large size category within the IT services with increasing growth in the enterprise application implementation and demand for network integration from telecom and banking verticals.

Further, over the next five years, domestic spending on outsourced IT services is projected to more than double, from Rs 103 billion in 2004 to over Rs 238 billion in 2009.