India's potentially vast IT market appears to be making a strong recovery in 2010 thanks to an improvingeconomy and consumer sentiment. Computer shipments were up by as much as one-third in the first halfof 2010, compared with the same period of 2009, although shipments have yet to return to the high-watermark recorded before the global economic crisis.The Indian addressable market for IT products and services is now projected to increase from US$16.3bnin 2010 to US$34.3bn by 2014. IT spending was down significantly in H209, which brought a doubledigitannualised shipment decline in PC sales, but growth had resumed by the fourth quarter. Strongergrowth in enterprise spending is expected in 2010, and government procurement should also growrobustly, along with opportunities in healthcare, education, telecoms and financial services.The long-term potential of India's IT market is plain: less than 3% of people in India own a computer(about one-fifth of the level in China), meaning particular potential in the lower end productrange. However, realisation of this long-term growth potential depends on fundamental drivers such asraising India's low computer penetration, rising incomes, falling computer prices and the government'sambitions to connect the vast rural areas to the outside world.Industry DevelopmentsAccording to data from Indian IT association Nasscom, India's technology and business services revenuesaccounted for 6.1% of GDP in fiscal 2010, up from 1.2% in 1998. This was despite the fact thatearlier Nasscom had downgraded its growth projections for the domestic IT sector as a result of the globaleconomic crisis. IT and business process outsourcing (BPO) exports grew only 5.5% in 2010, due mainlyto IT budget cutbacks by clients in Western countries.The government's five-year e-government plan, unveiled in 2006, was assigned a nominal budget ofINR23,000 crore through 2011. The budget covered 26 core projects including agriculture, income tax,pensions, land records and passports. However, as of the end of 2009, many of these projects had yet tobe awarded, or even tendered.A key driver of informatisation in the government sector is likely to be the e-ID card programme, whichtook a step forward in June 2009 when the government announced a new head for the Unique IdentityAuthority of India. After repeated delays, the project is still at a very early stage. However, it has beenestimated that the total cost of the project could be at least INR1.5bn lakh crore. The project received aboost in January when a court suggested that national ID cards should be made mandatory for all citizens.Competitive LandscapeIn 2010, HP and Dell continued to compete for top spot in the combined Indian PC market, whileTaiwanese vendor Acer was ranked in third place. In H110 Dell announced its intention to go after theEducation PC segment, particularly the private schools market. Meanwhile, Acer has forecast that it willachieve 30% volume growth in the Indian market in 2010, growing faster than BMI's estimate for themarket as a whole.A significant opportunity will be created by demand from Indian businesses and government agencies forhelp to utilise cloud computing. There are already more than 50 cloud computing service providersworking in the Indian market. Indian internet services providers (ISPs) and data centre service providerssuch as Bharti Airtel, Sify, Trimax, and NetMagic are investing in bandwidth and facilities to supportnew cloud service offerings.Meanwhile, Indian IT companies like Wipro, Infosys, TCS, HCL and Mahindra Satyam aredeveloping cloud computing applications and solutions for verticals ranging from financial services andbanking to manufacturing.Computer SalesBMI now estimates that the Indian addressable market for PCs (including notebooks and accessories) willbe worth around US$6.5bn in 2010, up from US$5.3bn last year. Shipments were up by as much as onethirdin H110, showing continued improvement as the rate of growth exceeded tha

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India Information Technology Report Q4 2010
Published on October 2010
Report Summary
India's potentially vast IT market appears to be making a strong recovery in 2010 thanks to an improving
economy and consumer sentiment. Computer shipments were up by as much as one-third in the first half
of 2010, compared with the same period of 2009, although shipments have yet to return to the high-water
mark recorded before the global economic crisis.
The Indian addressable market for IT products and services is now projected to increase from US$16.3bn
in 2010 to US$34.3bn by 2014. IT spending was down significantly in H209, which brought a doubledigit
annualised shipment decline in PC sales, but growth had resumed by the fourth quarter. Stronger
growth in enterprise spending is expected in 2010, and government procurement should also grow
robustly, along with opportunities in healthcare, education, telecoms and financial services.
The long-term potential of India's IT market is plain: less than 3% of people in India own a computer
(about one-fifth of the level in China), meaning particular potential in the lower end product
range. However, realisation of this long-term growth potential depends on fundamental drivers such as
raising India's low computer penetration, rising incomes, falling computer prices and the government's
ambitions to connect the vast rural areas to the outside world.
Industry Developments
According to data from Indian IT association Nasscom, India's technology and business services revenues
accounted for 6.1% of GDP in fiscal 2010, up from 1.2% in 1998. This was despite the fact that
earlier Nasscom had downgraded its growth projections for the domestic IT sector as a result of the global
economic crisis. IT and business process outsourcing (BPO) exports grew only 5.5% in 2010, due mainly
to IT budget cutbacks by clients in Western countries.
The government's five-year e-government plan, unveiled in 2006, was assigned a nominal budget of
INR23,000 crore through 2011. The budget covered 26 core projects including agriculture, income tax,
pensions, land records and passports. However, as of the end of 2009, many of these projects had yet to
be awarded, or even tendered.
A key driver of informatisation in the government sector is likely to be the e-ID card programme, which
took a step forward in June 2009 when the government announced a new head for the Unique Identity
Authority of India. After repeated delays, the project is still at a very early stage. However, it has been
estimated that the total cost of the project could be at least INR1.5bn lakh crore. The project received a
boost in January when a court suggested that national ID cards should be made mandatory for all citizens.
Competitive Landscape
In 2010, HP and Dell continued to compete for top spot in the combined Indian PC market, while
Taiwanese vendor Acer was ranked in third place. In H110 Dell announced its intention to go after the
Education PC segment, particularly the private schools market. Meanwhile, Acer has forecast that it will
achieve 30% volume growth in the Indian market in 2010, growing faster than BMI's estimate for the
market as a whole.
A significant opportunity will be created by demand from Indian businesses and government agencies for
help to utilise cloud computing. There are already more than 50 cloud computing service providers
working in the Indian market. Indian internet services providers (ISPs) and data centre service providers
such as Bharti Airtel, Sify, Trimax, and NetMagic are investing in bandwidth and facilities to support
India Information Technology Report Q4 2010 Page 1/6

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new cloud service offerings.
Meanwhile, Indian IT companies like Wipro, Infosys, TCS, HCL and Mahindra Satyam are
developing cloud computing applications and solutions for verticals ranging from financial services and
banking to manufacturing.
Computer Sales
BMI now estimates that the Indian addressable market for PCs (including notebooks and accessories) will
be worth around US$6.5bn in 2010, up from US$5.3bn last year. Shipments were up by as much as onethird
in H110, showing continued improvement as the rate of growth exceeded that recorded in Q409.
The main driver was once again the consumer PC segment, but sales growth of desktops, which
accounted for above 60% of PC sales, also reached double digits.
BMI predicts that the market will grow at a compound annual growth rate (CAGR) of 18% between 2010
and 2014, with unit sales resuming strong growth. Despite the economic headwinds of 2009, the market
has a number of potential strong growth drivers. Business demand could receive a lift in 2010 from
tenders deferred from 2009. The business segment also saw growth in Q110, and migrations to
Microsoft's new Windows 7 operating system, and new Intel core technology could also help to trigger a
new cycle of hardware upgrades.
Software
The Indian software market should continue to record healthy growth, with software spending CAGR for
2010-2014 projected at 23%. In H110, vendors reported that enterprise IT spending was trending
upwards, with stronger demand for technology from the small and medium-sized enterprise (SME)
segment. Despite the recent economic headwinds, the local market is likely to grow strongly in 2010, with
more projects from key IT-spending verticals such as financial services, telecoms and consumer goods.
In recent years, the SME market in India for hardware deployment has grown, and this has resulted in an
increasing opportunity in this segment for applications. More demand for solutions and hardware now
comes from second- and third-tier cities. Industry reforms and privatisations, government regulations and
new global competition have encouraged SMEs to use more technology. Recently, there has been an
increased enthusiasm for hosted applications and software-as-a-service (SaaS), which improved telecoms
infrastructure makes more feasible.
Services
India's IT services market is estimated at around US$6.3bn in 2010 and is projected to grow to
US$14.3bn in 2014.The Indian market has traditionally been low margin, with India's IT majors such as
Infosys, Wipro and TCS focusing most of their attention outside the domestic market.
Particularly following the US and global economic downturn, however, vendors are now more attuned to
the growing size of the Indian IT services market opportunity.
Over the next one to two years, vendors are expected to compete for a share of significant spending on
major public sector IT projects such as ID cards, e-government and railway modernisation. There is an
increasing number of large projects, particularly from the government, but also from key verticals such as
banks, telecoms, defence, manufacturing and retail. A significant opportunity will be created by demand
from Indian businesses and government agencies for help to utilise cloud computing, which is driving
data-centre investments.
E-Readiness
Broadband subscriber numbers have consistently fallen behind target in India. The main reason for the
slow uptake is thought to be insufficient demand, although the government has taken some measures to
reduce tariffs and encourage alternative forms of service provision. One brake on PC penetration is a poor
dial-up internet home-user experience, even in cities. If this is to change, the government must take the
initiative in improving bandwidth availability. Government plans to encourage WiMAX network
deployment may have some impact on penetration.
Key Issues For Investors
Despite a cheap and well educated workforce, India's business environment is impeded by excessive
government regulation. Foreign equity holdings remain restricted in many sectors. Hiring and firing
India Information Technology Report Q4 2010 Page 2/6

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procedures, meanwhile, are governed by rigid labour laws, under the terms of which companies
employing more than 100 people need the permission of the local chief minister to lay off workers. Other
concerns include: the 670-odd industries reserved for small-scale producers; high import tariffs levied on
foreign-made goods; failing infrastructure and, above all, poor power supplies; and a corrupt bureaucracy
needed to approve 'permits' for even the most routine tasks. India is now fast-tracking the creation of
South East Asian-style 'special economic zones' aimed at tackling some of these bottlenecks.
Table of Content
Executive Summary . 5
SWOT Analysis .... 8
Indian IT Sector SWOT 8
Indian Telecoms Industry SWOT 9
India Political SWOT . 10
India Economic SWOT .... 11
India Business Environment SWOT .... 12
IT Business Environment Ratings .. 13
Asia IT Business Environment Ratings .... 13
Table: Asia Pacific IT Business Environment Ratings . 13
Asia Regional IT Markets Overview 16
India Market Overview 22
Government Authority 22
Background . 23
Hardware .... 23
Drivers ... 25
Netbooks 26
Software . 27
Services .. 30
End-User Analysis 32
Industry Developments ... 34
Table: IT Industry Tax .... 36
Industry Forecast Scenario ... 38
Table: India IT Sector - US$mn Unless Otherwise Stated 41
Country Context .... 42
Table: Rural/Urban Breakdown, 2005-2030 42
Table: Consumer Expenditure, 2000-2012 (US$) ... 42
Internet .. 43
Table: Internet - Historical Data And Forecasts .... 43
Macroeconomic Forecast .... 45
Table: India ' Economic Activity ... 47
Competitive Landscape ... 48
Hardware .... 48
Software . 51
IT Services .. 52
Internet Competitive Landscape .... 54
Table: Regional Broadband Penetration Overview 55
India Information Technology Report Q4 2010 Page 3/6

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Company Profiles ... 56
IBM India.... 56
Wipro (India) ... 58
Microsoft India 59
Tata Consultancy Services (TCS) ... 61
BMI Methodology ... 62
How We Generate Our Industry Forecasts ... 62
IT Industry .. 62
IT Ratings ' Methodology .... 63
Table: IT Business Environment Indicators .. 64
Weighting .... 65
Table: Weighting Of Components .. 65
Sources .. 65
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