Bring out the bubbly. There is no denying the fact that the Indian economy is going through one of its best phases ever. And for the IT industry particularly, business is good and getting better. Sales are high, expectations even higher. And the channel community can finally rejoice. Given below are reports from two different trade bodies, with the same underlined message: Make hay, as the sun is shining now!

MAIT findings: A happy note
Let us first start with what the Manufacturers Association of IT (MAIT), the trade body representing hardware, training, R&D services sectors of the IT industry in the country, announced the findings of its Quarterly Industry Performance Review for the quarter October-December of FY2005-06. PC sales, including desktops and laptops, taken together crossed 11 lakh (1.1 million) units.

The sales of notebooks and peripherals witnessed robust growth. With strong macro economic conditions and upbeat market sentiment, sales in fourth quarter are expected to be buoyant. Sales in FY 2005-06 are expected to cross 4.4 million units.

IT consumption in the country continued to be dominated by industry verticals and corporate sectors such as telecom, banking and financial services, manufacturing and IT-enabled services. The consumption in these segments were largely driven by investments in software, solutions and other enterprise products.

Apart from these traditional sectors, high consumption was also witnessed in SMEs, education, retail and other computer-centric small enterprises. In addition, the trend of increased PC purchase in households, smaller towns and cities as witnessed over the last few quarters, continued to be steadfast. Aggressive pricing by the PC vendors has also helped improve the PC penetration, especially in the households and the SME segments.

MAIT's Industry Performance Review - ITOPs, conducted by the market research firm Indian Market Research Bureau (IMRB), is bi-annual and aims to address the hardware sector's efforts to manage the business environment, gauge the market potential and consumer trends. The module to monitor the industry performance every quarter alternates with the half-yearly review, using the supply side estimation model involving data collection from the top IT vendors and leading channel players.

This round of the quarterly study (October-December 2005-06) involved data collation from the major vendors and around 400 resellers/vendors in the top 16 metros in India. The quarterly review covers the market size estimation for desktop PCs, notebooks, servers and peripherals, including printers and UPS.

The desktop market grossed 9.67 lakh units in Q3, 2005-06, a growth of five percent over Q3, 2004-05 (YoY). Although it is 30 percent lower than the sales in Q2, 2004-05 (JAS) (sequential), sales are expected to be buoyant in JFM as IT sales peak in the last quarter (JFM) of the financial year.

As per the MAIT-IMRB study, the assembled PCs – the smaller lesser known regional brands and unbranded systems - accounted for 38 percent of the PC sales in Q3, 2005-06, while the proportion of the branded PCs was 62 percent. MNC brands accounted for 34 percent of the market while the Indian brands accounted for the rest 28 percent.

Quarterly PC Sales from Q1, 2004-05 to Q1, 2005-06 The desktop market grossed 9.67 lakh units in Q3, 2005-06, a growth of five percent over Q3, 2004-05 (YoY). Although it is 30 percent lower than the sales in Q2, 2004-05 (JAS) (sequential), sales are expected to be buoyant in JFM as IT sales peak in the JFM quarter of the financial year.	Usage And Benefits Of IT Implementation In Organizations 35 percent of the surveyed organizations have moved to a level where almost all processes are automated. With only five percent of organizations at the opposite end, using IT for a few standalone applications, the Indian IT industry is moving in the right direction.
Quarterly Peripheral Sales from Q1, 2004-05 to Q1, 2005-06 Compared to the same period last year, consumption of laser printers grew by 91 percent, dot-matrix printer by two percent and inkjet printers by three percent. Consumption of UPS witnessed an increase of 68 percent on YoY basis and 135 percent on sequential basis.	Advanced Applications Organizations Used Or are Planning To Use VPN and video conferencing are the most common advanced applications used by organizations in the country. Wireless LANs, Storage Area Networks and Voice over IP are the other two applications which a high number of domestic IT users are currently using and planning to implement.
Source: MAIT-IMRB Quarterly Industry Performance Review for OND, 05-06	Source: NASSCOM IT User Survey 2005

The findings of the MAIT-IMRB Quarterly Study for Q1, 2005-06 indicated some significant trends in buying and usage patterns. In the desktop market, in the business segment, it was primarily the banks, financial institutions, insurance companies, educational institutes; IT sector and IT related companies that were the lead consumers. In the household segment, reduced prices coupled with applications for 'entertainment' and 'education' has fuelled the market. The households market that witnessed a slight slow down in the earlier quarters has once again become vibrant.

Notebook sales touched 125K units recording 93 percent YoY growth and 67 percent sequential growth. The high growth in notebook consumption can be attributed to the drop in notebook prices and the additional benefit of mobility and space management. With notebooks now being available at sub-Rs 30K prices, they are increasingly finding their way into the homes and SMEs. High consumption in corporates, IT companies, financial institutes and the government however continues to drive the notebook consumption.

The server consumption in the first-quarter of 2005-06 was in excess of 14.4K units. With increased investments in corporates, especially manufacturing and retail, server consumption is likely to accelerate in the forthcoming quarters.

The printer market continued to be vibrant. Compared to the same period last year, consumption of laser printers grew by 91 percent, dot-matrix printer by two percent and that of inkjet by three percent. The UPS market has shown substantial increase in demand. Consumption of UPS witnessed an increase of 68 percent on YoY basis and 135 percent on sequential basis.

Commenting on the findings of the study, Vinnie Mehta, Executive Director, MAIT said, "With steady growth in IT consumption across households, SMEs and smaller cities, it is imperative that the IT industry build knowledge, competence and solutions to address the growing requirements of such markets. In order to sustain the interest of consumers in IT, there is a need to enhance the value proposition of IT compared to other avenues of lucrative returns. Towards this end, MAIT has launched Digital LifeStyle, a series of IT events - exhibitions and seminars to be held in smaller towns and cities across the country targeting the end consumers. To begin with, the event will be held in at least ten towns and cities in 2006."

NASSCOM too finds a reason to rejoice
NASSCOM, the trade body and the chamber of commerce for the IT software and services industry in India, too has good news to impart, as per the findings of the 'NASSCOM IT User Survey 2005'. The PC to employee ratio, which determines the extent of IT usage within an organization, shows that few organizations exhibit near 100 percent ratio. On the other hand, SMEs typically exhibited a ratio between 10 to 30 percent.

As many as 67 percent of the organizations surveyed have more than 90 percent of their PCs connected to a LAN. There are still organizations with less than 25 percent of PCs connected to LAN, but are looking at graduating to full scale LAN infrastructure within few years.

57 percent of the surveyed organizations have only 50 percent or less PCs connected to Internet. Another 28 percent organizations have more than
90 percent of their PC connected to the Internet.

Security continues to be the prime concern among the user organizations in the country. While there is adoption of advanced security systems, a large percentage of organizations surveyed still rely on anti- virus software and firewalls.

Speaking on the findings of the IT User survey, Kiran Karnik, President, NASSCOM noted, "Today, we see Indian businesses becoming increasingly competitive in the global market, using IT as a key enabler. NASSCOM's IT User survey indicates the trend among Indian IT vendors to increase their focus on the domestic market. Also, the user industry in India is outsourcing parts or entire IT infrastructure to specialized vendors, which requires world class standards, and best practices."

Usage and benefits of IT implementation
According to the NASSCOM study, 35 percent of the surveyed organizations have moved to a level where almost all processes are automated. With only 5 percent of organizations at the opposite end, using IT for a few standalone applications, the Indian IT industry is moving in the right direction.

IT benefits are resulting in adoption of new technologies. Findings of whether respondents have been able to trace the benefits of IT within their organizations show that almost 85 percent of organizations believe that they have been able to derive benefits out of the IT implementation. 50 percent of these respondents claim to have documentary evidence to support the claim as well.

About five percent of organizations are still working on methodology to track returns on IT investments, while another nine percent see limited benefits. Only one percent see no benefits of IT implementation. 75 percent of the respondents claimed to have made returns on investment made in IT. 50 percent of the respondents claiming that the returns have been below 75. Findings indicate that currently the industry is in an investment mode and the returns are expected in coming few years.

80 percent of the respondents feel they have been able to trace productivity enhancements within their organizations. Most organizations seem to be in the range of 50 to 75 percent increase in productivity levels. Only 40 percent of the respondents claimed that they have seen significant results in productivity improvements (improvement to the tune of 75 percent increase in productivity levels)

There may exist a need for organizations to track their customer's satisfaction levels on a more ongoing basis and adding questions related to impact of IT implementation in their customer satisfaction-related researches, as only 65 percent of the respondents surveyed claimed that they have been able to trace customer satisfaction improvements. From among those who have tracked customer satisfaction have exhibited good results, as high as 54 percent of the respondents surveyed claimed that the impact on their customer satisfaction has been immense. They have even reported an increase of 75 percent or more in their customer satisfaction statistics.

VPN and video conferencing are the most common advanced applications used by organizations in the country. The user fraternity is investing in applications that result in business benefits on an immediate time frame. Wireless LANs, storage area networks and voice over IP are the other two applications which a high number of domestic IT users are currently using and planning to implement.

While there is increased IT adoption by user organizations in the country, both at operational and advanced levels, the ongoing phase of investment by the industry will need a gestation period to exhibit its full potential, thereby achieving the maximum return on investments by organizations, according to NASSCOM. "The industry will need to continue the existing focus on sustaining this growth curve through investments and adoption. We hope the government will also become a major user of IT through the e-governance program. A favorable policy and taxation regime will give a boost to greater IT usage in the country with benefits to efficiency, productivity and employment," Karnik added.

Recognizing the growing importance and potential of the domestic market, NASSCOM has been focusing on this segment, which is expected to reach $4.3 billion in 2005-06, from the $3.5 billion in 2004-05. A milestone in this direction has been the creation of the Domestic IT Market Committee, and the commissioning of an in-depth analysis of the Domestic Services (IT-ITES) market opportunity report, in 2006.

A DQC REPORT

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