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New Delhi
May 27, 2008
A study by IDC India revealed that traditional large IT spenders like
banking, financial services and telecom remain on top in terms of absolute
spend. The Dataquest-IDC Mega Users survey, now in its fifth year, is the only
independent survey that tracks the IT spending patterns among large enterprises
from both primary and secondary sources.
The survey of 211 large IT user companies in India revealed that they spent
27 percent more on IT in 2007-08 as compared to 2006-07. During 2008-09, the
survey expects these companies to invest 22 percent more on IT.
Telecom and BFSI companies remained top IT spenders, with an average IT spend
per company touching Rs 191.6 crore and Rs 87.5 crore, respectively in 2007-08.
In the BFSI segment, LIC, NSDL, National Insurance, New India Insurance and
Oriental Insurance also made large investments.
The new generation grocery stores from big corporate groups are banking on
technology to compete in the low-margin, high-growth organized retail business.
The IT investments in the retail sector grew the highest, at 43 percent. The
retail industry is leading India Inc in terms of growth in average IT spend. The
average IT spend for a retail player was Rs 7.4 crore.
“We did expect the retail sector to be a heavy investor in IT,” said
Prasanto K Roy, Chief Editor, Dataquest. “But this young sector is also
showing surprising maturity on the IT adoption curve. For instance, through its
clear preference for off-the-shelf, packaged software, rather than the tedious
process of custom development that most other sectors tend to go through.”
The top spenders on IT from the telecom sector included Bharti, BSNL, Hutch,
MTNL, Reliance Telecom and VSNL.
The IT and BPO companies form the next lot of big IT spenders and include
Aricent, iGate, Infosys, ITC Infotech, Mastek, Mphasis, Sasken Communications,
Wipro and Zensar.
The lower growth in IT investments is expected across all sectors in 2008-09
except the pharmaceuticals and biotech sector that is expected to invest about
one-fifth more than their IT investments in 2007-08. The growth in investments
in the utilities sector is expected to slow down from 30 percent in 2007-08 to
10 percent in the current year.
The highest IT spend as a percentage of overall revenues was reported by the
BFSI sector that invested 1.5 percent compared to the overall industry average
IT spend of 0.63 percent of the revenue. The utilities sector led in terms of IT
spend per employee, with a budget of Rs 83,000 per employee, much above the
overall industry average of Rs 36,000 per employee.
One of the significant findings is the change in spending pattern among
Indian large IT users. Hardware, that accounted for 43 percent of the IT budget
of these companies in 2007-08 will account for only 41.6 percent in 2008-09. The
share of hardware will be picked up by services, which will account for 26.5
percent in 2008-09, as compared to 24.9 percent in 2007-08.
The share of package software in the overall IT budget will hover around the
same level of 26 percent. Retail, still a nascent industry in India, is going
for standard software in a big way and spent 38 percent of its IT budget on
package software.
The survey expects the large IT spenders to invest the most on basic
enterprise-wide IT infrastructure in the next two years. These would comprise
enterprise resource management, virtual private network and wide area networks.
This trend is expected from companies expanding their operations at a rapid
pace.
Customer relationship management and business specific applications will also
see significant spend increase to handle growth in the consumer sector, and
maturing of IT spending in BFSI and IT verticals.
The large spenders from among the oil and petroleum sector included Bharat
Petroleum, GAIL, Hindustan Petroleum, Indian Oil and ONGC. The automobiles
sector threw up Ashok Leyland, Maruti and Tata Motors in the list of 50 large IT
spenders.
Additional findings
- In terms of distribution of IT by business functions, while
enterprise-wide IT accounted for the lion's share of 46 percent of the total
IT budget, business specific IT solutions accounted for the next biggest
chunk of 21 percent.
- The retail sector spent the maximum share of IT budget (49 percent) in
business specific solutions.
- The retail sector will continue to lead the growth in 2008-09 as well,
with a projected growth of 36 percent. In BFSI, IT investments will grow at
27 percent, the second fastest growing vertical for IT.
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