by November 29, 2000 0 comments

Let me begin with a poser–what does Indian IT mean to you?

Chances are that you’ve already started thinking about our
successes in the software exports arena. Amid all the applause for Indian
software exporters, achievements in the domestic market tend to get sidelined.
Agreed that software and services exports from the country have been growing at
an enviable pace, but the domestic IT market can also boast of impressive facts
and figures. Consider this. India is one of the fastest growing IT markets in
the world, the fastest growing PC market in the Asia-Pacific region, and also
the country with the fastest growth in Internet usage in this region.

It was in the last fiscal (1999-00) that domestic IT spending
bounced back after three years of slowdown. And what a revival it was. A 12
percentage-point improvement in annual growth rate is no mean achievement, after
all. IDC believes that there is tremendous momentum in the domestic IT market
today, which will help the industry tide over the minor slowdown being predicted
for the economy in the current fiscal. Over the next five years, the domestic IT
industry is predicted to grow at a CAGR (Compound Annual Growth Rate) of 28
percent, which is among the highest in the world.

Personal Computers

What drives the Indian IT market? As is the case with most
nations in the early stages of the IT maturity curve, the Indian market is
primarily hardware driven. The hardware sector currently accounts for around 56
percent of total IT spending and is growing faster than other sectors of this
industry. Looking at the frenzy in the PCs marketplace, it’s fairly obvious
that PCs are fueling growth in the hardware market.

PC shipments crossed the million mark in the last fiscal and
are likely to shoot beyond two million in the next. That makes India the fastest
growing PC market in the Asia Pacific region. If the Indian market continues to
grow at this pace, which it certainly will, we’re slated to become the second
largest PC market in the region by 2003.

Perhaps the single largest contributor to this impressive
growth is the burgeoning home segment. Today, more than a third of all PCs
shipped in a year make their way to the home segment; and the way things are
moving, this share will only improve in future. This obviously means that no
vendor can afford to neglect this segment. The winners of the future will be the
ones who have in place a focused consumer strategy to address the home segment.

IDC’s “Millennium Home” study reveals that the
most important reasons for purchasing a home PC revolve around enhancing the
family’s computer skills. In an era where people have realized the importance
of being IT literate, this finding springs no major surprises. Another important
finding is that while the chief wage earner of a household is the primary
decision-maker insofar as PC purchase is concerned, family and friends play an
important role in influencing the decision. The survey also reveals that the
average home PC user is around 28 years old–however, IDC believes that as
computer education in schools becomes more widespread and more children start
using PCs at home, the average home PC user of the future might be younger.

Servers

Servers–both Standard Intel Architecture Servers (SIAS) and
RISC/Unix–is another category that’s showing impressive growth. New areas–such
as ISPs, Web hosting, and CRM–besides the more established applications such
as ERP contribute to this explosive growth. Data centers and Application Service
Providers (ASPs), the latest buzzwords doing the rounds in the industry, will be
the future drivers of the server market. In other words, servers will transform
themselves as engines to hosted applications.

One expected development is the blurring of the defining line
between SIAS and RISC Unix servers. While SIAS will continue to cater to the
bulk of requirements, especially in the SME segment, the entry-level RISC/CISC
Server (non-SIAS) space will see the most activity in the server market. All
vendors are investing heavily in channel build-up, training, and motivation to
reach out to the SME segment and dot-coms. These factors, coupled with further
drop in prices of the low-end models of this class, will see this class
increasingly fighting in the same space as the SIAS. Increasing acceptance of
Unix for Web-related activity in the SME segment will also contribute to growth
in this class.

Internet Usage

The last two years have seen explosive growth in Internet
usage in India. We already have more than a million subscribers. And this growth
shows no signs of slowing down, thus making India the fastest growing Internet
market in the Asia-Pacific region. The Internet boom has had a positive impact
on the IT industry. While Internet access is slowly emerging as an important
purchase decision criterion for the home segment, investments by Internet
Service Providers (ISPs) and other Internet companies to set up their
infrastructure will remain an important accelerator for domestic IT spending.

In the wake of the growing prominence of the Internet, there’s
been a lot of debate on the future of PCs, with people spelling out doom for
them. The rise of thin clients and information appliances (or alternate Internet
access devices) have led to this debate. IDC believes that while all this makes
good copy, the truth is further away. The PC is not dead and buried, it still
has a lot of life. The PC will maintain its dominance in the commercial segment,
and will continue to have a place in homes. There’s been an increase in
activity in the Information Appliances arena, but IAs will not eat into PCs.
Rather, they would complement PCs in a digital home.

There are a number of interrelated issues that will limit the
adoption of information appliances in India. For one, we have to consider
whether users are ready to choose specialized products over a general-purpose
product. Most information appliances will perform only one function, whereas a
PC is a powerful multifunctional device that can do a host of other stuff apart
from Internet access.

Price and availability are other important issues. Till these
products become available in the market, users will remain confused about their
real benefits and the price associated with them. Another crucial factor that
might limit the adoption of information appliances is the development and
proliferation of supporting technologies such as broadband and wireless.

One must also keep in mind that information appliances are
merely enabling devices. It’s the content and service that consumers will
value. This implies that vendors must ensure availability of services and
content in order to promote the adoption of new information appliances. That, we
believe, will take some more time, thus ensuring a prominent place for the PC as
an access device in the Indian marketplace.

Aditya Pant
heads research operations at IDC India

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