Many sectors of Indian industry are going to see a further acceleration in IT implementation rate, and a few would take time to mature.
India is one of the few growth engines for the IT industry, ranked second after China. But it is not as if the whole of India is busy implementing IT. There are variations in the rate of adoption of IT across sectors, across geographies and across demographies. Let's take a quick look at what is happening where. Before that, a word of caution; this is not based on any scientific survey, but on my interactions with a wide cross section of informed people from across the country. The conclusions are my own.
The past couple of years, the BPO and financial sectors were leading in IT spend. BPO is expected to slow down this year, now that the initial spurt is through. The financial sector can be further divided into three. Foreign and private banks fall in tier one. They were the drivers of the huge investments that we saw in the sector thee past few years. This is expected to slow down. In tier two we have the large PSU banks. So far, they were behind tier one and can now be expected to accelerate their rate of implementation, and growth in implementation rates in the banking sector will primarily come from here. Tier three comprises the smaller, regional and cooperative banks. In fact, some of them, particularly the cooperative banks based in Maharashtra and Karnataka were the leaders in bank computerization till private banks were allowed to be set up. This group would now get busy upgrading their older platforms and applications. Insurance mirrors the first two tiers in banking.
Government is going to be another area of rapid growth. By government I do not mean the PSU's, but the various departments, ministries and the different tiers of governance, such as local self-government bodies. The budgetary outlays for e-governance are huge and I don't expect that to be fully spent. But a percentage of the budget still works out to a significant volume. The military can also be expected to significantly improve its usage of IT in the coming years. Academics, particularly schools and colleges are going to be another growth area. At one time, the manufacturing sector contributed to the bulk of domestic IT implementations. Then the sector went into a slump, but has since risen phoenix like. Manufacturing is now ready to upgrade, update and otherwise add-on to its already sizeable IT infrastructure. So, this sector also will see significant growth in implementations starting this year. Natural resources exploration, including petroleum and mining will also see increased growth in IT implementations as will the infrastructure-particularly the transport and communications sectors.
Two other sectors, which the IT industry sees as sunrise sectors, are the medium-sized business segment and retail. Here, I beg to differ with the projections of the IT industry. The expectations from these sectors reminds me of the earlier, failed home computing thrust by all vendors. These two sectors are similar, disorganized and extremely price sensitive and lack in adequate IT skills. Sure, the potential is there, it but will take some time for it to mature.
16 cities contribute to 80 % of the IT purchases and implementations in the country. Many vendors have started a big push into the hinterland, the C and D cities and smaller towns. That too, I feel will take time to mature.