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Another great year for the Indian domestic IT market is over and as we enter the New Year, the only question in our minds is how will 2007 shape up? To answer this question, as per regular practice, IDC (India) announced its Top 10 IT Market Predictions for the year 2007. Most of these predictions are concerned with the domestic IT market. However, there is a reference to those trends in the global market, which will have deeper implications in the domestic market.

Growth Scenario
The domestic IT market in India grew by 22.4% in 2006 (primary estimates) and is expected to keep the momentum up in 2007. The estimated y-o-y growth in 2007 is found to be 21.5%, making it the fastest growing market in the Apac region.

"The domestic IT market has posted impressive growth in the last three years and is expected to continue the momentum in 2007 also, which only means the domestic market has come of age," says Kapil Dev Singh, country manager, IDC (India).

Globally, 2007 will be a year of intense hyper disruption in the IT industry, with major structural changes taking place along different industry vectors at once, all interacting with each other and, more importantly, accelerating each other. In 2007, small businesses will become big, more software will become services, more services will become software, business IT players will become more consumer-ish, and consumer players will become more business-like. These disruptions, and others, will force most market leaders out of their comfort zones and venture into new opportunities.

These deep shifts in the global market place will surely have their implications on the Indian market and will pose unique challenges. These challenges will be around managing the twin play of IT going deeper into already penetrated market segments and simultaneously exploring newer segments for growth to be sustained", Singh says.

India Continues to Soar
The Indian economy posted a strong 8.5% real GDP growth. What is required to keep it steady and go up is a continuous stream of foreign direct investment (FDI), sustained domestic demand, growth across all major sectors, as well as a strong supportive infrastructure. The Indian government recognizes the drawbacks, and is committing funds to reduce these logistical challenges. Better connectivity among major cities and from important ports, improvement of international airports through privatization, and greater outlay to make India more attractive for foreign investments are all steps in that direction.

In addition to China, the world is paying more attention to India because of its rapid growth. The Brazil, Russia, India, and China (BRIC) phenomena has forced most multinational companies (MNCs) and leading governments to explore what business opportunities can be availed from being present in these markets. One major challenge right away is the IT infrastructure of the incumbent companies.

Consequently, a major wave of IT investments has started to take place across banks, financial services institutions (FSIs), telecom, manufacturing, government, resources, education, and other industries. This is probably why India is the fastest-growing country by domestic IT spending in 2006 (22.4%) and is forecast to remain so in 2007 (21.5%) when it reaches Rs 75,891 crore.

In 2007, IDC feels that the IT market will continue to be driven mainly by hardware spending across consumer and enterprise segments.

Entering Phase 2 in 2007
Enterprises in India have matured to the extent of consolidating their IT infrastructure that they have acquired over the years. Cost pressures are forcing large enterprises to evaluate and re-evaluate the utilizations and productivity of their IT assets. At the same point of time business goals have started to get linked to the IT roadmap of the organization.

The year 2007 will witness Indian enterprises graduate to the second level of dynamic IT infrastructure, where IT infrastructure will effect changes instantaneously and dynamically in response to the changing business scenario. The key components that may be require to attain this state would be virtualization, SOA, and application integration. IDC envisions that end-users will require much help from vendors and systems integrators to establish processes to aid their business process re-engineering (BPR) in the near term. Application integration will continue in 2007 with enterprises reducing the number of applications wherever possible and rolling out applications on a centralized architecture.

Disruption to Set In
The year 2007 will mark the beginning of an aggressive focus from all major vendors to broaden and deepen their coverage of the SMB sector. We have already witnessed the launch of SMB specific products and micro-verticalized solutions for SMBs with special delivery through specialized partners.

Vendors will experiment with new models like on-premise hosted applications, hardware on lease, and software as a service (SaaS). In the application software world, 2007 will be a period of continuing radical change, with major expansion of SaaS as a way to accelerate SMB penetration. Major application vendors like SAP, Oracle, and Microsoft will expand their SaaS offerings. SMBs will contribute almost 50% to the enterprise applications market in 2007 in India.

IT services vendors will also bring to market packaged services that are pre-scoped, pre-priced, pre-quality assured, and shrink-wrapped offerings that are ready to be implemented at the client site. The focus will be midsize enterprises.

The one-to-many hosting model put forth by hosted application management (HAM) vendors would create a new profitable delivery model for application outsourcing services to mid-market customers. HAM will grow at a CAGR of 38% over the period 2005-10, with a y-o-y growth rate of 33% in 2007.

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