The consistency displayed by the domestic IT market in the last three years has been nothing short of remarkable. A 26% growth in 2003-04 was followed by an increase of one point in 2004-05; and, remarkably, even in 2005-06 the scenario repeated itself as the Indian IT market grew by 28% to reach Rs 55,124 crore. Crossing the Rs 50,000 crore threshold was important, but perhaps greater significance lay in the market maintaining such consistent growth three years running. If this consistency was good news, on the flip side the fact that even in three years the market could not take off at a much faster pace justified the criticism in some quarters that Indian enterprises are still a long way off from attaining maturity in the IT adoption curve.

No prizes for guessing that just like the previous two years, BFSI still headed the list amongst all verticals in domestic IT spending followed by telecom. In fact, it was the banks and telecom service providers again who were at the forefront of the IT maturity curve-trends like total IT outsourcing or managed services were more prevalent amongst them. Government, as a vertical, was third in IT purchase-and this spend was restricted only to the departments involved in administration or on the e-gov front; different PSUs have been excluded from the government sector and clubbed under their respective business segments. Manufacturing was the other high growth sector; sub-segments like engineering, automotive, pharma or oil & petrochemical contributed to this. The SOHO segment and IT/BPO companies were among the other heavy IT spenders.

Blue-eyed BFSI
From an IT perspective, the blue-eyed BFSI vertical was segmented into three categories during 2005-06-public, private and multinational banks. The focus of public sector banks seemed to be core-banking implementation. While some private banks had a mature strategy, a few were building best of breed systems to compete with foreign banks. The multinationals, with robust infrastructure, were faced with challenges too: how do they adapt global platforms for use in India?

Banks and insurance firms increasingly looked at outsourcing as an option, with some new ones like Yes Bank positioning it as a differentiating strategy. Routine stuff like implementation of the core banking platform and infrastructure management were outsourced to help even the IT teams focus on business enablement rather than remain preoccupied with day-to-day operations. Most CIOs also predict this trend to continue into 2006-07, also because outsourcing is becoming a specialized game.

In the IT development world, to set India on the global roadmap, most Indian IT organizations got ISO 9000 certified very quickly followed by SCI CMM level III, IV and V. So much so, that most of the SCI CMM level V companies are now in India. Global standards got raised and everybody now wants process efficiency and quality. With the growth of infrastructure management as a service area, outsourcing vendors have gone in for specialized certifications like BS 15000, making themselves ITIL compliant. In other words, making sure they now have efficient and consistent project delivery frameworks.

With this kind of quality and efficiency being brought to the table, most banks, it is expected, will take a decision on outsourcing its IT infrastructure. To what extent will depend on the size and priorities of the bank. Private sector and multinational banks have also seen a future in wireless broadband, which they believe will happen shortly at an affordable price. CIOs are imagining a workforce with portable devices in the field that can access every application they would normally do from the desktop in the office.

Three Phases of Telecom
The most visible impact of liberalization was on the telecom sector-even a decade back the good old P&T telephone was the object of all sorts of ridicule and lampooning as the teledensity hovered at less than 1%. Contrast this with 2005-06: forget landline telephones, all kinds of sleek mobile handsets are available with a large section of the people as the teledensity has shot up manifold to over 11%. In fact, this increasing penetration of both mobile (GSM + CDMA) and landline phones in remote rural interiors of the country called for more and more IT usage.

Typically, IT usage by telcos happens in three phases-while for most Indian players the first phase has already happened, the second is well on the way, the third has just taken off the ground. To elucidate, the first phase involves the IT applications required to support the entire telecom network infrastructure, ie the MSCs, the INs, the BTs and the DWDM networks. Though this phase can never be completely over, at least the initial spurt has now slowed down-while one only looks at the telecom equipment vendors like Lucent, Motorola, Ericsson, Nokia, Siemens and Alcatel offering the hardware, people ignore the software applications they provide to run these networks.

The second phase at its peak now is the adoption of different OSS/BSS applications by the telcos. Not only that they are going in for a host of applications like CRM with BI, data warehousing or even billing applications that would integrate with the OSS/BSS. With customer base for each telco assuming significant proportions, not only billing even applications like churn management, fraud management amongst others are becoming popular.

The third area where IT usage is on the upswing is the maintenance of data centers for almost every telco. With customer bases gradually reaching a plateau, most service providers are looking at offering value-added services to retain customers. Also, world over, voice ARPU is gradually falling-combined, this implies that customers are expecting phones to deliver more and more data-based functionalities other than the ubiquitous SMS. To support multiple such functions, most service providers have impressive data centers which are basically run through IT only.

Other than banks and telecom service providers, the government and manufacturing verticals proved to be the heaviest IT spenders during 2005-06. The trends and activities in these areas have been subsequently chronicled in detail. However, what many people tended to ignore was that the IT/BPO sector in itself was another high spender on automation. It's like talking about carrying coal to Newcastle. Surely it needs no rocket science to realize that India's technology sector, comprising BPO shops and traditional IT services players, would also be one of the biggest consumers of IT. Unlike any other vertical, including heavy IT users like banking, telecom, auto or pharma, usage of IT is the leit motif of the existence of the technology sector.

The BPO industry required a more stringent IT infrastructure-nothing short of a five nines uptime could wipe them out of business altogether. In order to conform to the stringent SLAs the BPO companies sign with their clients, their CIOs too need to chalk out water-tight deliverables from their vendors. Even in case of IT services companies, CIOs deliberate over a stringent set of SLAs with their local vendors as most time & material billing model now includes reward and penalty clauses.

Rajneesh De
rajneeshd@cybermedia.co.in

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