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IT Spending: Which Way to Go
Taking all key IT spenders into consideration (including 11 companies which
did not participate but we got the data for them from IDCs earlier studies and
secondary research), the DQ-IDC Mega Users Survey noted that during 2007-08 the
average IT expenditure across organizations has recorded a 27% growth touching
Rs 32 crore. However this year too the traditional IT spenders like BFSI,
telecom and Oil & Petrochemical spent the maximum but when it came to growth it
was retail all the way.
The retail sector at 43% clocked the highest growth in IT spend in the
current year amongst all verticals. Other sectors like BFSI, IT and ITeS, and
automobile maintained the industry average; while utility was the only other
vertical that crossed the industry average. This year too oil and petrochemicals
was the relative laggard, joined by pharma and biotech which clocked 10% and 11%
growth respectivelydespite the fact that both these verticals are regarded as
tech-savvy.
Interestingly, the survey predicts that IT spending in FY 2008-09 would slow
down by 22% to touch Rs 3,748 lakh in 2008-09. It is as many analysts point out,
the sign of a maturing market which has reached the initial saturation point.
Ashok Kumar Wahi, director, Group-IT, Spice Telecom attributes it to a growth
in outsourcing which explains the slowing down in growth in IT spending.
What we are now seeing is Indian enterprises taking to outsourcing like
never before. This has therefore resulted in the growth of the services market,
says Wahi. The survey finding of hardware spend as a percentage of total spend
going down in 2008-09 also is consistent with this observation. Packaged
applications too are finding a place in the IT budget, and, therefore, while
spend on hardware is reducing, that on packaged software and services is
steadily rising. With IT outsourcing becoming the norm of the day, it appears
that companies are now more comfortable outsourcing their IT infrastructure and
focusing on their core business rather than maintaining their IT departments
in-house.
The average IT spend as a percentage of the total turnover for the companies
surveyed this year was 0.63, a marginal decline from the previous year. BFSI saw
the highest average spend at 1.50%, and retail, which was the big surprise, was
at 1.32%.
The Indian retail industry has of late seen the entry of the biggies of the
global retail market, and with technology playing an integral role in the
success of any business, this has expectedly resulted in the established players
going in for advanced IT adoption in a bid to retain their market share.
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| Even though the vertical has
grown less than the industry average, the sector is spending on
consolidating its IT infrastructure from possible threats, whether it is
spending on security solutions, disaster recovery, or establishing WAN and
VPN |
With BFSI traditionally being one of the more mature verticals when it comes
to IT adoption, the fact is that while BFSI took a long time to reach the
maturity level, retail has made the journey fairly early. Retail has emerged as
the clear leader whether being the highest spender on business line specific
software (at 49%) or growth in IT spending (at 43%). One can clearly deduce that
retail is here to stay and the rapid growth in the sector would only result in
IT adoption going up steeply.
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