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Government to the Rescue

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DQI Bureau
New Update

Fiscal 2003-04 is not likely to be any different from the previous fiscal in

terms of IT spend by verticals.According to Gartner, of the total IT spend of

$12 billion in India during 2002, nearly 33 % was consumed by the communications

sector (includes telecom and broadcasting) followed by manufacturing at 13%.

Other big spenders include the BFSI, services and the government sector. While

there might be some segments like the BPO industry, which may see higher growth

rates due to the nascent stage of the industry, verticals like manufacturing

would continue to dominate in IT spending since the base of the industry is very

large. Some verticals with a very small base like the healthcare and hospitality

industry are also expected to see accelerated growth in spending as they expand

into more sophisticated usage of technology. As a thumb rule, Gartner says that

the vertical IT spend is expected to be equivalent with the international

competitiveness of the industry segment.

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Communications industry



IT spending in the this sector will by far outstrip investments by any other

verticals. Kingshuk Hazra, the industry vertical analyst at Gartner explained

that, "this is because communications sector–read the telcos–are the

biggest consumer of networking equipment–which is the single biggest IT

spending category in the country now". Besides the rapid expansion of the

telcos, the broadcasting industry is also in the expansion mode what with the

race for launching new channels going on.

Manufacturing



Here process manufacturing spends much more than discrete manufacturing.

This is contrary to what is happening in the rest of the countries in Asia

Pacific. Hazra explains that, "discrete manufacturing has fewer number of

players in India. We see that the discrete manufacturing players are higher up

the value chain and are investing in high value IT services. They are already

through with basic computerization which the process sector is focusing on

now".

BFSI



The BFSI sector has an estimated spend of $1.2 billion. The financial sector

will see a mix of both IT hardware and services spend. While the MNC companies

are spending on IT services in a big way, national banks still need to be

purchasing a lot of hardware to upgrade existing systems, expand their

computerization initiatives into smaller branches and providing ATM facilities

to customers.

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Government



The Government is the fourth biggest vertical in terms of IT spending. Many

e-government initiatives undertaken by the Central Government and some state

governments like in Karnataka and Andhra Pradesh will continue to spur growth in

the IT sector. Besides, the government directive of keeping aside 2 % of each

department’s budget for IT purchase has been instrumental in driving IT

penetration in government offices. The Bhoomi project by the Government of

Karnataka and the Gyandoot project in Madhya Pradesh are indicators of the

spending patterns in e-governance projects. The Census Board of India has

embarked on an ambitious plan to digitize its 22 crore census forms.

Services



Among the services sector, BPO players would be making a lot of purchases as

the sector itself is in the ramp-up stage.

Wipro Spectramind has just started its third center at Chennai with the total

capacity going up to nearly 4,000 seats now. It has two other centers in Delhi

and Mumbai. Besides captive centers like American Express and GE are also

ramping up fast.

Other segments



Other segments witnessing fast growth include the healthcare industry,

insurance sector and the logistics industry. The Indian healthcare industry is

poised to take off as a global destination of cheap but quality medical services

just as the insurance sector would be witnessing a boom with the opening up of

the sector. The logistics sector is experiencing a boom spurred by the Prime

Minister’s vision to connect the country with quality roads.

Balaka Baruah Aggarwal



CNS

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