IT Forecasting: Directions '98

The annual IT briefing session conducted by

International Data Corporation (India) was held in July this year. The session focused on

various gamuts of the domestic IT industry. These included the cyber space dynamics,

hardware markets, ERP and package software, comparison of the IT scenario in India and

China, the India home PC market, internet growth in the country and channel issues and

strategies. We consider some of the significant trends reported by this consulting

organization.

face="Arial" size="2" color="#000000">Projections for the IT Industry in 1998-99:

The domestic IT industry will continue to experience a slowdown in IT spending by the

large and medium corporate organizations and the government. This will affect capital

expenditures in hardware, leading to the moderate growth of 13%. Within hardware, growth

will be driven by desktop sales to the home and small office segments. Also driving the

hardware segment are inkjets and laser printer sales. The datacom market is also

continuing to experience moderate growth levels despite the regulatory environment

inhibiting VSAT, internet and value added services. Part of the reason for these growth

levels is the small base for datacom revenue and the increasing penetration of LANs and

WANs. The maximum growth levels are being exhibited in IT services involving consultancy,

project management, customized development and implementation. The training segment of the

industry is also witnessing high growth levels with the drivers being the need to maintain

and develop IT skills by both corporate and individuals.

face="Arial" size="2" color="#000000">Domestic PC market outlook: With

the value of the PC market constituting more than 50% of the domestic IT industry, factors

affecting the PC market are also instrumental in deciding the overall trend of the IT

industry. Keeping this in mind, IDC (India) has forecast a pessimistic and optimistic

range for PC shipments. The pessimistic range is built by taking a larger number of

inhibitors in the forecast and the optimistic range is built by taking a larger number of

facilitators. Under both the circumstances, PC shipments would reach the million-mark only

in 1999-00. However, with the recent acceptance of the recommendations of the IT Task

Force, it is quite possible that the million mark may be reached before the IDC forecast

span.

face="Arial" size="2" color="#000000">PC market segmentation: With low

investments by corporate organizations and the government, the growth in desktop shipments

to this segment is expected to reduce in comparison to the previous years. The cumulative

average growth rate (CAGR) of desktop shipments to this segment is only expected to be

27%. In comparison, shipments to the small office segment are expected to grow at a faster

CAGR of 33%. However, the fastest growing market segment for desktop shipments is the home

segment. Desktop shipments to this segment are being driven by the need for work at home,

high visibility of computers in secondary level education, aspiration levels of the middle

class and edutainment. Due to the high CAGR of 57%, the share of this segment is also

expected to increase significantly in the coming years.

face="Arial" size="2" color="#000000">Printer forecast: This segment of

the domestic IT industry continues to be driven by inkjet sales. The CAGR forecast for

inkjet sales is above 60% and has almost no comparison basis with the almost saturated

growth levels of the DMP segment. However, contrary to initial conclusions, the DMP

technology is not a dead technology, but it may be unable to make fresh inroads into

emerging market segments. The DMP usage will continue to be limited to high-volume,

low-cost printing and application- specific printing. The latter includes devices like

retail and POS printers, which have only the dot matrix printer heads and more compact

transfer mechanisms. The inkjet printer sales continue to be strongly influenced by

channel strategies and pricing.

face="Arial" size="2" color="#000000">Internet subscriber forecast: IDC

(India) has built various scenarios about the possible take-off directions for internet

subscribers in the country. The pessimistic outlook envisages the lack of internet

privatization, with VSNL the monopolistic player. The optimistic outlook forecasts the

spurt in internet subscribers with the existence of a number of internet service

providers. Under optimistic circumstances, the million mark is forecast only in the next

decade. However, with the recent acceptance of the IT Task Force recommendations,

including availability of multiple gateway providers, clearance for ISP implementation,

focus on schools for internet connectivity, this mark may be achieved earlier than

forecast by IDC.

Comparative of PC and internet

installed base: The table lists comparisons of PC and internet installed base and

PC and telephone penetration across some Asia Pacific countries. The most significant fact

which appears is that internet penetration and absolute number of subscribers are related

to the telephone density. In other words, the telecom infrastructure is a critical success

factor for internet adoption and penetration. An exception is China, where because of

government regulations, the number of internet connections are controlled. An interesting

comparison is between USA and S Korea, where both countries have the same percentage of

internet penetration in the PC installed base, but different PC and telephone densities.

In spite of a weaker telecom infrastructure, S Korea has still been to achieve a

comparable internet penetration in the PC installed base.

The IT industry in 1998-99 is likely to

witness a further slowdown in corporate spending as far as capital expenditure is

concerned. However, as part of the IT Task Force recommendations, the government has

accepted the need for it to invest in IT on a continuous basis from this year itself.

Additional investments levels, upward from Rs 700 crore, are expected from the government.

With the recent emphasis on fast-track clearances for power, roads, ports and

transportation, additional IT investments are expected in the next year.