IDC Market Predictions for 2007
India continues to soar.
The Indian economy posted a strong 8.5 percent real GDP growth
and even this could have been a percentage point higher had it not been for
rising oil prices, felt the Indian finance minister. What is required to abate
this is a continuous stream of foreign direct investment (FDI), sustained domestic
demand, growth across all major sectors, notably agriculture and exports, 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. This has led to the entry of many global giants in different
industries, putting immense pressure on the domestic enterprises to stay competitive.
One major challenge right away is the IT infrastructure of the incumbent companies,
which lags behind these foreign entities
Virtualisation and SOA
2007 will witness Indian enterprises graduate to the second
level of dynamic IT infrastructure, where IT infrastructure would be able to
effect changes instantaneously and dynamically in response to the changing business
scenario. The key components that may come to the fore to attain this state
would be virtualisation, SOA and application integration.
Virtualisation will be adopted by enterprises at all layers
to achieve the true Return or benefit of consolidation that they have already
undertaken. Virtualisation across multiple hardware platforms will provide additional
capacity to enterprise CIOs, which would provide a better RoI on their IT investments.
On the other hand, virtualisation will also help enterprises to attain better
utilisation of the multi-core, multi-processor servers that are going to become
mainstream in 2007.
The move to SOA infrastructure will gather much-needed momentum
in 2007. Application integration will continue in 2007 with enterprises reducing
the number of applications wherever possible and rolling out applications on
a centralised architecture, reducing the computing at peripherals to minimum.
Data warehousing will witness multiple implementations in 2007.
New delivery and usage models will evolve
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-verticalised
solutions for SMBs with special delivery through specialised partners. SMB offerings
will witness further micro vertical customisation.
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.
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
percent over the period 2005-2010, with a year-on-year growth rate of 33 percent
Connectivity, Content and Convergence will run parallel
According to the Telecom Regulatory Authority of India (TRAI),
the overall Internet subscriber base has grown at around 45 per cent over the
previous year and stood at nearly 7.7 million in June 2006. Around 20 per cent
of this number was broadband subscribers.
Even though bandwidth tariffs have come down significantly
and the availability of bandwidth in the access part of the network is improving,
the high Total Cost of ownership (TCO) for a broadband subscription will not
permit the 9 million Internet subscriber-mark to be reached in 2007.
To standardize or to achieve 75 percent repeatability of
services deliverables has always been a sought after objective for IT services
vendors. The major pain point of SI vendors remains consistent and quality delivery
of IT services across diverse customer sets and in line with the distinct nature
of their businesses.
Productisation leading to emergence of a new
services delivery model. The next level of maturity would come from the conversion
of services into standalone standard products or modules. Vendors will be able
to replicate the services products across multiple clients, which traditionally
had been highly customised for specific clients. Delivery of these productised
services will continue to be based on fixed service level agreements (SLAs)
between the primary vendor and the end customer.
The market spending on SI services in India for 2007 is expected
to be around US$
872 million growing at 19 percent and contributing to 21
percent of the total IT Services market. This change in the delivery model will
not have a huge impact on spending, but will definitely improve vendor earnings
and client confidence from the standardised services deliverables.
Internal security will drive enterprise security
Security is no longer a discrete function and is slowly moving
towards the concept of end-to-end security, closely and intimately
integrated to the business processes of an organisation.
With changing nature of threats being faced, organisations
need to lay equally strong emphasis on all the three critical elements of business,
such as people, process and technology, to achieve the state of a truly resilient
enterprise. 2007 will witness enterprises defining their internal processes
in detail and having proper policies in place to protect the core business operation.
The identity and access management (IAM) market will continue
to grow at 31 percent in 2007. Security solution vendors will focus on management
and optimisation of their offerings and developing an ecosystem of partners
to provide deeper services and help their customers manage their security environment.
Build-outs than rollouts for 3G and WiMAX
India is expected to add around 85 million new mobile subscribers
in 2007. For the first time, India is expected to beat China in mobile subscriber
additions for a full year. China is likely to add around 75 million subscribers
This sharp growth in subscriber additions would call for
a huge network expansion drive, which is expected to result in investments of
the order of $ 10 billion or more. Around $ 8.5 billion of this would be investments
flowing into mobile service networks alone. Broadband, IP VPN and others would
account for another US$ 2 billion of investments.
Operators will test 3G and WiMAX on a much wider scale, but
may have to delay their commercial rollouts until early 2008, when the spectrum-availability
issues are ironed out. The Department of Telecom (DoT) is engaged in separate
dialogues with the Ministry of Defence and the Department of Space for freeing
up spectrum for 3G and WiMAX, respectively.
Optical fibre cable links may replace some of the existing
Defence wireless links with an objective to release additional spectrum in the
relevant frequency bands. This means that wireless frequency will not be available
in all telecom circles simultaneously, but rather in phases. Consequently, a
pan-India mega rollout of 3G is quite unlikely.
IT retailing to gain momentum
. Experimentations will be seen in retail formats, in-store
and on-site promotions, product bundling, and alternative payment options. This
will require efforts on the parts of vendors for backward and forward integration
with other vendors, retailers and service providers within or outside the organisation.
2007 will witness a variety of in-store and on-site promotions
for IT products. While not all of these experiments are expected to be successful,
these promotions would be the harbingers of future trends.
Emerging Asia approaches BRIC-like performance
While Asia is home to India and China, two of the dynamic
BRIC economies, the region contains a number of other countries with potential
to outpace the BRIC economies in the coming years. These Emerging Asian Countries
(EACs) include Pakistan, Sri Lanka, Bangladesh, Thailand, Malaysia, Vietnam,
Indonesia, and the Philippines. The GDP of this massive region contains almost
800 million people and is expected to reach US$ 912 billion in full-year 2006.
As GDP growth levels off through 2010, IT spending will expand
dramatically, with a Market-wide compound annual growth rate (CAGR) of 12.5
percent over the same period, or 80 per cent growth over the market size in
2005. In addition, the higher growth in Pakistan, Sri Lanka, Bangladesh, and
Vietnam are expected to account for a combined 16.1 per cent of the $ 15.6-billion
IT market in 2007. IDC predicts that EAC markets will grow a very strong at
12 percent in 2007.
Worldwide IT spending will be marginally higher in 2007
Worldwide IT spending will grow 6.6 per cent in 2007, up
from 6.3 per cent in 2006. IDC predictions for spending in the three major product
and service categories are as follows:
- Software will lead growth again, with 8 percent
spending growth in 2007. Among the major software categories, infrastructure
software will stand out with continued strength (over 9 percent).
- Services will remain stable, with 6 percent growth.
- Hardware will bounce back in 2007, where prediction
states 6.5 percent growth, up from about 6 percent growth in 2006. Networking
equipment (almost 7 percent and volume servers (6.5 percent)