India's IT services market surges by 6.6% pc in 2023: IDC Report

Business Tuesday 25/June/2024 08:38 AM
India's IT services market surges by 6.6% pc in 2023: IDC Report

New Delhi: The Indian domestic IT & Business Services market has shown resilience in the face of economic uncertainty, growing by 6.6 percent in 2023, according to the latest data from the International Data Corporation (IDC).

Valued at USD 14.5 billion, the market saw a year-over-year (YoY) growth rate of 6.1 percent, slightly down from 7.4 percent in 2022.

This moderated growth rate reflects a cautious approach by Indian enterprises towards IT spending amidst volatile macroeconomic conditions.

Harish Krishnakumar, Senior Market Analyst for IT Services at IDC India, provided insights into the market dynamics, stating, "Indian enterprises focused on cost optimisation while prioritising IT projects with quicker returns. Enterprises continued to invest in areas like enhancing customer experience and improving operational efficiency to gain a competitive advantage by leveraging technologies like cloud, analytics, and AI/ML."

"In the coming years, IT service investments will be driven by interest in GenAI. Enterprises will continue engaging with IT service providers to develop potential use cases and POCs and also to transform and manage their complex IT infrastructure and applications," he added.

A closer examination of the IT & business services market reveals that the IT services sector, which constitutes 78.4 percent of the total market, grew by 6.6 percent in 2023, a slight decline from the 8.1 percent growth observed in 2022. IDC projects that the IT & business services market will grow at a compound annual growth rate (CAGR) of 7.3 percent from 2023 to 2028, reaching USD 20.7 billion by the end of the period.

IDC categorises the IT & business services market into three primary segments: project-oriented services, managed services, and support services.

In 2023, project-oriented services registered the highest growth rate at 6.8 percent, followed by managed services at 5.8 percent, and support services at 5.2 percent.

The Managed Services segment has been buoyed by the demand for Hosting Infrastructure Services and Hosted Application Management, as enterprises increasingly deploy their workloads in service provider-owned data centres.

The rising adoption of cloud services has also fueled demand for managed cloud services.

Furthermore, strong growth in system integration services has been driven by digital transformation (DX) initiatives and the increasing demand for emerging technologies.

Neha Gupta, Senior Research Manager for Software and IT Services Market at IDC India, highlighted the evolving industry landscape, noting, "The industry today is incredibly dynamic, driven by the advent of AI and GenAI, prompting enterprises to rigorously examine use cases to ensure the delivery of measurable business outcomes. As they navigate this landscape, they seek consultative-led approaches and tailored solutions from their IT service providers."

She added, "Digital execution has ascended to a C-suite imperative, with CEOs becoming increasingly hands-on in digital technology decision-making. In this context, vendors must showcase their ability to overcome challenges and fulfil the value propositions sought by enterprises, positioning themselves as providers of next-generation, comprehensive, and impactful solutions."