Favourable climate for IT start-ups: IDC

A report recently published by the International Data Corporation (IDC) talks about favourable signs in the IT industry of India. According to IDC’s report “India IT Market Overview Report – 2012”, the total IT market in India is expected to grow to $43.57 billion in 2012 from $37.46 billion (Rs 2.09 lakh crore) in 2011.

‘IDC estimates the Indian IT market to be in the region of $38b in 2012, with double digit growth forecast for the next 5 years. It is thus a market difficult to ignore for technology companies as well as global and Indian venture capital and private equity funds seeking alpha returns,’ says the report.

The reason behind this growth, the report goes on to say, are the twin factors of increased spending by Small and Medium Enterprises (SMEs) and a shift in the landscape of demand across the world. Investors are fully willing to back people in their ventures, seeing the current favourable climate. However, the prevailing financial and economic conditions will mean that any investment will be subject to the most stringent of checks.

According to the report, 38 per cent of the enterprise IT spending in 2011 was by the SME segment, which is expected to grow to 43 per cent by 2015.

“Market driven policies pertaining to e-Governance, financial inclusion and youth-driven entrepreneurship are enabling rural development,” says Ravi Sharma, IDC India Research Manager (Consulting Group). “Political initiatives are increasingly driving demand for IT hardware.”

What does this all mean?

Basically, the implication of the report is that enterprises, particularly SMEs, are in a position to exploit the market to its fullest despite the recession. Various mavericks are founding companies dealing with providing services to Indians. Investors have realised the potential behind these initiatives and have begun to put their money behind them.

E-Governance has been a great success story of India. Various services like passport affairs, company affairs, visa form filling, pensions etc. have all been put into the cloud for the average Indian to access. The most noticeable of these is the Indian Railways portal. Providing these services has accelerated Rural Development.

While it may not seem important or even useful to you, do bear in mind that the size of India’s rural population is vast and tapping into its potential is a great thing. With the growth of the collective conscience of youth, socially driven start-ups are not uncommon any more. What these generally focus on is the empowerment of villages and people who have historically not had much access to cutting edge technology and infrastructure.

And the future of Indian Enterprise lies in Rural Development. Not all of us can adopt villages, but small initiatives can turn into globally recognised ones. The most recognisable of these is “Grameen Bank” started by the Nobel Laureate Mohammed Yunus in Bangladesh.

Of course, if you’re not very socially inclined, then the traditional sectors of banking, financial services and insurance (BFSI), communication and media, advertisement, government and manufacturing are also ripe for investment in IT infrastructure. These sectors were the highest spenders in 2011 with a growth rate of 14-18%.

Social Media Usage

Indian enterprises have started to mature and tap into modern technologies as well. The usage of Facebook, Twitter etc. for social linkages and collaboration tools like Google Apps for internal working are becoming commonplace. Start-ups, in particular, rely increasingly on them.

“Although at a nascent stage of adoption, Indian enterprises have started leveraging social technologies externally for customer engagement and internally to promote team collaboration and knowledge sharing,” says Pavan Magge, IDC India Senior Analyst (Consulting Group). “There is large demand for SaaS (Software as a Service) based applications among large enterprises and enterprise mobility is also at the top in terms of organisation focus and investments.”

A summary of the IDC report may be found here