Bangalore: The information technology (IT) market in India has begun to feel the ripple effect of the US slowdown as hardware vendors such as Hewlett-Packard Co. and Dell Inc. are seeing a delay in technology purchase decisions by some of their customers operating in the country.
Customers, especially the captive units of multinational companies such as Cisco Systems Inc. and Texas Instruments Inc. and IT-enabled services firms have turned cautious with the worsening economic situation in the US, the largest IT market globally.
However, vendors expect the overall growth story in India to remain intact as Indian firms continue to invest in technology to drive their growth, fight global competition, cut costs and improve efficiencies.
A Dell Computer Corp. facility in Austin, Texas. Officials at the firm’s Indian unit say there have been some instances where customers have delayed their IT buying as they re-evaluate their plans
“Decision-making is getting delayed in the past three-four months,” said Rajesh Dhar, country manager for industry standard servers at Hewlett-Packard India. However, it is too premature to quantifyand comment on the impact, he added.
Traditionally, the January-March period is the strongest quarter for IT buying as a large chunk of government deals get finalized then. Research firm Gartner expects the Indian IT market to grow at a five-year compounded annual growth rate of 20.3% to reach $24.3 billion (Rs96,957 crore) by 2011, or nearly 2% of the country’s gross domestic product then.
“There has been no significant impact in the March quarter, but there could be a marginal slowdown in the current quarter,” said Pallab Talukdar, director (enterprise business) at Dell India Pvt. Ltd. The company has seen some instances wherein customers have delayed their IT buying process as they re-evaluate their plans, he added.
For vendors such as SAP AG and Sun Microsystems Inc., India has been the fastest growing market geographically.
Sanjit Sinha, research head at the Indian unit of market research company International Data Corp., said, although slowdown could have affected segments such as the multinational (company), or MNC, captives and business process outsourcing, the impact would be insignificant as India is a consumption market in itself.
A recent Gartner survey of chief information officers worldwide said Indian companies will report a stronger than average IT budget increases of around 13% compared with the global average of 3.3% for 2008. The increased spending in the country was directed primarily towards building new capabilities, with 30% of the IT spend allocated for business growth and 19% towards business transformation, it added.
Gartner expects some effects in purchases in the IT software services business as it is highly dependent on the US economic situation, said analyst Naveen Mishra. Indian IT services vendors such as Tata Consultancy Services Ltd and Infosys Technologies Ltd would be announcing their fourth quarter results in the week starting 14 April and the market is expecting a conservative forecast by Infosys in view of the current conditions in the US.
PC vendors such as Acer Inc. are yet to feel the impact of the slowdown. “There’s a palpable feeling as most of the MNC captives are exercising caution,” said S. Rajendran, chief marketing officer, Acer India Pvt Ltd. Large customers such as Infosys continue to buy aggressively, he added.
Soumitra Aggarwal, director (marketing) at Network Appliances, said captive units of technology MNCs in India were reviewing their investment plans, but his company has not faced any impact of that. “Buying decisions on storage cannot be postponed as data needs to be archived,” he added.
Although demand varies from different sectors in different quarters, India continues to be a good market for storage as all industry verticals were performing well, said Manoj K. Chugh, president at EMC Corp.’s India and Saarc unit.
However, officials of Texas Instruments’ India research and development centre and Cisco India maintained that their plans were intact. “Our IT purchases are as per plans,” said a Texas Instruments spokesperson.
“Cisco’s plans to ramp up headcount to 10,000 by 2012 are still on track and we are continuing with phase II of our expansion plans at our campus in Bangalore,” a spokesperson said in a statement. Cisco currently has about 3,000 engineers in India.
Research agency Forrester said on Thursday that the US market for technology goods and services will grow at less than 3% in 2008 from 6% in 2007. “The US tech market will still grow despite a likely recession in 2008 and it is poised for much stronger growth, assuming that any US recession is shallow and short,” Forrester vice-president and principal analyst Andrew Bartels said.
He anticipates the 2008 slowdown in US purchases to be followed by 10% growth in 2009 and 2010, on account of downward revisions to its 2008 forecast. The demand will significantly slow in the first three quarters of 2008 and should start to pick up in the fourth quarter and accelerate in 2009 as the US moves out of a recession, Bartels said.