India’s software market to surpass $8.2 bn by 2021-end: IDC

India’s software market is expected to surpass $8.2 billion in terms of revenue by the end of 2021 and grow at a compound annual growth rate (CAGR) of 14% between 2020 and 2025, according to a new International Data Corporation (IDC) report.

IDC also expects the revenue share of platform-as-a-service (PaaS) and software-as-a-service (SaaS) in the overall software market to increase from 37.1% in 2020 to 59% in 2025, at a CAGR of 25.1%.  

Going forward, the demand for robotic process automation (RPA), artificial intelligence (AI), conferencing and collaborative applications, IT service management (ITSM) and digital commerce applications will also grow, IDC said in the report released on Thursday.  

New data protection and data localisation policies will also lead organizations in India to relook at their compliance frameworks. This will fuel demand for data security and privacy compliance solutions, IDC added.  

Read more: India's artificial intelligence market to reach $7.8 bn by 2025: IDC

Hemanth Gudiwada, Associate Market Analyst at IDC India believes software markets related to cloud, artificial intelligence (AI) and security will continue to grow for the next couple of quarters.  

"Indian enterprises are continuing their digital transformation initiatives with a clear focus on scalable, secure and agile frameworks. They ramped up investments on the cloud for scalability, AI to leverage data accurately and serve the clients more efficiently, and security to protect their network and systems," he added.  

IDC data on the first half of 2021 show, the size of the software market in India was $4.0 billion, growing at 15.9% year-over-year (YoY) and accounting for 18.3% of the software market in the Asia-Pacific region excluding Japan and China (APeJC) region. Microsoft, Oracle, and SAP were the top software service providers in India during this period.  

Pent-up demand led to a sharp spike in the software market during the first half of 2021, as per IDC. Most enterprises are back to pre-pandemic level usage, while the remaining ones are expecting operations to normalize by the end of 2021 or the first half of 2022. 

IDC classifies the software market into three categories-- applications, application development and deployment, and systems infrastructure software. During the first half of 2021, applications accounted for most of the software market (60.9%), followed by application development and deployment (21%) and systems infrastructure software (18.1%).  

"Collaborative applications, artificial intelligence platforms, system and service management and security witnessed the strongest growth during the period due to the adoption of cloud-based solutions," said Shweta Baidya, Senior Research Manager for Software & IT Services at IDC India.  

Baidya points out, software vendors have been re-aligning their portfolios to cater to the evolving requirements of their customers. "There is a strong push towards solutions that are agile, scalable and secure, and enterprises are clearly prioritizing vendors with platform offerings over point solutions," she added.  

According to a Gartner report, published on December 1, 2021, software was the highest growing segment in IT in India with an expected total spending of $10.5 billion in 2022, up 14.4% from 2021.