Digital transformation initiatives boost domestic IT services to $14bn in India

A rise in companies implementing digital transformation initiatives in India led to a year-on-year growth of 7.2% in the domestic information technology (IT) services sector in India in 2021. According to a report by market research firm the International Data Corporation (IDC), the domestic IT services industry was valued at $14.15 billion in 2021, outpacing the 5.3% growth pace that the sector clocked in 2020.

According to IDC, adoption of new technologies such as cloud platforms, artificial intelligence (AI)-based services, cyber security and modernisation of applications helped the growth of IT services through last year. Going forward, the domestic IT services sector is projected to reach $21.67 billion in valuation by 2026 – with a projected compound annual growth rate (CAGR) of 8.9%.

Harish Krishnakumar, senior market analyst for IT services at IDC India, said that enterprises in India increased their IT spends through 2021 to “improve the resiliency and efficiency of their business operations, and enhance customer experience.” He also added that the adoption of hybrid work models across the industry further led to increased IT spends in India.

IDC India has maintained over the past few quarters that a pent-up demand for digital transformation and adoption of new technologies – which were delayed due to the covid-19 pandemic – has been fuelling the growth of domestic IT services in India. It also added that project-oriented IT services attracted the highest growth rate among domestic IT services, with 7.9% YoY growth.

“IT services providers continued to build capabilities on digital technologies through solution and platform-centric approaches. Areas like cloud and security continued to see momentum along with automation and AI. We see this trend continuing as Indian enterprises will look up to their service providers, as they progress towards their goal of becoming a future-enterprise,” said Sharath Srinivasamurthy, research director of enterprise solutions at IDC India.

The trend of growth in IT and business services in India was also echoed in the Q4 FY22 financial report filed by India IT services company, HCL Technologies, earlier this month. The latter said that revenue from its IT and business services grew to $2.199 billion in this quarter, which helped the company post overall revenue growth during the quarter.

C. Vijayakumar, managing director and chief executive of HCL, said during the company’s earnings call that strong growth in “digital, cloud and engineering services” boosted the IT service provider’s overall quarterly revenue in the country.