Indian IT services grow by 8% in first half of 2022, says IDC

The Indian IT services market grew by 8.1% in the first half of 2022 compared to the 7.3% growth in the same period last year, research firm International Data Corporation (IDC) said on Tuesday.

The overall IT and business services market, which IDC classifies into three segments, namely, project-oriented, managed services, and support services, was valued at $7.15 billion and recorded a 7.4% year-over-year (YoY) growth compared to 6.4% growth in the first half of 2021.

“Apart from digital transformation initiatives, there is also a rise in discretionary spending, as IT investments put on hold due to the pandemic have resumed. With investments in the cloud continuing to rise, enterprises also continue investing in data analytics and AI/ML for better decision making and IT security to improve their overall security posture,” said Harish Krishnakumar, Senior Market Analyst, IT Services, IDC India.

The higher growth rate is due to the continuing rise in digital transformation investments among Indian enterprises, it said. 

The IT and business services market is projected to grow at a CAGR of 8.3% between 2021 and 2026 and reach $20.5 billion by the end of 2026, IDC had said in an earlier report.

On Monday, analyst firm Gartner also said that Indian businesses are likely to increase their spending on IT moderately in 2023 amid the looming tensions on inflation and economic slowdown. India’s overall IT spending is projected to grow 2.6% next year down from 22.1% per cent in 2021, said Gartner. However, the growth of IT spending has improved compared to 2022, when it had come down to 1.9%, it said, adding that Indian businesses are expected to spend around $112.42 billion on their IT requirement in the coming year.

IDC said, the IT and business services market is poised to record strong growth in the upcoming years, as enterprises are expected to continue with their digital transformation investments and will not face a considerable impact due to the economic slowdown.

For 1H2022, project-oriented services registered the highest growth rate at 8.1%, driven by the demand for system integration services, and the demand for IT consulting services. This was followed by managed services at 7.3%, and support services at 6.0% respectively. The managed services market is driven by the increased demand for hosted application management and hosting infrastructure services caused due to the rising adoption of cloud and colocation services.

Neha Gupta, senior research manager, software and IT services market, IDC India said that more than 60% of Indian organisations plan to increase their budgets across all business and IT services contracted from professional service providers as a service provider can best support their business and IT. 

“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,” she said.