Indian IT & Business Services market grows 5.41% to $13.4 bn in 2020: IDC

New Delhi: The IT and Business Services market in the country recorded a lower year-on-year growth of 5.41 per cent to USD 13.41 billion in 2020 due to the impact of the COVID-19 pandemic on organisations, research firm IDC said on Tuesday.

However, the IT and Business Services market is expected to grow at a CAGR of 7.18 per cent between 2020-2025 and touch nearly USD 19 billion by the end of 2025 on the back of increased spending in areas like cloud and artificial intelligence.

The Indian IT and Business Services market had grown by 8.43 per cent in 2019, but the growth rate fell in 2020 due to the impact of the COVID-19 pandemic on businesses in the country, as per IDC Worldwide Semi-annual Services Tracker.

Of the IT and Business Services market, the IT Services segment contributed 77.06 per cent and grew by 5.97 per cent in 2020. This is against a growth rate of 8.91 per cent in 2019.

As per IDC, the IT and Business Services market will begin picking up momentum gradually from 2021 onwards due to increased spending in areas like cloud, application modernisation, AI, automation etc.

“The IT and Business Services market is projected to grow at a CAGR of 7.18 per cent between 2020-2025 and reach USD 18.97 billion by the end of 2025,” it said.

IDC India Senior Market Analyst (IT Services) Harish Krishnakumar said enterprises across all sectors have started investing in digital transformation as the pandemic made it evident that businesses with higher digital adoption would fare better than ones with traditional IT systems.

“During the second half of 2020, apart from cloud adoption and IT security, enterprises also started to increasingly invest in technologies like AI, machine learning, and analytics for solutions like conversational AI and Chatbots, fraud prevention, demand forecasting, etc., which would help streamline their business operations,” he added.

Even sectors like manufacturing, which was adversely affected during the initial stages of the pandemic, started investing in cloud-based applications and automation projects, Krishnakumar said.

IDC classifies the IT and Business Services market into three primary markets – Project-Oriented, Managed Services, and Support Services.

For 2020, managed services segment registered the highest growth rate at 6.85 per cent, followed by project-oriented services at 5.92 per cent, and support services at 4.51 per cent.

In 2020, hosted application management and hosted infrastructure services witnessed a higher growth as many enterprises continued to migrate their applications to the cloud, IDC said.

The growth is also attributed to the increase in demand for cloud services driven by the rise in remote working, online classes, and online streaming because of the COVID-19 pandemic, it added.

“While the year 2020 pushed enterprises to focus on survival and business continuity strategies through cost takeout and cost optimisation initiatives, the year 2021 will pave the way for business resiliency plans to kick-in and accelerated investments in technologies to support an enterprise”s digital goals,” IDC India Senior Research Manager (Enterprise Software and ICT Services) Shweta Baidya said.

Some of the areas where IDC envisions clear opportunities for service providers include cloud enablement and augmentation services, network management, optimisation and automation, managed security services, and AI-based services, among others, Baidya added.

“With a large part of the workforce being out of action during the second wave of the pandemic, enterprises will look up to their service partners to enable digital transformation initiatives and prepare them to be a future-ready enterprise,” Baidya said.