Top Indian companies spent Rs. 7123 crore on deploying Information Technology systems in 2006-07, a growth of 27% over the previous year, according to a survey carried out by CyberMedia publication Dataquest and IT research and advisory firm IDC India. This year Indian enterprises are expected to invest 26% more on IT taking the combined spend to Rs.8974 crore.
This is revealed by the 5th Dataquest-IDC MegaSpenders 2007 survey of 226 organizations across 11 verticals. The IT investments made by Mega Spenders in 2006-07 make up more than one-tenth of the total domestic IT/ITES industry that notched up sales of Rs. 68411 crore in 2006. (Each year, this survey studies the IT spend by 200-plus top-spending enterprises in India).
The 5th annual survey pointed out that the marginal decline in IT spends projected in 2007-08 is due to reduction in costs of IT inputs both software and hardware as the nature and pattern of IT adoption becomes more sophisticated.
The average IT spend as a proportion of a company's turnover went up to 0.7% in 2006-07 from 0.6% the previous year since adoption of IT not only increased but became more sophisticated and spread across all hierarchies within the organization. The BFSI, IT/ITES sector invested 1.19% and 1.58% of their revenues on IT in 2006-07.
The surveyed organizations had an IT spend per employee of Rs. 34,000.
According to the survey the average IT investment by an “IT megaspender” Indian company was Rs. 34 crore in 2006-07, and is expected to grow by 26% to Rs. 43 crore this financial year.
Interestingly, more than half the top 50 spenders on IT during 2006-07 were PSUs. This breaks the myth that modernization processes such as automation and IT deployment can take place only after privatization.
BFSI and Telecom sector biggest spenders
The IT investment of Rs. 2646 crore by 35 banks, financial institutions and insurance companies was the highest among the IT buyers.
The Top 15 IT buyers from the BFSI sector also made it to the Top 50 in the survey. These included Bank of Baroda, Bank of India, Canara Bank, Centurion Bank, HDFC Bank, ICICI Bank, IDBI Bank, Indian Overseas Bank, ING Vysya Bank, Karnataka Bank, Punjab National Bank, State Bank of India and Syndicate Bank. The 4 insurance firms, LIC, New India, Oriental and United India also made to the Top 50 IT buyers.
In 2007-08 as well the BFSI sector is expected to remain the highest inductor of IT with expected investment of Rs. 3368 crore, says the survey.
The telecom sector comprising 8 firms pumped in Rs. 2314 crore on IT during 2006-07, making the highest average IT investment of Rs. 289 crore for each company, the survey reveals. These included Aircel, Bharti, BSNL, Hutch, MTNL, Reliance Communications and VSNL. IT investments by the telecom sector is projected to increase to Rs. 3031 crore this year.
The sunrise IT and ITES sector invested Rs. 652 crore during the last financial year. This resulted in 23 mega spenders, including MphasiS, NIIT, TCS, Wipro from the IT and ITES sector investing an average of Rs. 34.32 crore.
While the mega spenders will increase their IT spend by 26% in the current year, sectors like Retail, Utilities, Telecom and BFSI will invest at rates higher than the 226 mega-spenders from 11 verticals.
Retail sector is expected to increase its IT spends by 41% while the Utility, Telecom and BFSI are expected to grow at 35%, 31% and 27% respectively.
Hardware purchases make up for 42% of IT spend
Overall, about 42% of the total spend on IT was on hardware while expenditure on packaged software and services software stood at 26% each. Within hardware more than half the expenditure was on PCs, notebooks and servers, while system software and application software accounted for more than half of spend on software.
However, more than 40% of the services spend was on support and maintenance.
Presently, Mail Messaging solutions, Security and Wide Area Networks (WAN) are the often used technologies in the megaspending organisations. In future too, most organisations will continue to expand their reliance on these technologies.
Next year, business specific applications like core banking in BFSI, engineering applications in automobile and implementation of ERM and CRM across verticals would be the drivers of IT spend, according to the survey.
The growth in IT expenditure by the retail sector was relatively low-key last year, but is expected to perk up significantly in 2007-08 as companies like Reliance, Pantaloons, Tatas plan to expand. Enterprise applications like ERM and CRM are expected to be in vogue throughout this year.
The slowest growth in terms of expenditure on IT is expected from the oil and petrochemicals sector that is likely to invest a total of Rs. 455 crore, up 6% from Rs. 429 crore invested in 2006-07.
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