Bangalore: With the aim to modernize its services, IT spending by India's public sector reached an estimated $3.1 billion in 2008. The spending is further expected to grow to $5.1 billion by 2011, indicating a compounded annual growth rate (CAGR) of nearly 19 percent from 2007 to 2011, says a report by Springboard Research, an IT market research and advisory firm.
According to the 'Public sector IT opportunity in India' report, more than two-thirds of the total IT spending will be undertaken by the central government, with state government and local governments contributing to the rest of the spending. The report provides a detailed coverage of the public sector market dynamics in India, including buying process, for the key segments like healthcare, education, defense and public safety. "The re-election of the Congress-led UPA government will spur further investments in e-governance projects, including the $5 billion National e-Governance Plan," said Nilotpal Chakravarti, Senior Research Analyst - Vertical Markets at Springboard.
The report also notes that education is the biggest individual market segment in terms of spending with an 11 percent share of total spending; while defense and public safety and taxation and finance round up the list of top three segments. In terms of IT segments, hardware corners half of the overall spending, while IT services has a bigger share than software.
According to the report, the current key challenges IT vendors are facing include slow decision-making process despite the adoption of e-procurement, delays caused by bureaucratic hassles and complex bidding procedures and a price-sensitive market. On the other hand, the end-users (citizens) face challenges in the lack of transparency and efficiency in government services, lack of integration among different government agencies and poor mechanisms of complaint handling. In its future market outlook, Springboard points out the high growth rate for healthcare and education. Other areas of future high growth include public transportation and utilities projects.
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