CIOs Expect Slowdown in India to End by Fourth Quarter

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A majority of Indian CIOs expect the economic slowdown in India to end by the fourth quarter of this year, according to a poll by IDC India published Monday.

IDC India believes that while the slowdown may be over by the end of this year, a revival in IT spending may have to wait until after the second quarter of next year.

"Even as the economic fundamentals start improving, the effects of the slowdown, the anxiety and the wait-and-watch approach of CIOs will continue for some time," said Kapil Dev Singh, country manager of IDC India, on Monday.

The IDC study during February and March covered 467 CIOs from mid-size and large enterprises across 18 industries. Around 66 percent of those polled said they expect the slowdown to end by the fourth quarter.

For now, the outlook continues to be grim.

Hardware and software sales are expected to drop by 20 to 40 percent this year compared to last year.

Enterprises are cutting back on new projects and focusing on the maintenance of existing IT setups, IDC said. Of the total planned IT expenditure for 2009, enterprises plan to spend 20 percent on new purchases and reserve the balance for managing their existing setups, it added.

The CIOs surveyed by IDC said that virtualization, unified communications, business intelligence, data warehousing, Software-as-a-Service (SaaS), and open source software are priority investments this year.

The slowdown in IT spending this year is likely to directly impact hardware vendors and off-the-shelf software vendors, IDC said.

IT services vendors are likely to be the least impacted if they focus on providing services like infrastructure management, business transformation and business continuity, IDC said.

Other research firms have also forecast slower growth in the domestic market. IT spending in India is forecast to increase by 5.52 percent this year, research firm Gartner said in January. This growth in IT spending will however be lower than the 13 percent growth last year, and a 16 percent growth in 2007, it added.

Some customers have, however, awarded large contracts this year. Indian outsourcer HCL Technologies, for example, has bagged a US$76 million contract from the country's National Insurance Company.

Wipro, another large Indian outsourcer, won a US$236 million IT outsourcing contract from Employees State Insurance Corporation, a government organization that runs a social security scheme.

Indian outsourcing companies are focusing more aggressively on the Indian market as growth in IT spending in key markets like Europe and the U.S. flattens.

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