India’s IT services market hits $14.5 bn, digital transformation fuels growth

New Delhi, Oct 28: The India IT services market grew 6.1 per cent year-over-year (YoY) to reach $14.5 billion in 2023 despite slower IT investment recovery, according to a new report on Monday.

While IT investments showed a slower recovery compared to the previous year, digital transformation (DX) initiatives and the increasing complexity of IT environments will continue to drive market growth, according to an IDC report.

While 2023 saw a slowdown in IT investment, 2024 will be all about growth fuelled by digital transformation (DX).

“The increasing complexity of IT ecosystems — blending on-premises, private, and multi-cloud environments — along with surging demand for AI and GenAI solutions, stronger security measures, and automation, will drive the market forward,” said Neha Gupta, senior research manager, software and IT services market, IDC India.

Service providers are at the heart of this evolution, enabling businesses to manage complex infrastructures, responsibly harness AI, and deliver enhanced customer experiences, Gupta added.

According to the report, the leading tech companies capitalised on increased digital spending across enterprises in India, driving significant revenue growth. Performance was bolstered by strong demand in cloud, AI, security, and application modernization, with notable success in the government sector and telecom and manufacturing verticals.

India-based companies prioritised strong analytics, automation, and cognitive enablement capabilities, including GenAI, from their next-generation IT service partners.

"In today's digital business environment, technology vendors must be forward-thinking innovators, utilizing technology to create new digital value and keep their customers ahead of the curve," Gupta said.

According to the report, the GenAI solutions market is experiencing a surge, presenting numerous opportunities for vendors, particularly in productivity-related use cases such as report summarization, job description generation, and code creation.

The market is expected to evolve, initially focusing on business function use cases, where AI models are integrated with enterprise data for specific functions like marketing, sales, service, and procurement.