"India stands as the second-largest software market in Asia/Pacific (excluding Japan and China) (APEJC) and also managed to keep its growth pace stronger than some of the major economies in the region," said Mohsin Baig, market analyst, enterprise software, IDC India.
According to IDC’s latest Worldwide Semiannual Software Tracker, 2H19 (July–December), India’s software market grew by 16.0% year over year (YoY) in 2H19 compared to 2H18. For 2019, the India software market achieved a revenue of US$6.48 billion.
What’s been growing
IDC classifies the software market into three primary categories: applications, application development and deployment (AD&D), and systems infrastructure (SI) software. Applications contributed 61.0% to the overall market revenues, followed by AD&D and SI software with shares of 21.6% and 17.4%, respectively, in 2H19.
As per IDC’s current estimates, engineering applications, collaborative applications, customer relationship management (CRM) applications, enterprise resource management (ERM) applications, and data management software are the leading software segment in terms of revenue. The collaborative applications remained the highest growth segment with 47.3% YoY during 2H19.
Baig attributes the growth to demand for cloud application, application modernization, increasing IT spend by the small and medium-sized business (SBM) segment, cloud-native software start-ups, and government initiative for data localization.
Drivers of growth
The majority of India enterprises have digital transformation (DX) initiatives in place or plan to implement in the next 12–24 months. These initiatives are tied to their enterprise strategy. Modernizing legacy applications, using as-a-service model, and harnessing emerging technologies, such as Internet of Things (IoT), automation, and augmented/virtual reality (AR/VR), to enhance customer and employee experience are some of the key DX initiatives, which are acting as the driving factors for the software market in India.
That’s the good news.
Worldometer reports 529,577 COVID-19 cases as of June 28, 2020 01:14 GMT.
According to Statista, India’s quarterly GDP is estimated to decline over 9% between April and June, a decrease of 5% from the beginning of 2020. The COVID-19 lockdown which started on March 25 has restricted the movement of 1.3 billion people.
Adjusted numbers – some good news despite the bad
IDC estimates India’s overall software market to grow by 3.8% YoY in 2020 and grow at compound annual growth rate (CAGR) of 7.6% during 2019–2024. There is a significant decline in the overall software market because of the COVID-19 pandemic, forcing enterprises to relook at their IT spend.
Enterprises at this point are focusing on operational resiliency, ROI, business continuity plans, and parking aside all noncritical projects for the next three to six months at least. However, there has been an increase in spending on remote work enablement and cloud adoption.
There will be heightened demand for collaborative applications, application platforms, security software, system and service management software, and content workflow and management applications.
The ongoing pandemic has pushed many enterprises to implement work-from-home (WFH) policies for the first time, and this has created a demand for collaborative applications as well as an increase in security threats.
IDC expects a rise in demand for technologies such as VPN, authentication, endpoint security, encryption, and application security. In the application platform segment, enterprises have mostly prioritized their spending based on the criticality of applications or processes as the enterprises focus on automation, demanding application agility, and speed to market.
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Segments such as robotic process automation (RPA) and model-driven application platform (MDAP) are expected to witness growth in the spending.
According to Shweta Baidya, senior research manager, enterprise software and IT services, IDC India, the outbreak of COVID-19 has resulted in the partial/complete transformation of working models with the use of collaborative platforms.
“New software implementations, upgrades, or migrations will be delayed by a few quarters, unless extremely critical. Because of the supply chain disruptions, especially in the manufacturing and retail sectors, IDC expects heightened adoption of supply chain management digitalization and optimization solutions, to strengthen operational resiliency and business continuity plans in the likelihood of a relapse of the crisis," she concluded.
