The India IT services market is forecast to reach $10.2 billion in 2013 a 12 percent increase from an estimated $9.1 billion in 2012, according to Gartner, Inc.

India's IT services market offers significant opportunities for IT services providers because of the increasing needs and wants of IT buyers. As companies grow in size and scale, the market is likely to see larger IT services deals with more- sophisticated deal engagement practices. This market has a critical mass that is worth tapping into and has the potential to expand further with "as a service"-type service offerings.

“Although India's IT services growth rate has slowed in the past two years, the rate of growth remains relatively high,” said Arup Roy, principal research analyst. “Although India's GDP growth has slowed in the past year because of global economic challenges, India's GDP growth fundamentals are on relatively solid footing, driven primarily by growing domestic consumption. For this reason, GDP growth is expected to remain steady in the longer term.   Services spending on the transparency and efficiency-related projects from the government, such as governance projects Unique Identification Authority of India and Accelerated Power Development and Reforms Programme, are expected to drive service spending.”

Government infrastructure projects will strongly drive IT, in conjunction with the expansion of the financial services and manufacturing sub-sectors. All industry verticals have a high propensity and willingness to spend on IT given the growth story across the board.

The India domestic IT services market is fast transitioning, with profound changes in buying needs and behaviour. The number, size and scale of IT services deals are increasing. Buyers are becoming more sophisticated in their sourcing practice and vendor management. Deals are transitioning from first- to second-generation outsourcing. The Indian market of the future is likely to see efficiency and enhancement-based deals in energy and utilities, transportation, education and parts of government bodies. Likewise, the market is likely to see more transformation deals in banking and insurance, telecom, retail and government.

“Service providers wishing to enter into the Indian market, must factor in the rising infrastructure and IT labour rates, coupled with high attrition levels, in their planning exercise for their operations costs, as well as local regulations and bureaucratic challenges in establishing and operating businesses in India. Leveraging Tier 2 and Tier 3 cities (Kolkata, Trivandrum and Lucknow, for example) for Indian business is a tactic that could be used in conjunction with the mainstream delivery from Tier 1 locations,” said Roy.