IT services providers are looking at a potential $ 900 billion digital technology-led services market by 2025, as more organisations transform their businesses to cater to customers online. The digital technologies market is expected to grow at 16% every year over the next four years to reach $ 900 billion in financial year 2025 from an estimated $ 490 billion in the current fiscal year, Devang Bhatt, analyst at ICICI Direct Research, wrote in a research note.
Organisations are in the first phase of a multi-year transformation of their businesses as they are being pushed to implement online services faster in the wake of the Covid-19 pandemic, Bhatt said. The pace of digital acceleration has increased after the onset of the pandemic. “We believe we are in the first phase of a multi-year technology transformation phase. In the current phase, enterprises are building a cloud-based foundation that will serve as a resilient, secure, scalable digital core,†Bhatt said
In subsequent phases, enterprises will see new-age technologies like Artificial Intelligence, Augmented Reality, Virtual Reality, data analytics and Internet of Things to be developed around Cloud, leading to a multi-year technology spends, he said. “The pipelines of the major service providers are robust and clients across the board are moving to implement more practical digital initiatives and these initiatives are larger and focus on achieving business results,†said Peter Bendor-Samuel, CEO of IT consultancy Everest Group.
If all technology spending on digital, hardware, software, and services – both internal and external – is included then $ 900 billion is a reasonable estimate, said Bendor-Samuel. The increased spending on digital technologies would be primarily driven by the need for online services. While banks and financial services providers will focus more on improved customer experience and invest in digital channels including omnichannel support that would require increased adoption of conversational AI, healthcare providers will invest in new technologies such as 3D printing for customizing pills for individual patient needs, and blockchain technologies for regulations around track and trace, analysts said.
Connected medical devices would also drive growth for the Internet of Medical Things (IoMT), generating measurable data to improve the speed and accuracy of diagnostics and facilitate in offering targeted and personalized treatment, said Mrinal Rai, principal analyst, ISG. The virus outbreak has essentially accelerated the adoption of these digital technologies, Rai said. “Our experience with clients says that the spending will be higher for the majority of these technologies; however, one area that would receive maximum attention across industries and regions is cybersecurity,†he said.
‘Digital at scale’ initiatives will also result in huge demand for technology and the talent and skills to implement and run them, according to analysts. “The service firms – all of which are dependent on Indian talent – are well positioned to ride this wave to strong growth, with 2021 looking to be perhaps the strongest year as a wave of modernization and digital at scale programmes get kicked off,†Bendor-Samuel said.
Ray Wang of Constellation Research pegged the size of the digital technology market at $ 1 trillion by 2026 and believes digital initiatives would lead to monetization. “Digital monetization includes ads, search, memberships, subscriptions, goods, and services. These are a wide range of initiatives that are key to achieving this monetization, from automation, AI, cloud, data and analytics, virtual and mixed reality, low code/no code platforms, and more,†said Wang.
