India's IT and Business Services Market Reaches $14.5 Billion in 2023 Amid Moderation in Growth

In 2023, the Indian domestic IT and Business Services market was valued at $14.5 billion, marking a 6.1% year-over-year (YoY) growth, according to the International Data Corporation's (IDC) Worldwide Semi-annual Services Tracker. This growth rate reflects a slowdown from the 7.4% recorded in 2022, attributed to Indian enterprises' cautious IT spending amidst volatile macroeconomic conditions.

"Indian enterprises focused on cost optimization while prioritizing IT projects with quicker returns," said Harish Krishnakumar, Senior Market Analyst, IT Services, IDC India. "Enterprises continued to invest in areas like enhancing customer experience and improving operational efficiency to gain a competitive advantage by leveraging technologies like cloud, analytics, and AI/ML."

Krishnakumar added that interest in Generative AI (GenAI) will drive future IT service investments. Enterprises will continue engaging with IT service providers to develop potential use cases and proofs of concept (POCs), as well as to transform and manage their complex IT infrastructure and applications.

The IT Services market, which constitutes 78.4% of the IT and Business Services market, grew by 6.6% in 2023 compared to 8.1% growth in 2022. IDC projects that the overall IT and Business Services market will grow at a compound annual growth rate (CAGR) of 7.3% between 2023 and 2028, reaching $20.7 billion by the end of 2028.

IDC classifies the IT and Business Services market into three primary segments: Project-Oriented Services, Managed Services, and Support Services. In 2023, project-oriented services registered the highest growth rate at 6.8%, followed by managed services at 5.8%, and support services at 5.2%.

The Managed Services segment's growth is driven by Hosting Infrastructure Services and Hosted Application Management, as enterprises continue deploying workloads in service provider-owned datacenters and adopt managed cloud services. System integration services also reported strong growth, fueled by digital transformation (DX) initiatives and demand for emerging technologies.

Neha Gupta, Senior Research Manager, Software and IT Services Market, IDC India, highlighted the dynamic nature of the industry driven by AI and GenAI. "The industry today is incredibly dynamic, driven by the advent of AI and GenAI, prompting enterprises to rigorously examine use cases to ensure the delivery of measurable business outcomes," she said.

"As they navigate this landscape, they seek consultative-led approaches and tailored solutions from their IT service providers. Digital execution has ascended to a C-suite imperative, with CEOs becoming increasingly hands-on in digital technology decision-making. In this context, vendors must showcase their ability to overcome challenges and fulfill the value propositions sought by enterprises, positioning themselves as providers of next-generation, comprehensive, and impactful solutions," Gupta added.

IDC's report underscores the importance of ongoing investment in IT services to maintain a competitive edge in the evolving market. As AI and GenAI continue to influence business strategies, Indian enterprises and service providers are poised to lead in the development and application of these technologies, ensuring sustained growth and innovation in the sector.