IT spending by India’s Public Sector reached an estimated USD 3.1 billion in 2008, and is further expected to grow to USD 5.1 billion by 2011, signaling a Compounded Annual Growth Rate (CAGR) of nearly 19 percent between 2007-2011, says the latest research study by Springboard Research. 

Springboard’s report ‘Public Sector IT Opportunity in India’ adds that more than two-thirds of the total spending will be controlled the federal government in India, with states (22 percent of spending) and local governments (11 percent of spending) controlling the rest. 

The Springboard report provides detailed coverage of the public sector market dynamics in India including the buying process, for key segments like healthcare, education, defense and public safety. 

“The re-election of the Congress-led UPA government will spur further investments in e-governance projects, including the USD 5 billion National e-Governance Plan,” said Nilotpal Chakravarti, Senior Research Analyst - Vertical Markets at Springboard Research. “Also, the government’s strong commitment to improve the delivery system in India by leveraging ICT will propel IT investments in the public sector, and will offer significant opportunities for IT vendors eyeing this high-potential space.” 

Projects like national ID cards, defense tactical communication systems and providing PC and broadband access to schools across the country are predicted to act as further drivers to the growth of India’s public sector IT spending. 

The report also notes that education is the biggest individual market segment in terms of spending with an 11 percent share of total spending; while defense, public safety and taxation and finance round up the list of top three segments. In terms of IT segments, hardware corners half of the overall spending, while IT services has a bigger share than software. 

The current key challenges IT vendors are facing include: slow decision-making process despite the adoption of e-procurement, delays caused by bureaucratic hassles and complex bidding procedures, and an especially price-sensitive market. On the other hand, the end-users (citizens) face challenges due to the lack of transparency and efficiency in government services, the lack of integration among different government agencies and poor mechanisms of complaint handling. 

In its future market outlook, Springboard points out the high growth rate for healthcare and education respectively. Other areas of future high growth include public transportation and utilities/public works projects.