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Study bullish on infotech budget

New Delhi, Oct. 17: India continues to be one of the highest IT spenders and forms 3 per cent of the total IT spending world-wide, which is expected to double to 6 per cent in 2003.

According to a survey conducted by DSP Merrill Lynch, spending with Indian firms is rising the fastest among all outside service categories. “Our survey shows project pricing modestly down in India, in line with US-based consulting, over the last six months. But 62 per cent of the CIOs polled have shown flat to higher pricing. This is in line with our cautious outlook on pricing, though in recent months, we have been indicating stabilising pricing,” says the DSP Merrill Lynch report released here today.

“We have introduced an India-focused section for the last two years. This report also covers 50 CIOs from major US IT user organisations, both commercial (Fortune 1000) and government,” the report said. The report observes that overall, the global IT services environment is weak. CIOs have reported uncertainty, cautious spending and delay in contract awards.

“IT budgets are expected to grow 3 per cent in 2002, slightly below our last survey. There will be a modest spending growth this year, but an improvement over 1 per cent growth in 2001. It also appears that a weak economy is built into current spending levels,” it states.

The latest CIO survey reinforces that India is gaining from work being shifted from high cost contractors in the US or Europe. Thereby, it represents a significant and rapidly growing sector within IT spending. About 37 per cent of CIOs indicate spending with firms in India will expand the quickest compared with others.

It is important to note that the percentage outsourced to India appears low, because of the vast untapped user organisations and services spend. Of the total CIOs surveyed, 67 per cent had no outsourcing to India this year, but in 2003, some CIOs intend to start outsourcing to India and the percentage of CIOs with no India outsourcing is likely to drop to 56 per cent in 2003.

“A weak economy is already built into the current spending levels and thereby, we expect no drastic cuts from current levels, perhaps a levelling off,” the report notes.

IT spending is weaker in Europe and is expected to grow only 1 per cent in 2002.

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