India's retail industry to fuel IT market growth: study

By Enterprise Innovation Editors | Nov 25, 2009

IT growth in India’s retail sector is projected to grow at a CAGR (compounded annual growth rate) of 23% during the period of 2008-2012, but will see a bit of a slowdown to 22% in 2009, down from 43% the year prior, new statistics from Springboard Research reveals.

In terms of core IT categories, software is estimated to grow at a CAGR of 28% for the period under review, while hardware will grow at 19%. Findings of this report are based on Springboard’s interviews with leading IT vendors operating in the retail sector and 152 CIOs from both large and mid-sized retail companies across India.

“Although the recession has affected retailers’ profitability, it opens a window of opportunity for IT vendors as retailers turn to technology to address the challenging economic scenario,” said Nilotpal Chakravarti, Senior Research Analyst at Springboard Research. “Many retailers are eschewing curtailing their long-term IT projects, while they remain cautious with short-term IT spending and new investments,” Mr. Chakravarti added.

Inventory Management is Key Focus Area
Nearly half of the CIOs in the retail sector interviewed by Springboard indicated large format stores/hypermarkets as the top business opportunity in the sector, while competition is named as the biggest business challenge by a majority of the CIOs. Inventory management emerged as the top strategic IT focus areas for the CIOs interviewed, followed by Supply Chain Management (SCM). Enterprise Resource Planning (ERP) topped the list of business applications in terms of actual deployments in the last 24 months.
According to Springboard’s data, POS is the top preferred store solution that Indian retailers have deployed in their stores. As compared to western markets, self-checkout terminals and self-service kiosks are still in the nascent stage.

Vendors Must Get Pricing Right
Springboard’s interviews with the CIOs revealed that a large number of retailers mentioned price as a key determinant in external IT vendor selection, while strong service and support came in the second place on the list of priorities. Other influencers like vendor reputation, existing relationship, etc. rank much lower in the priority hierarchy. Springboard also found that local IT vendors have a sizeable foothold in the retail space because they provide low-cost, industry-specific solutions.

According to Springboard’s data, SAP, Microsoft and Oracle hold the largest market share in the Indian retail sector, while HCL is the leading local vendor in the retail space. IBM is also named as among the leading vendors in this space.