Competition may shatter India's manufacturing dreams: Survey

Even though technology giants like Microsoft, Intel and Cisco systems have committed multi-billion-dollar investments to the country, the government's plan of making the country a premier manufacturing hub may still be a distant dream, says a recent report by Forrester.

While outsourcing, telecom and financial services have fuelled much of India's current economic growth, manufacturing is expected to have a tough year ahead, a business technographics survey data by Forrester said.

The survey cited increasing competition from China and other Asian manufacturers, and also the country being hobbled with low investment, weak infrastructure and rigid labour laws, as reasons.

Forrester surveyed 703 technology decision-makers in companies in the Asia Pacific. Of these, 128 were from Australia and New Zealand, 60 from India, 150 from Japan, 100 from China, 80 from South Korea, 40 from Taiwan, 60 from Hong Kong and 85 from member countries of the Association of Southeast Asian Nations.

"More than half of the Indian respondents to the survey came from manufacturing, giving us a view into the business sentiment and IT investment plans of this less visible sector of the Indian economy," said Sudin Apte, country manager - India, Forrester.

The survey which formed the basis of the report India IT Spending Outlook 2006: Focus On Manufacturers by Simon Yates with Sudin Apte, John McCarthy, and Thomas Powell noted, "Forty-one per cent of Indian respondents felt 2006 looked like an extremely challenging year."

However, there is good news for the IT industry, "As more than two-thirds of respondents plan to increase their IT spend this year. While half plan to increase investments in new IT technologies, more than half plan to increase spending on PCs and workstations with equally aggressive spending planned for network, server and storage hardware. Only 10 per cent reported their intentions to decrease spending on IT this year," said the report.

The trends in IT spending revealed that Indian companies have a global outlook. "As almost half plan to increase spending on Web applications. Again security is a key issue with eighty per cent of Indian enterprises focusing on security as an IT priority. On the other hand, over one-third of Indian enterprises plan to reduce spending on packaged applications like Siebel and SAP."

The key drivers for IT are infrastructure consolidation, aligning of business objectives, increasing efficiency.

"More than two thirds of Indian firms point to IT infrastructure consolidation as a priority in 2006, aligning with the top business priority of improving IT efficiency and the desire to better measure IT's effect on business performance," said the report.

Among the preferred vendors, the report stated, "HP leads at 31 per cent for computing hardware, IBM and Cisco are also potential beneficiaries with 24 per cent and eight per cent each respectively."

And when it comes to software, it isn't a surprise that Microsoft is the preferred vendor with thirty-nine per cent of the Indian firms investments.