Challenges for Indian IT may continue, cautions a survey

The Offshore Insights survey says 58 per cent of respondents will wait and watch and invest conservatively on any new business initiatives in the ongoing calendar year.

By E Kumar Sharma  
Thursday, January 24, 2019

Indian IT companies may have sounded positive in their respective management commentaries, a new survey has raised concerns on the year ahead for the IT sector. The survey by an IT research firm Offshore Insights found out that global economic pressure and lull in the market is putting pressure on spending and IT is facing a drop in tech spend.

Sudin Apte, CEO and Research Director at Offshore Insights pointed out nearly 48 per cent of global 2000 were keeping the budget flat around 30 per cent, reducing the budget by 2-5 per cent. Besides, geopolitical concerns, especially trade war kicked in uncertainty on large programs and new investments.

This stands in contrast to what management commentaries and observations by analysts suggest. They feel cautious optimism on expectations that the effects of corporate tax cuts in US, which triggered increased IT spending, was expected to continue well beyond FY18. This will benefit verticals such as retail, communication and most importantly the Banking, Financial Services and Insurance (BFSI) vertical, for which the growth driver would just be the inevitable need to migrate some of the critical systems onto the digital stack. Some of the leading Indian companies like TCS and Infosys have shown deal wins and better performance in these segments.

However, the Offshore Insights survey says 58 per cent of respondents will wait and watch and invest conservatively on any new business initiatives in the ongoing calendar year.

Offshore Insights apparently surveyed about 400 global outsourcing clients during budgeting time (Nov - Dec 2018) and just after budgets are finalised (Jan 2019). These clients, it says, use Indian IT providers.

The survey was with a view to look at the clients' spending plans, the business problems that they intended to solve, the services they intend to buy, the nature of their engagement models, the  providers they work with and their levels of satisfaction.

On the vendor market, Apte noted  that flip flop on traditional vs new models, changing (or up and down of) focus on traditional app work vs digital, AI etc would continue to result in inconsistency of marketing message.

"In addition, ever-eluding M&A scale and benefits restrict large scale consolidation of the industry. To make the situation further challenging, providers' inability of making impactful entry and grow in new or challenging markets (Continent, Japan) don't de-risk American business challenges," he added.

In fact, the note put out by Offshore summed up IT sector's FY20 outlook in the following header: Indian IT Industry Faces Dull year FY 20. The survey, it says, was based on about 400 phone-based interviews of CIOs, Business leaders and their direct reports.

Those in the Indian IT may be hoping that even if the CIOs cut down the budget, the IT spend by the company as a whole and its various wings, may perhaps continue to rise.

Here are some of the key findings shared by Offshore from its survey:

Also read: Oracle accused of paying 25% less, discrimination against Indians

Related Stories

Yesterday's project managers are today's scrum masters; how new IT jobs are replacing old ones
Yesterday's project managers are today's scrum masters; how new IT jobs are replacing old ones
NASSCOM urges government not to generalise 'intermediaries', seeks further clarifications
NASSCOM urges government not to generalise 'intermediaries', seeks further clarifications
HCL Technologies Q3 net profit rises 19% YoY to Rs 2,611 crore
HCL Technologies Q3 net profit rises 19% YoY to Rs 2,611 crore

Latest Stories

RRB Group D results: No date, no time confirmed as candidates keep waiting
RRB Group D results: No date, no time confirmed as candidates keep waiting
'India Size' apparel based on Indians' body measurements to hit shelves soon
'India Size' apparel based on Indians' body measurements to hit shelves soon
Vodafone-Idea plans to sell optical fibre assets, mobile tower stake for Rs 20,000 crore
Vodafone-Idea plans to sell optical fibre assets, mobile tower stake for Rs 20,000 crore
SPONSORED