Business

Still under denial, Indian IT industry faces a dull FY20, finds survey

Updated : January 21, 2019 10:50 PM IST

The FY20 will be a dull year for the Indian information technology industry as it's in denial of challenges and not accepting inability to compete in the sector, a survey said on Monday.

The Budget Time Survey Insights exclusively accessed by CNBC-TV18 said global economic pressure and lull in the market is making 48 percent of global 2000 companies to keep their budget flat and nearly 30 percent firms to reduce their IT budget.

Up to 58 percent of companies participated in the survey said they will wait and watch, and invest conservatively on any new business initiatives in the current calendar year as geopolitical pressures, especially trade war kick in uncertainty on large programmes and new investments.

Further, overwhelming majority of companies put renewed focus on cost cutting after spending decent in the last couple of years.

According to the survey, tech spend (gross) dropped to 2.9-3 percent from more than 3.8 percent in 2018. The infrastructure spending on data centre/IT will remain flat and high possibility of backend system market shrinking by up to 5 percent.

Coming to software growth, the survey said it will narrow from whooping double digit (10-10.5 percent in 2018) to modest range of 7.5-8 percent and IT services (overall) growth too will reduce from 5.5 percent plus pace of growth to about 4 percent.

However, 2019 will be a year when cloud spend will exceed first time spend on non-cloud investments and purchases.

The survey said offshore penetration would stay muted by 33-34 percent. In lower estimates, it may even reverse to below 32 percent (currently it is at 33 percent). The Offshore Insights predicts that IT services (export) growth will be between 7.5 percent to 8 percent in current fiscal (FY18-19).

The survey also predicted that IT services growth (export) will be flattish in best case or reduce slightly most probably in next year (FY2019-20) and will be in range of 6 percent to 8 percent.

The protection of business profitability is a core concern of 62 percent of client companies and 18 percent ranked it as secondary, the survey said.

Better synergy and collaboration between business functions for higher operations efficiency was top priority of 54 percent of IT heads and 20 percent listed these areas in top three tech goals for their companies.

Top objective of new IT investments and new projects are innovating client engagement model and preparing to better compete against incumbent as well as new entrant. Up to 70 percent of clients listed new projects as number two IT goal in the survey.

With 80 percent of companies mentioning cost cutting as the top priority, ensuring speed of implementation (40 percent) and adopting change in business process or model (36 percent), were other top IT objectives, survey said.

Right skilling, nearshore and closer to client delivery locations are top two investment areas for the vendor companies.

The Budget Time Survey Insights covered 408 interviews of IT and business decision makers across North America (185), Europe (123) and Asia Pacific (90).

Still under denial, Indian IT industry faces a dull FY20, finds survey

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