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Indian IT leans on govt spends, managed services as deals slow

While short-term projects are getting stalled, the managed services segment, which fetches significant revenue for service providers, has still not been impacted by the outbreak.

, ET Bureau|
Last Updated: May 08, 2020, 09.14 AM IST
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Information Technology spending this year will likely fall as organisations trim investments in technology in the wake of the Covid-19 pandemic-led slowdown, analysts said.

IT advisory IDC estimates that domestic IT spending this fiscal year will decline 4.5% to $55.5 billion.

This will be on the back of a “double whammy of sharp fall in device shipments and organisations limiting investments for critical demand," Shweta Baidya, senior research manager, IDC India, told ET.

In 2019, overall IT spending, including hardware, software and IT services, recorded more than 9% growth.

However, government agencies and enterprises are continuing to invest in software and IT services, helping the market remain stable.

“Spending in software IT services is still stable and will see tepid growth compared with last year. Software growth is so far driven by security applications, automation tools, collaboration tools etc. On the IT services front, we have not seen a major impact as of now,” Baidya said.

While short-term projects are getting stalled, the managed services segment, which fetches significant revenue for service providers, has still not been impacted by the outbreak.

Technology services providers and hardware companies did comment.

Microsoft said it was focusing on helping clients build economic resilience using new-age technologies.

“During an unprecedented time like this, technology plays a critical role in building economic resilience and supporting business continuity. As a platform and tools provider, we are committed to helping organizations of all sizes build the digital capability required to keep their businesses moving forward,” said a Microsoft spokesperson.

Other analysts, however, said hardware deals were still being signed, but not at the same pace or size as last year.

“Deals are slow, the overall size of the market will shrink. Software is doing well. Many hardware deals have been signed,” said Sanchit Vir Gogia, chief executive of Greyhound Research.

According to IDC, the IT spending environment would vary based on the pandemic situation over the next two months and beyond.

For example, if the situation deteriorates, spending by the managed services segment will take a hit.

Enterprises are spending money on critical IT needs, while the government is spending more on citizen services, Baidya said.
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