Growth prediction for IT services industry 13-15% for FY15

Spends on offshoring and new tech up; budget cuts down significantly

The $108 billion Indian IT services industry is expected to have a growth rate of 13-15% for FY15, up from 11-12% registered for FY14. The prediction based on the client budget spends, in the first client survey carried out by analyst firm Offshore Insights.

The survey conducted across 410 business decision makers from markets like US (200 participants), Europe (100) and APAC (100), said that client budget spend are not only better than last year but budget cuts that were in the range of 14-15% has come down to about 5% to single digits. The survey was carried in the months of November, December and January.

“Almost two-third of the respondent base sounded much more positive. Compare this to scenario in June of 2013 when almost 50-55% were not confident of spends. Within six months we have seen improvement of almost 10%. This is a huge improvement in sentiment,” said Sudin Apte, research director and CEO, Offshore Insights.

Apte also said that one of the biggest positive that the survey said was sentiment on budget cuts. “Over the last two-three years clients have been talking about budget cuts of 14-15%, this has come down significantly to single digits. It is down to just about 5% and lower,” he added. Add to this share of offshoring spends is expected to increase. When compared to December 2012 offshoring to December 2013, the offshoring share is up by almost 10%.

The survey also found that clients are spending more on emerging technologies such as mobility, cloud, social and analytics. “About 70% of clients in the survey said that their budgets are either similar or marginally up by say 4-5%. But budgets in verticals such as retail, hi-tech and portal companies is up in double digits,” said Apte.

Tech spends are being driven by application modernization and transformation, deploying analytics, mobility, big data and social platform for large business processes.  Survey also highlighted that the traditional work of application development and maintenance is also undergoing shift.

“If you look at the budgets there are two parts—about 80-85% is going for maintenance and tweaks, but even the traditional ADM work has changed. And about 12-15%, which is a sizeable chunk is being earmarked for new projects,” said Apte.

The survey however also stated that all providers are not equally geared for tapping this opportunity as skills required are very diverse and different than age old-work coming to Indian providers.

“There is a clear polarization happening between companies. What is required is good business understanding, well entrenched in the account, good experience and presence in BPM, SI and programme management and deep pockets to invest upfront if required. TCS, and Cognizant are well placed compared to others,” he said.