IT sector likely to get a booster shot as firms plan to spend more

Having been able to brave pandemic-triggered business challenges to a large extent, Indian IT and IT-enabled services (ITeS) sector is staring at a favourable business environment. 

According to a report by industry body Nasscom, IT spending is expected to get a further boost as a majority of the clients would reprioritise spending to strengthen digital capabilities and cloud migration apart from increasing the overall IT budget.

According to the report, titled Future of Technology Services – Navigating the New Normal, 87 per cent of the client chief investment officers (CIOs) said business digitisation and digital channels would be their focus areas in the next 12-18 months. According to the report, 47 per cent are expecting to embark on cloud transformation to stay afloat in the new business environment. 

With accelerated digital adoption, about 80 per cent of the near-term spending may be driven by Covid-19-resilient digital offerings. This is also expected to result in a consolidation of the vendors. Sixty per cent of the clients are looking for vendor consolidation, the report said, while another 23 per cent were planning to selectively add specialist partners (service providers). 

“The report suggests that the world has leapfrogged on digital adoption by three to five years in the past nine months. Agile companies have made the most by rewiring their operating models,” said Noshir Kaka, Senior Partner and Global Leader, Analytics, McKinsey & Company, which did third-party research and analysis on the report.

Nasscom President Debjani Ghosh said the next 10 years would be fundamentally different. “To ensure faster recovery, companies need to develop a two-part response to the evolving landscape: near-term plan of action and long-term strategic rethinking.”

One of the major shifts that the industry is expecting in coming days will be in areas of “future of work” as well as the delivery model, which will not be dependent on any location or geography but can be executed from ‘any shore’. 

While there is a high share of remote working currently, the future of work will be a hybrid model. “It may not be the same set of people always working from home or always working from the office. 

There will be a lot of flexibility,” said Nasscom Chairman U B Pravin Rao, who is also the chief operating officer of Infosys.

The obvious advantage would be the tapping of talent from anywhere and everywhere. “It will help in terms of diversification of talent and getting more women in the workforce in tier 2/3 cities and decongesting cities,” said Rao. 

In terms of employment opportunities, the IT industry is expecting to end the year with a net addition to the workforce. “There has been a focus on optimising headcount and at the same time bringing in (newer) talent. So, overall the year will be a net hiring year for the industry,” said Sangeeta Gupta, senior vice-president, Nasscom.