Covid-19 may slow India IT and business service growth to 6.5% in 2020: IDC

The Indian IT and business services market is expected to grow annually by 6.5 per cent to reach  $14 billion by December 2020, with some impact from the ongoing Covid-19 pandemic, according to research firm International Data Corporation.  

The IT and business services market grew by 8 per cent annually in the second half of 2019, according to IDC Worldwide Semiannual Services Tracker-2H19. The Indian software services industry body, National Association of Software and Services Companies (Nasscom), stopped providing a current year growth projection for the industry from 2019. 

In FY2019-20, the IT-BPM (domestic and overseas) grew 7.7 per cent. 

According to IDC's research, the IT Services market contributed 76.3 per cent of the IT and business services market in second half of 2019 and grew by 8.5 per cent year-over-year during the same period. 

Further, as per IDC, the IT services market will grow at a compounded annual growth rate (CAGR) of 7.6 per cent between 2019-2024, to be valued at $14.6 billion by the end of 2024. The COVID-19 pandemic has resulted in a slowdown in the overall economy, and also in the IT Services market, IDC said. 

While new contracts and renewals in IT Services are likely to be affected during the pandemic,  a host of other segments may represent higher revenue generating opportunities in calendar year 2020, IDC said. These include consulting services, modern collaborative applications, managed security services, network management services and hosting services. 

In the second half of 2019, the higher growth markets continued to be hosting services (applications and infrastructure hosting), which is expected to continue in 2020, on account of increased remote business functions being carried out across sectors.

"In CY2020, the focus of IT Services vendors during the pandemic has shifted to addressing the challenges of remote connectivity and collaboration, connecting with their ecosystem of customers, suppliers and partners, while also ensuring business continuity, building organizational resilience, and being more adaptable. Digital technologies are the core in ensuring business continuity in this challenging time, with cloud and AI being the technology forerunners,” said Garima Goenka, Market Analyst, IT Services, IDC India.   

Amid the Covid-19 outbreak, project-oriented services, such as consulting, custom application development, systems integration, etc. are expected to reduce steeply in the short-term, while managed services, such as application management, hosting services, IT outsourcing, network management etc. are expected to reduce only marginally in the short-term. Further, it is expected that helpdesk support services will witness an upsurge for emergency support extended to remote working professionals.

"The crisis has accelerated the adoption of digital technologies to keep the lights on amidst the COVID-19 pandemic. Enterprises that are ahead in the digital maturity curve will clearly be better equipped to handle the crisis and will further invest in technology upgradation to address the changing customer demand. Long-term managed services contracts are expected to continue despite lock downs, as IT vendors find innovative ways to continue servicing their customers. Vendors have created emergency response teams and are also leveraging automation tools and AI to provide uninterrupted service to their employees and customers for business continuity plans," said Shweta Baidya, Senior Research Manager, Software and IT Services, IDC India.