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India’s information technology services companies are likely to be in a better position to deal with the global economic downturn than many other sectors as the impact of IT in the post-epidemic world may be limited, say industry experts.
As many companies recognize the importance of new digital investments, even if they decide to cut the IT budget, the sector may not see a decline like the one following the 2008-09 global financial crisis, they added.
“A few years ago, (especially covid) showed that it would not be possible without digital presence. If companies have to deal with inflation or other economic crises, they have realized that investing in digital innovation is a matter of hours,” said Jayanth Kolla, founder of a research company. market Convergence Catalyst.
“Things will be very clear in the next 2-3 months, but we can expect a 10-15% decrease in overall technology usage,” said Kashyap Kompella, founder and chief executive officer, RPA2AI Research.
That being said, IT service officials feel the rising heat of inflation, tensions and fears of a recession. While analysts say the economic downturn in the US may not have far-reaching effects on the IT budget, many companies are in a state of alert and observation.
The possible decline in IT costs is reflected in the reduction of the number of IT companies in India through measurement firms. For example, American investment bank JP Morgan in May reduced the number of IT service executives from neutrality to low weight, followed by Japanese financial services group Nomura lowering prices for Indian IT majors with lower revenue.
The reduction has prompted the sector, which was expected to reach $ 227 billion this year, according to industrial organization Nasscom, to launch cost-cutting measures.
IT firms have not yet used the playbook slowdown yet, but some “multi-billion-dollar IT projects” by large companies may show a decline, Kompella said. However, this will not have much impact on everyday technology. spending, such as IT and cloud storage, he added.
Kolla actually sees a “chance in trouble”.
While firms will not reduce the technology budget, they may reduce travel costs and limit funding for more experimental projects in AI (artificial intelligence) and AR / VR (the unpopular reality taxpayers we see and virtual reality), and instead focus on basic offerings, such as clouds. . business service planning, cell phone development and statistics, and job creation, ”said Kolla.
“Crypto-related technologies, which are still trying to establish a solid foundation, may find it difficult,” Kompella said. “Business automation technology that can bring immediate benefits will be preferred over R&D-enabled operations projects,” he added.
“In the past, the recession was followed by a period of high growth for Indian IT businesses operating abroad. For example, during the global financial crisis of 2008, Indian IT executives saw annual contract prices exceeding the previous years, with increased government spending, health care and manufacturing industries, “said Anurag Dua, partner, EY India .
“There may be a reduction in spending in the short term, which will have an impact on a few digital projects, but new forms of offshoring will attest to higher growth,” he added. “With many Indian IT firms providing services to dying businesses in all sectors including government, manufacturing, banking and health care, the IT services business will remain strong despite the economic downturn.”
Siva Prasad, chief operating officer of labor company TeamLease Digital, said major IT companies are building a strong pipeline in the coming months and there are no signs of declining employment.