Indian tech spending is expected to grow 8.2 per cent in 2022, Forrester forecasts in a new report “Asia Pacific Tech Market Outlook By Country For 2021 And 2022.”
This is one of the highest growth rates in the Asia Pacific region.
“Although the second wave of Covid-19 dampened the pace of India’s recovery in early 2021, economic activity picked up in the second half of the year thanks to a sharp drop in case numbers and progress made on vaccination. That said, energy shortages, rising inflation concerns, and a possible resurgence of Covid-19 could make its recovery a bumpy one,” the report said.
In the broader Asia Pacific region, Forrester expects that “continuous improvement in vaccination rates and the progressive reopening of economies” will lead to more sustained tech market growth in 2022, at par with or higher than the growth they typically recorded before the pandemic. The APAC tech market is forecast to grow by 6.2 per cent in 2022 in US dollars, with Southeast Asia and China (apart from India) having the strongest growth.
In 2021, as per Forrester estimates, the overall APAC tech market grew by 6.4 per cent while India’s tech spending grew 9.8 per cent.
Software outperforms
Tech hardware spending picked up in 2021 while software performed best in the overall tech market. After cutting hardware spending in 2020, Indian tech leaders will spend 7 per cent more on it in 2021. Communication equipment also witnessed a strong 6.9 per cent growth in 2021 with telcos expanding their investment in and trials of 5G. Software was the only spending category that did not take a significant blow during the 2020 contraction, and we expected its growth to jump to nearly 15 per cent in 2021, Gartner said.
Recovery will be consolidated in 2022, as per the report.
In 2022, India’s spending on software is expected to yet again outperform, forecast to grow at 14.6 per cent in 2022, slightly lower than 14.8 per cent estimated in 2021, followed by IT outsourcing (with hardware maintenance) which is expected to grow 11.2 per cent. IT consulting services is expected to grow 9.8 per cent in 2022.
Tech consulting and tech outsourcing are expected to continue their rapid growth in 2022 “as tech leaders resume transformation initiatives and reboot outsourcing or IT consulting deals,” as per the report.
Following 2021’s spending spree, growth in hardware and communication equipment will dip from 6 per cent or 7 per cent in 2021 to 4 per cent or 5 per cent in 2022.
“We expect demand to be high in infrastructure modernisation, business process automation, and tech strategy consulting services. We also expect Indian firms to seek the help of third-party IT service providers to set up agile development, DevOps, or continuous integration and delivery capabilities,” it said.
Further, India’s privatisation plans have also boosted sentiments.
“India is betting on digital infrastructure and talent. India’s recent privatisation reform plan in a range of sectors including aviation and banking should provide the funds needed to rebuild the economy and bump up infrastructure spending. This move toward privatisation has added to the bullish mood of tech investment in both the public and private sectors,” it said.
Intend to spend high in the corporate sector
Separately, as per another new report Indian CIOs Must Make Future Fitness A Strategic Imperative, the intent to spend on IT across corporate India rose faster in 2021 than the global average. This comes as firms focus on “pragmatism, revenue growth and market performance”.
The report is based on the Forrester Analytics Business Technographics Priorities And Journey Survey, 2021 that was fielded from November 2020 to January 2021. This online survey included 21,130 respondents in Australia, Canada, China, France, Germany, India, the UK, and the US from companies with two or more employees.
In the Forrester survey, 53 per cent of Indian purchase influencers said that their firm spent more on tech products and services in 2020 than in 2019, while 75 per cent said their firm would spend more in 2021 than in 2020. 42 per cent expected spending to increase by 5-10 per cent.
“CIO agendas were characterized by accelerated digitisation leveraging emerging technologies like cloud and analytics and a sharper focus on innovation,” the report said.
Additionally, interest in automation and emerging technologies also hit a new peak.
“Technologies such as robotic process automation, digital process automation, and AI-based products and services have traditionally enjoyed lukewarm growth among mainstream (i.e., non-IT or IT-enabled services) firms due to prevalent lower labour and wage costs,” it said.
“However, the disruption spurred companies to pivot toward automation, cloud, and AI capabilities to improve the quality, scale, and reliability of customer-facing services. This marks a major digitisation milestone and a broader forcing function for process modernisation across the ecosystem,” it added.