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According to a report by the credit rating agency, CareEdge, IT spending can be expected to be resilient in the near to medium term. In addition, broad trends in demand outlook in the Indian IT industry along with technology-driven spending will continue during FY23, says report.
The digital transformation initiatives grew manifold during the pandemic, with a much greater realisation of the need for digitization and data-driven solutions, and this trend is expected to continue going forward. This augurs well for the IT services industry.
According to CareEdge, cloud computing, artificial intelligence, cybersecurity, data analytics, and IoT among others are expected to be the key focus areas going forward.
However, a slowdown in the key markets of the US and EU, uncertainties arising from the global macro-economic slowdown and currency volatility can potentially play spoilsport with respect to corporations spending on technology, and may lead to postponing some of these spends.
With significantly increased employee attrition levels across most players, there has been a surge in employee costs. This is the single largest expense item for the sector, and will potentially impact the operating margins of the players, the report said.
Client Additions
Overall, the Indian IT industry witnessed a strong client addition during FY22 supported by vendor consolidation, and various initiatives like cloud adoption and digital transformation agendas by clientele across various verticals. The industry has been re-aligning its offerings to cater to the evolving requirements of its clients with respect to the emerging technologies in order to become more effective in the dynamic business environment.
The IT companies expanded their products and service offerings to cater to the new demands of an expanding set of clients with a focus on delivering customer-centric solutions. During FY22, IT majors have seen a strong progression of client addition in existing as well as new geographies and verticals. The client wins in the higher deal-size buckets have significantly increased, the report said.
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