“IT budgets could fall by a minimum of 10%”

Naveen Mishra, Senior Research Director, Gartner, believes that Government, education and e-commerce will recover more quickly from the effect of the pandemic. Despite overall decline in budgets, IT areas such as BCM, remote working, collaboration, automation, AI, ML, Cloud, supply chain, security are expected to see growth in this fiscal.

IBT: What impact is Covid-19 pandemic likely to have on the growth of the Indian IT industry this year? How long do you expect the industry to take in order to recover from its impact?

Naveen Mishra (NM): With a revised spend of US$ 83.5 billion in 2020, overall Indian IT expenditure is expected to register a year over year decline of 8.1%. Devices (PCs, laptops and others) and data centre systems (Server, storage, network and others) will see a double digit decline, while other areas such as software, IT services, etc will see modest decline. 2021 is expected to witness positive growth and it should take mid to end of next year to reach pre-COVID-19 IT end user spend levels.

IBT: How exactly are the demand side factors (eg. global slowdown, drop in fuel prices, drop in international travel and its impact on hospitality sector, and halt in manufacturing activity) going to impact the IT industry in India?

NM: It has a net negative impact on the IT industry. Impacted industries such as hospitality and manufacturing won’t have the same pre-COVID budget to invest into IT. Fuel economies with bad demand scenario will also reduce their all expenses including 2020 annual budgets. Freeze on travel will lead to temporary hold on the digital transformation of airlines. This in turn will have an indirect negative impact on IT services revenue, given that deep consulting assignments will shrink.

IBT: In India, a lot of IT corporations have reduced their major expenses. How will this affect the country’s journey towards the adoption of advanced technologies like AI, robotics and cloud computing?

NM: As per Gartner’s recent webinar polling on April 20, 89% of the polled Indian audience is estimated to reduce their IT budget by a minimum of 10% or more. Indian CIOs have to play the balancing role of accelerating cost optimization initiatives that can deliver on expected cost reduction targets, while staying invested in the strategic (and digital) imperatives of the business. Cloud has earned credibility during COVID-19 and its advancement is expected to advance with specific use cases such as artificial intelligence (AI) and robotic process automation (RPA).

IBT: COVID-19 caught the country by surprise, forcing a lot of IT companies to switch to remote working overnight. Do you think that this WFH culture is likely to continue in the future? Is the country equipped to handle this switch in the long run in terms of having a robust digital infrastructure and data protection policies?

NM: Indian enterprises have embraced WFH positively. In the same polling, 13% of the polled respondents indicated that they will consider permanent WFH after COVID-19 scenario. As part of new normal, enterprises will invest less in offices and incentivise people to work from home. Certain IT services roles will still be fulfilled from offices (those which are governed by strict internal data privacy and protection laws). I am optimistic about the improving state of digital infrastructure.

IBT: What are the major turnaround strategies that would define success for the industry going forward in your view?

NM: Gartner believes that India (like many other countries) is in second stage of this pandemic and the transition from Stage 2 to Stage 3 will define the early signs of rebound. Success of impacted industries and enterprises will be based on their ability to optimize their cost structures and align with revenues coupled with their ability to digitally engage with their customers. Education, Government and e-commerce are expected to quickly recover and transition to Phase-3. These sectors are rapidly working on transforming their customer engagement and experience models, while keeping an eye on current challenges. Financial institutions have already invested in digitization. E-commerce is rapidly aligning with this paradigm now. Education has been transitioning towards a digital pedagogy.

IBT: What opportunities does the crisis present for the Indian IT sector in the coming fiscal? Which sectors are expected to boost their share of revenues and why?

NM: IT areas such as BCM, remote working, collaboration, automation, AI, ML, Cloud, supply chain, security are expected to see growth in this fiscal, despite overall decline in IT spend in 2020. For example, security will grow as enterprises investing in WFH and cloud, need to secure their users and data. AI, ML will help strengthening the touch-less digital engagement for various businesses.

---

Naveen Mishra is a Senior Director, Analyst focusing on Digital Business and its impact on IT infrastructure and data centers. His 2019 research area focuses on integrated systems and Public cloud. Mr. Mishra is writing research papers subjects such as Data centers, public cloud and hyperconverged systems (HCIS). Clients seek his advisory assistance on areas such as hyperconverged systems, data center planning and consolidation, virtualization and Cloud. In addition, Mr. Mishra has the privilege of being inaugural conference chair of the Gartner’s Data Center and Cloud Strategies Summit in India and a regular speaker at Gartner events in the Asia/Pacific region and the Middle East. He is often consulted by CIOs and IT leaders in government and the banking industry while they create digital ready infrastructure.