IT firms may grow faster in 2020 on rising client spend

Indian IT services companies are likely to grow at a faster rate next year as IT spend by clients globally is projected to rise at an increased pace during this period. According to global research firm Gartner, total spend in the IT services space is likely to grow 5.5 per cent in 2020, and will touch $1.08 trillion as compared to 3.7 per cent rise estimated for 2019.

The report said this year’s slowdown in spending won’t stretch as far as into 2020, despite concerns over recession and companies cutting on discretionary IT spending. Demand will mostly be driven by firms catching up on Cloud spending, it added.

Reports suggest the global Cloud computing market size for 2018 was $36.7 billion, which is anticipated to touch $285 billion by the end of 2025, a CAGR of 29.2 per cent during this period.

“The first phase of Cloud adoption is now over. Companies were initially testing to see how the benefits were playing out, but now they are getting on to mainstream. The sizes of the deals are becoming larger. That is going to be one of the strongest drivers for improved growth of IT services from next year onwards,” said Harit Shah, IT analyst at Reliance Securities.

Digital transformation will be on a rise because many small and medium players are going to increase digital spend and traditional manufacturers will adopt technology in order to compete with new-age firms.

“Overall the digital trend will continue to accelerate and every company will grow digitally as it directly impacts company's products, services, business model and revenue, which will translate to larger IT spending,” said Pareekh Jain, founder of Pareekh Consulting and an IT outsourcing advisor.

While the US is leading in Cloud adoption, the UK and China are also fast catching up, giving a boost to total Cloud spending universe, Gartner said. “The US is leading in Cloud adoption and accounts for over half of global spending on Cloud. The country directly behind the US on Cloud spending is the UK, which only spends 8 per cent on public Cloud services. An interesting outlier is China that has the highest growth of Cloud spending of all countries,” the report said.

On overall IT spending, which includes data centre systems, enterprise software, devices, communication services apart from IT services segment, is also likely to grow at a healthy pace in 2020. Total IT spend is projected to touch $3.87 trillion next year, growth of 3.7 per cent as compared to a rise of 0.4 per cent in 2019.

Apart from IT services, enterprise software will be another growth area, which is projected to grow at 10.9 per cent to touch $507 billion next year. Even communication services, devices and data centre systems will clock growth in 2020 after witnessing a shrinkage in 2019.