Are the good times returning for IT services?
If recent deal wins by top-tier players are anything to go by, IT services companies are in for better times ahead. Gartner’s forecast of growth in global tech demand with ‘gold rush’ spending on AI, only adds to the optimism. Mint explains:
1 Do record deal wins signal better times?
In its recent earnings, Infosys reported its highest ever large deal total contract value (TCV) at $17.7 billion for FY24, with 52% being new. This was despite a challenging macroeconomic environment and slowdown in discretionary spending. Wipro’s order book was up over 16% at $4.6 billion as compared to $3.9 billion in FY23. TCS raked in a record $13.2 billion worth of orders in Q4 alone. K. Krithivasan, CEO & MD, TCS, noted that FY25 will be better than FY24 as major markets will start turning around in some time. Client spending could increase post the US presidential elections later this year.
2 Is global IT spending increasing?
Worldwide IT spending on software, services, data centre systems, devices etc is expected to total $5.06 trillion in 2024, an increase of 8% from 2023, according to analyst firm Gartner. This is an increase from the previous quarter’s forecast of 6.8% growth and puts worldwide IT spending on track to surpass $8 trillion well before the end of the decade. IT services alone will grow by 9.7% to $1.52 trillion this year. In the domestic market in India, Information technology spending is estimated to record a doubledigit growth of 13.2% in 2024, totalling $138.9 billion, up from $122.6 billion in 2023.
3 What will be the impact on Indian IT exporters?
Gartner expects Indian IT services revenue to grow by around 10% this year. Naveen Mishra, VP, team manager, Gartner, says, “Global enterprises are lagging behind in IT skills. They will partner with IT services companies to do projects and bridge the gap.” Also, GenAI sets a strong foundation for growth. Domestic market spending on technology will also increase in 2024.
4 Will fresh and lateral hiring return?
TCS, Infosys and Wipro saw a fall in their combined workforce by almost 64,000 in FY24. While data points to improving demand, companies remain cautious on hiring. Wipro is fulfilling its previous hiring commitments. Infosys is yet to decide on fresh hires and TCS aims to add around 40,000 in FY25. Global Captive Centres (GCCs) offer better opportunities as they expand their presence in India. Gartner sees companies re-skilling to meet demand. It sees demand for data scientists and prompt engineers.
5 How is the domestic market shaping up?
In India, IT spending got a boost post pandemic, with firms pushing digitization. This will continue with new opportunities in enterprise digital transformation, improving operational efficiency, better customer experience, deployment of cloud, analytics and other services. AI offers growing opportunity in the local market, but the AI focus is on planning adoption rather than execution. Large and mid-level firms and startups are looking at AI to enhance user experience. This will lead to a bigger domestic IT spend.