IT Cos Set For Better Growth Level In 2025

We believe that the market has hit the bottom and there will be a modest, but uneven recovery in 2025. We expect a moderate recovery in the modernization spending and an increase in the labour arbitrage cost cutting in Europe. All that said, we don’t see a strong recovery - Peter Bendor Samuel, CEO, Everest Group, tells Bizz Buzz

Bengaluru: Next year is likely to be a better year than 2024 for the global IT services industry though the growth recovery will be uneven and modest. After two years of slump, IT services companies have shown some improvement in their performance in the last quarter (July-September), indicating the slowdown bottoming out.

Analysts are of the view that better demand environment in the all critical BFSI (banking, financial services & insurance) and technology verticals will supplement growth prospects of IT firms including the Indian ones.

However, the demand recovery will be a far cry to be termed as strong, the analysts added.

“We believe that the market has hit the bottom and there will be a modest, but uneven recovery in 2025. We see BFSI and Technology (verticals) leading the way from an industry perspective. The eight quarters in a row of deceleration for tech services are close to a record and we see firms needing to make business adjustments leading to more tech services spending. We expect a moderate recovery in the modernisation spending and an increase in the labour arbitrage cost cutting in Europe. All that said, we do not see a strong recovery,” Peter Bendor Samuel, CEO of global IT consulting firm, Everest Group, told Bizz Buzz.

As next year is likely to see modest recovery, it is likely to create intense competition within players, which are vying for increasing their market share. Such competitive intensity will lead to further pressure on pricing, which has already been seen this year. Despite all the publicity and commentary from management about the potential of artificial intelligence (AI), this new technology area will fail to be a revenue spinner in 2025.

“We expect the digital modernization movement to modesty rebound with a small sprinkling of AI. However, we have yet to see the large compelling use cases for the much-anticipated AI boom and don’t expect that AI lead transformation will contribute significantly to growth in 2025,” Bendor Samuel said.

Especially, analysts pointed out that enterprises are increasingly wary over generative AI projects and seeking clear return on investment on such projects. They pointed out that the initial euphoria over GenAI PoC (proof of concepts) is slowly leading to hard-nosed calculation over their return potential.

“The market is becoming Gen AI pilot weary and reluctant to continue the torrid pace of PoCs. Increasingly, we see significant discipline being exercised to ensure investments have clear RoI (return on investment). This combined with a paucity of credible large AI use cases will mean that the much-anticipated AI wave is still some years out in the future,” Bendor Samuel said.

Meanwhile, experts also pointed out that among geographies, while the US economy is likely to drive growth, Europe is slowing down, which can pose growth challenges in some verticals.