It will be a mixed bag for Indian IT industry in 2024

A roller coaster ride for the technology world is very likely in 2024. The last two quarters of 2023 saw worsening of demand environment for the IT services companies. Enterprises not only held back all kinds of discretionary spend but also gave less work orders on their existing projects. This apparently led to a fall in revenue growth of most IT firms, which came after two years of rapid growth in the post-pandemic period. Most experts opine that IT spending is unlikely recover till the first half of 2024. The sentiment remains low with less business confidence among enterprises. As a result, they are taking time in deciding the budgetary spend for the year. Sources in the know said that businesses are handing over short-term projects to IT vendors. Budgetary allocation has been frozen for the next two quarters as business houses wait to get clearer picture on growth prospects. Despite such gloomy environment, technology consultancy firm Gartner’s projections on technology spending give some hope of a late recovery.

The worldwide IT spending is projected to touch $5.1 trillion in 2024, an eight per cent increase over 2023 figures. Within the overall technology spending, the IT services segment is projected to grow in double digits. “The software and IT services segments will both see double-digit growth in 2024, largely driven by cloud spending, on which the global spending is projected to increase 20.4 per cent and like in 2023, the source of growth will be combination of cloud vendor price and increased utilisation,” Gartner said. Against this backdrop, 2024 is likely to be a mixed year with low growth during the first two quarters and a recovery towards the end. Despite the buzz around generative AI, the year may not see much business coming from Gen AI segment. However, enterprises will continue to invest in AI and automation to increase operational efficiency and bridge IT talent gaps.

“The hype around GenAI is supporting this trend, as CIOs recognize that today’s AI projects will be instrumental in developing an AI strategy, before GenAI becomes part of their IT budgets starting in 2025,” the Gartner report reasons. Therefore, Indian IT services players will rely on proven technology areas like cloud computing for driving growth. As far as hiring is concerned, it will hinge on demand recovery. If IT firms see technology spend picking up, then there is every possibility that they will initiate the hiring process, all over again. And this is expected towards the end of the year or early next year. Fresher hiring, hence, is unlikely to pick up this year. Meanwhile, as the going gets tough, churning in the higher management is very likely. Last year saw more than two dozen CXO-level persons moving from one company to another. This trend is expected to accelerate further as investors and promoters demand better performance in a slowing market. All-in-all, 2024 may not be a washout like it was in 2023 but a full-throttle recovery is still a far cry.