Modest growth rate in store for IT firms

Though Indian IT firms have not given estimates for revenue growth for 2024, most global IT firms have done so. And those growth estimates indicate that subdued demand environment will continue - Pareekh Jain, Founder, Pareekh Consulting, tells Bizz Buzz

Many experts have pinned their hopes on a likely recovery during the second half of 2024. But the recent revenue projections of Accenture have dashed such hopes

Bengaluru: Indian IT industry is staring at a pre-pandemic era growth level with most companies likely to post mid-single digit revenue growth in the current fiscal. Even industry experts opined that growth in the next financial year (FY25) may not be very different from the ongoing fiscal year as indicated by the annual guidance of global IT firms.

“Though Indian IT firms have not given estimates for revenue growth for 2024, most global IT firms have done so. And those growth estimates indicate that subdued demand environment will continue. So, for Indian IT industry, it may be back to 2018-19 period when mid-single digit growth rate was the norm,” Pareekh Jain, an IT outsourcing advisor and Founder of Pareekh Consulting told Bizz Buzz.

Just before the pandemic (2018-19 period), growth in the Indian IT industry had slowed down with large firms posting low single digit rise in their revenues. This had led to consolidation in the industry with some players getting acquired. The industry had also seen exit of some large investors.

However, demand for IT services surged just after the pandemic when remote operations became the new normal. Such demand scenario had pushed revenue of large companies to touch double-digit, while many mid-tier firms had done better.

The 2023, though turned out to be a washout year as IT spending came down amid high inflation, wars among major nations and cost escalation owing to over-spending on technology during pandemic times.

Many experts have pinned their hopes on a likely recovery during the second half of 2024. But the recent revenue projections of Accenture have dashed such hopes.

This week, Accenture has reduced its 2024 fiscal year guidance, dashing hopes of a late recovery towards the end of the year. For 2024, Accenture now expects full-year revenue growth in the range of 1-3 per cent fromearlier projections of 2-5 per cent.

“We see pressure in the volume of our smaller deals and that’s why we have the 1-3 percent guidance for the full year,” Chief Executive officer, Julie Sweet said to investors.

According to Accenture’s management, clients are unable to allocate extra budget as overallspending is constrained. That’s tied to the uncertain macro that’s putting peopleconstrained,” Sweet has added.

Accenture result is seen as a precursor to Indian IT firms’ growth prospects in coming quarters. “The reduction in Accenture’s full year guidance indicates that there is no material improvement in the demand environment in clients IT spending decisions. The company’s growth guidance includes contribution from inorganic acquisitions indicating that the headwinds in organic business persist,” ICICI Direct said in a note.

Apart from Accenture, other global firms like Cognizant and Capgemini have also given lower revenue growth guidance for 2024.

France-headquartered Capgemini expects its revenue to remain flat or at best grow three per cent in constant currency terms this year compared to 4.4 per cent reported in 2023.