Slowdown in global IT space bottoming out?

We forecast one more quarter of deceleration, and then a modest uptick in demand. A fun fact is normally these declarations last 8 quarters. We can see that the large enterprises are talking about new initiatives. This is particularly the case in the largest industry sector- Banking - Peter Bendor Samuel, CEO, Everest Group, tells Bizz Buzz

Bengaluru: Will global IT services industry show signs of recovery in 2024? That’s a question to which every stakeholder is seeking answers. Experts said, past trends indicate after consecutive eight quarters of growth deceleration, recovery happens. Going by such trend, global IT services industry may see another quarter of tepid demand, post which uptick is very much likely.

“We are forecasting for one more quarter of deceleration, and then a modest uptick in demand. This is the 7th quarter of declaration and the second quarter of industry contraction or degrowth. A fun fact is normally these declarations last eight quarters. In this case, we are still experiencing enterprise uncertainty and limited discretionary spending. However, in our customer sentiment work we can see that the large enterprises are talking about new initiatives. This is particularly the case in the largest industry sector- Banking. Hence, it would appear that the second half of the year we are likely to see a recovery,” Peter Bendor Samuel, CEO of global consultancy firm, Everest Group, told Bizz Buzz.

Last week, world’s biggest IT services and consulting firm, Accenture has reduced its 2024 fiscal year guidance. For 2024, Accenture now expects full-year revenue growth in the range of 1-3 per cent from earlier projections of 2-5 per cent. Such cut in growth guidance has dashed hope of an immediate recovery.

“The Accenture results and supporting commentary appear to support our thesis. Accenture is guiding down after over estimating growth for the last three quarters,” Bendor Samuel added.

Earlier, JP Morgan report has termed FY24 as a washout fiscal year with only recovery likely in the next fiscal year.

“Investors have assumed FY24 is a washout and shifted focus to FY25, hoping for a rebound,” JP Morgan said in the report.

However, if the industry follows the eight-quarter rule, IT spending is expected to recover in the coming quarters.

The US Federal Reserve has indicated that it will reduce the interest rates three times in 2024. Most experts are of the opinion that such reduction will lead to reduction in cost of capital and free up capital in the hands of enterprises to invest in new technology areas.

Similarly, some segments of IT industry like manufacturing, healthcare and engineering services keep growing despite slowdown pangs.

“We believe that the market is bottoming out, but will remain challenging for at least one more quarter,” Bendor Samuel said.