IT cos unfazed on spend amid new Covid variant

Bengaluru: Despite rising concerns world over on new variant of Covid, Indian IT industry is unlikely to see any fall in the IT spending budgets for next year. Analysts are of the opinion that clients across the world have already been accelerating their digital transformation journey and are not expected to hold back those spending, which are necessary during this time of pandemic.

"Globally, enterprises are moving to cloud and accelerating their digital transformation journey. A lot of pent-up demand has come to the market in 2021 and clients have started spending on digital initiatives. There is no reason why companies will hold back those spending when operational resilience sits at the coreduring this pandemic," Ashis Dash, research analyst at brokerage firm Sharekhan by BNP Paribas, told the BizzBuzz. The last quarter (October-December) of the year is the time period when mostenterprises globally finalize their IT budgets.

Given the new variant of Covid-19, there are concerns that there might be delay in decision-making by companies with regard to their IT spending budgets. In a note, Morgan Stanley has said that currently, there is limited informationavailable on the new variant. "The key factor to watch is both transmissibility and fitness of this mutation. We would expect it to take two weeks to have an initial understanding of the impact of mutation on vaccine efficiency," the Morgan Stanley said in the note. As uncertainty over the new variant looms, industry watchers feel that the change in the nature of expenditure with regard to IT budget is bringing in a paradigm shift inspending decisions.

"Most of the large enterprises especially in Europe have been making a strategic shift towards outsourcing models for saving costs or increasing focus on core areas. Most large global companies are shifting technology investments from capex (capitalexpenditure) to opex (operational expenditure) as it would provide scalability. Technology spend is expected to increase to 5 per cent of enterprise revenue over the next 5-10 years from 2-3 per cent currently, as per McKinsey. Hence, we believetechnology demand is expected to remain strong in the medium term, asinvestments on digital transformation initiatives are not limited to a short period oftime," Brokerage firm Sharekhan said in a note.

Global consultancy firm Gartner estimates that IT services spending would grow by 8-8.5 per cent in the next four years as compared to the average of 4.2 per cent achieved over the past 10 years. Forecasts indicate higher demand for cloud infrastructure services, a potential increase in specialised software, potential investments in transformation projects by clients, and increased online adoption across verticals, experts said.