As corporates spend more on cloud-based technology enablers, Indian IT services companies should see an acceleration in structural growth over the medium term, according to a report by Motilal Oswal Financial Services.
“This shift in the business model should lead to a substantial increase (5 per cent revenue v/s 3 per cent historically) in the tech budgets of enterprise clients, adding 5-6 per cent incremental growth for the industry, “ the report said.
“Growth in the cloud would anchor this phase of technology spending, which would see a mid to high teen growth rate. Along with continued double-digit growth in digital services, this should more than compensate for the decline in traditional services,” it added.
‘TCS biggest benefactor’
The report said that TCS is among the best-positioned companies to benefit from this structural spending uptick. “With the industry seeing supply-side challenges, TCS has been the industry bellwether in managing these challenges over multiple business cycles. We see this as a key factor for TCS to be able to post sustainable growth,” Motilal Oswal Financial Services said.
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Covid-19 has structurally accelerated the growth profile of the IT services industry as corporates are embarking on a multi-year upgrade cycle. “We are seeing cloud usher in a new cycle of technology spending -similar in potential to the ERP wave of the 2000s - creating significant growth opportunities for IT services companies. Cloud adoption/migration is a $300-350 billion opportunity for IT services providers,” the report said.
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