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Gartner, the research firm, has recently forecast that global technology spending may expand by 3.2 per cent in 2014. That may not seem an exciting number, but it is good news for Indian IT.
Typically, when global tech spends pick up, the outsourcing pie, which Indian biggies depend on, expands 3-5 times the global IT spends. Last year, Indian IT exports were up 13 per cent (according to trade body Nasscom) despite global IT spends creeping up only by 0.4 per cent.
What this suggests is that Nasscom’s projection that India’s IT sector will grow by 13-15 per cent this fiscal year (2014-15) may be understating it. The breakdown of Gartner’s numbers reinforces bullish prospects for Indian players, especially software firms that rely on offshoring. Global IT spending is set to grow at 4.6 per cent in 2014, compared to just 1.8 per cent last year, while enterprise software spending is expected to grow at 6.9 per cent. This indicates that the traditional application services deals, which make up the bread and butter for Indian software companies, will continue to contribute handsomely to their growth.
The expected pick-up in enterprise software spending meanwhile suggests that global companies are also beginning to loosen up their purse strings on discretionary spending, which have been muted in recent years. This revival has also been signaled by Infosys’ numbers in the last couple of quarters.
The other data point is telecom services returning to growth for the first time in many years, though the growth is a small 1.3 per cent. Most large software firms in India, barring TCS, have struggled to grow in the telecom vertical in the last two-three years. The revival in this segment augurs well for top and mid-sized playerssuch as Tech Mahindra.
Top software players such as TCS and Infosys had indicated a soft fourth quarter, but now it appears that this may only be a mild seasonal blip. In the recent quarters, previous laggards such as Infosys and Wipro too have delivered growth rates close to outperformers such as TCS, HCL Technologies and Cognizant, indicating an industry-wide acceleration.
So, what’s all this to you? If you are one of the many thousands employed in Indian IT or BPO companies, it may mean better prospects and pay packets. Of course, a thriving IT sector would have many positive spin-offs for the faltering economy too.
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