The global industry of information technology (IT) services may see a decline in overall revenue by up to 3 to 4 percent, as a slowdown of businesses induced by the coronavirus pandemic takes a toll on the entire world. The projection has been made by market analysis and research firm IDC, which states that the impact on the overall IT industries of the world will compound as the year unfolds, in which time the exact extent of the impact on India will also be clear. Going by these projections, and taking into consideration how significant the IT industry is for India, the slowdown in overall IT expenditure across the world may cost India billions of dollars.
The IDC analysis states that while hardware businesses will face the maximum impact, the trickle down effect will also eat into the software and services industries across the world. According to the India Brand Equity Foundation, the IT and BPM (business process management) industries of India accounted for $177 billion in FY19, of which $137 billion came solely from exports, or overseas projects undertaken by Indian IT giants. While it is difficult to project how the IT industry may grow or shrink in overall volume through FY20 (due to the coronavirus outbreak towards the end of the financial year), this figure itself gives us a rather worrying estimate.
With India being a major contributor to worldwide IT services, a decline of close to 4 percent in global IT spends is bound to have an impact on India as well. Not taking India's own IT sector into account, at the estimated rate of decline, India stands to lose over $5 billion in IT services exports itself. This can be a significant juncture to consider, as a global economic slowdown has officially pegged the world to be in recession, with many executives undertaking salary cuts and thousands losing jobs across the world and through industries. With a large section of non-resident Indians being engaged in IT services with global industry giants, this can be a major cause for concern.
"While the actual impact of COVID-19 on India market will be evident by middle of 2020, we expect a slowdown in terms of discretionary IT spending, contract renewals and new deals getting signed as enterprises recalibrate by cost structure in coming months. Existing project executions have also taken a hit due to travel restrictions in place. IT vendors will be forced to relook at their growth targets for the rest of the year as the impact will become evident in the next few quarters," said Sharath Srinivasamurthy, research director of enterprise solutions at IDC, in a statement.
With alarming projections showing what it may cost the world in the long run, it remains to be seen how global IT majors such as TCS, Cognizant, Infosys, Wipro and other stakeholders in the industry innovate and readjust to new economic parameters in order to weather the storm. With the entire technology industry taking a major hit, the blow on IT services can be heavier than preliminary estimates.