Domestic pie set to increase for IT cos

(Picture used for representational purpose only)
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(Picture used for representational purpose only)

Highlights

Covid pandemic has brought in a paradigm shift in our lives. While Work from Home (WFH) has emerged as the prevalent operating model globally, enterprises have embraced digitalisation in a big way to reach out to their consumers.

Covid pandemic has brought in a paradigm shift in our lives. While Work from Home (WFH) has emerged as the prevalent operating model globally, enterprises have embraced digitalisation in a big way to reach out to their consumers. Such rapid transformation has resulted in increased spend on technology. Therefore, IT services companies and a host of other businesses providing technology-led offerings have gained from this spend.

According to Global consultancy firm Gartner, worldwide IT spending will reach $4.2 trillion in 2021, an increase of 8.6 per cent over last year. In 2020, spending was badly hit due to the pandemic and stood at 0.9 per cent. Gartner also predicts that India's IT spending is projected to be around $93 billion in 2021, an increase of 7.3 per cent from last year.

The rising spend on technology by Indian enterprises amid digital transformation drive throws open unique opportunities for Indian IT services companies. Traditionally, domestic software companies are dependent on exports with US and Europe being the two key markets. While the US accounts for more than 50 per cent of revenue contribution, domestic IT firms are drawing around 20-30 per cent of their revenues from Europe. In comparison, most large IT firms hardly draw more than 5-7 per cent of their revenues from India. However, experts are of the opinion that the share of India's contribution in revenues is likely to rise in coming years. And the current pandemic has set the ball in motion in this regard.

Such optimism is driven by a couple of factors. Firstly, the pace of internet penetration is rising very fast in India. Market research firm Statista said internet penetration rate in India reached 45 per cent level in 2021 from a mere four per cent in 2007. Such an 11-fold rise in the internet user base reflects that consumers' affinity to use various digital platforms is high. Therefore, more businesses are reaching out to consumers through digital interfaces. The trend has already been reflected in the increased reach of ecommerce players in far-flung areas of the country in this pandemic. As organisations spend more on technology, business opportunities for Indian IT firms are all set to rise. Similarly, the Indian startup ecosystem is coming of age with close to 50 unicorns operating in the country. Most of these startups are technology-powered startups that are spending billions for coming out with innovative solutions. Starting from etailers to edtech companies; from ehealth to fintech firms, all are taking the help of technology to tap the new consumer base. Such an app-heavy environment is creating new business opportunities for Indian IT firms.

Last but not the least is the increasing digitalization of government wings. The Indian government is embracing technology to serve the citizens in a better way. Income tax & GST filings, passport applications, postal services and many more government services are being enabled on technology platforms. Therefore, the Indian government is emerging as one of the biggest spenders in technology. This opens new vistas for Indian IT firms.

As the pace of digitalisation grows, Indian IT services firms are likely to draw a lot more revenues from India itself in coming years as their domestic business pie is set to increase. It is definitely good news for the IT industry which is looking out for new geographies to shore up its revenue base.

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