Teji Mandi: With growing digitalization, outlook looks bright for Indian IT companies
Image by Tomasz Mikołajczyk from Pixabay

Covid 19 prompted global corporations to ramp up their digital infrastructure. Companies are increasing their spending on digitalization. It resulted in a strong order flow for India's IT companies during FY21. Future trends are looking increasingly better with improved spending outlook from the US and Europe.

End users' preference is also tilting towards using digital platforms. It has forced companies to accelerate digital adoption. Improving digital customer experience and enhancing cybersecurity have become more important than ever for them.

Positive spending outlook in US:

The pace of digital adaptation is fastest in the banking and finance segment. The commentary of large US banks, points at the growing need for investment in digital infrastructure. As per the Kotak Institutional report, Citi will continue investing in risk control & compliance and digital capabilities. JP Morgan indicated a $0.9 bn increase in technology expense in 2021. They would be investing in areas like improving a customer’s digital experience, strengthening fraud detection capabilities, and modernizing technology infrastructure, cloud, and data capabilities.

Goldman Sachs is looking to increase its technology budget while saving expenses in other areas. Wells Fargo also plans to decrease overall expenses but indicated a $1.6 bn increase in technology-related investments.

European banks to continue increasing IT spend:

European banks also indicated a strong IT spending cycle going ahead. Deutsche Bank has recently signed a multi-year partnership with Google Cloud. BNP Paribas will also ramp-up its digital transformation programs in 2021. Credit Suisse indicated a commitment to invest in technology across all divisions. Societe Generale is also looking to maintain client's interests through investments in digital banking, cloud infrastructure, data, and Artificial Intelligence.

Strong indications for Indian IT companies :

Given the strong presence in the US and European market, Indian IT companies are perfectly poised to reap the rewards. Indian IT companies have enhanced their competency in the BFS segment and they are increasingly gaining orders in this domain.

The IT companies have seen an increasing number of large deal wins in Q3. With the growing size and value of deals and faster conversion rate, the companies have ramped up their hiring activities.

Major IT services companies are witnessing highest-ever utilization levels. As a result, total headcount addition stood at 39,000 in December quarter. In comparison, there was a net decline of 3,000 employees in the past nine months. Average attrition rate in Q3 was at lowest ever at 11.3% v/s 16.2% a year ago.

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