News & Analysis

India’s IT Spending to Grow in 2021 Amid Uncertainty


India’s IT spending is forecast to grow at 8.8% in 2021 to Rs. 273,776 crore, despite uncertainty and challenges, revealed Coeus Age, a research organization.

The country’s IT spending dropped 1.8% in 2020 due to the COVID-19 impact, de-growing for the first time ever, according to Coeus Age’s annual research report titled: ‘Enterprise Business and IT Priorities 2021’.

CEO priorities in 2021

The research report based on inputs of 96 CEOs and 110 CIOs/ IT Heads of large and medium sized Indian enterprises reveals that 48% of the CEOs expect uncertainty to be present through 2021 and another 21% think it may have subsided but may take time to go away. This has implications for the growth scenario as more than half the respondents believe that growth at present seems uncertain or will take at least 6 months to return.

This thinking is only natural, given that a vaccination program will also take 6 to 9 months to cover the entire population. And then there are scares of new variety of viruses emerging. All put together, the environment will remain uncertain for a large part of 2021.

But Coeus Age’s research shows that nearly 50% of the CEOs are prioritizing digital transformation to emerge stronger in the crisis. Hence, even with business scenario remaining uncertain, businesses will continue spending on IT and Digital. As Dr Kapil Dev Singh, CEO, Coeus Age said, “Every industry has been negatively impacted by the COVID crisis; IT industry has been no exception. But the impact has been less severe given IT’s importance in helping businesses and individuals survive the crisis. Though the overall spending has marginally dipped in 2020, and the business outlook for 2021 looks uncertain, IT spend is expected to bounce back with 8.8% growth’, commented.”

Rise in digital IT spending

The IT spend by the enterprises (business and government) dipped by 3.5% in 2020, primarily due to lower spending on traditional IT.

The traditional hardware and software products such as PC, server, storage, networking, and in-premise enterprise software spend has been severely hit in 2020 due to COVID. It de-grew by 10.7% and is expected to remain under pressure in 2021 too.

Enterprise spend on digital technologies has saved the day as it grew by 18% in 2020, though at a slower pace than previous years. It is expected to be strong in 2021, growing at 23.4%.

In fact, adopting digital (56%), ensuring security and BCDR (49%), and IT operations automation (46%) emerge as top 3 enterprise priorities for 2021, Coeus Age report revealed. As Singh said, “The COVID crisis has catalyzed the digital transformation drive of the enterprises. Business leadership is now convinced on the need of revamping their approach to survive in the new normal that has emerged and digital has been accepted as an important cornerstone of their strategy.”

The top three enterprise priorities for 2021 of adopting digital, ensuring security and IT operations automation are reflection of the environment that businesses are operating in. The triple imperatives of agility, sustainability, and efficiency with inherent tensions among them has been brought to fore by the COVID crisis.

In another report published by Forrester in 2020, VP and Research Director Ashutosh Sharma, Forrester forecasts that in 2020, India will have the slowest tech spending growth in at least a decade on account of sharp economic disruption due to the global pandemic.

In the worst scenario, the analyst firm predicted that tech spending might contract by up to 4.8% in 2020 with only a mild recovery, to 1.4% growth, in 2021.

He recommended that success will come to those that achieve the dual objectives of managing costs and selectively investing in making their operating models more adaptive.

To achieve these complementary objectives, analysts expect CIOs to invest in employee safety and remote work enablement, drive customer-centric investments to chase growth, focus on adaptability via digital initiatives and reduce spending on large transformational initiatives.

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