IT spends to grow only slightly in 2019: Gartner forecast

Updated: July 13, 2019 1:05:55 PM

TCS reported a reasonably good set of numbers in Q4FY20 on the back of expanding enterprise spends on technology-led products or service innovation, customer analytics and insights, and core transformation initiatives.

Analysts in India say the banking vertical is among those that will see smaller spends in 2019-20. (Reuters File photo)Analysts in India say the banking vertical is among those that will see smaller spends in 2019-20. (Reuters File photo)

By Srinath Srinivasan

Gartner has forecast a smaller 0.6% increase in worldwide IT spending in 2019 at a total $3.74 trillion.Even a quarter earlier, the projected growth was 1.1%, indicating the rapid deterioration in the outlook. The weaker outlook comes at a time when Indian IT firms are facing many headwinds including fewer visas than required and the rising costs for employees overseas. Infosys and TCS have been among those impacted by H-1B restrictions.

Analysts in India say the banking vertical is among those that will see smaller spends in 2019-20. “Banking firms expect overall tech spending growth will be lower than last year with additional investments funded by higher cost take-outs. Banks face challenges from a slowing global growth, low interest rate environment and escalation of trade tensions,” analysts at Kotak Institutional equities wrote recently.

According to John David Lovelock, research vice-president at Gartner, the IT spending in 2019 will remain flat, despite uncertainty fuelled by recession rumors, Brexit, trade wars and tariffs. “While there is great variation in growth rates at the country level, virtually all countries tracked by Gartner will see growth in 2019. Despite the ongoing tariff war, North America IT spending is forecast to grow 3.7% in 2019 and IT spending in China is expected to grow 2.8%,” he said.

TCS reported a reasonably good set of numbers in Q4FY20 on the back of expanding enterprise spends on technology-led products or service innovation, customer analytics and insights, and core transformation initiatives. Along with TCS, Infosys and Wipro have been focused on new products and platforms, especially new services to cater to various stakeholders in enterprises. Relatively younger business segments like Media and Communication have been working for these players.

Last year’s trend shows mid-cap companies also increasing their offerings in the form consolidated service and product packages in the same. The enterprise software market will experience the strongest growth in 2019, reaching $457 billion, up 9% from $419 billion in 2018 (see table below). CIOs are continuing to rebalance their technology portfolios, shifting investments from on-premises to off-premises capabilities.

Source: Gartner (July 2019)

 

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