Near-term disruption likely in IT sector; FY22 should be normal year: Citi report

By: |
June 16, 2020 6:06 PM

COVID-19 has provided IT services companies with an opportunity to test work from home (WFH) concepts, and innovate on services as well as delivery.

"On Indian IT, we expect near-term disruption but 2021-22 should be a normal year, given the need for technology across segments," it said.“On Indian IT, we expect near-term disruption but 2021-22 should be a normal year, given the need for technology across segments,” it said. (File image)

The Indian information technology (IT) sector is expected to see near-term disruption but the financial year 2021-22 “should be a normal year” given the need for technology across segments, according to a report by Citi.

COVID-19 has provided IT services companies with an opportunity to test work from home (WFH) concepts, and innovate on services as well as delivery.

IT services companies are seeing higher percentage of employees working from home versus earlier without much impact on productivity levels, though trends on this need to be watched out for as things open up, it added.

Clients have also adopted technology at a faster pace than earlier, to ensure business continuity and some of these shifts will likely stay in the post-COVID-19 world, given cost and efficiency benefits.

“On Indian IT, we expect near-term disruption but 2021-22 should be a normal year, given the need for technology across segments,” it said.

The report noted that most businesses were forced to move to work-from-home models as a response to disruption following the COVID-19 pandemic. Businesses on the cloud responded better and that will lead to acceleration in cloud adoption.

A distributed workforce means higher usage of collaboration/communication tools and need for cybersecurity, all areas of big growth in coming years, said the report dated early June.

“(In the) near term, we expect disruption in 1HFY21 (first half of 2020-21) and then gradually normalisation of demand as technology remains critical to businesses,” Citi said.

Overall, COVID-19 is likely to drive behavioural changes that can push more people toward using digital medium for transactions, resulting in a shift away from cash.

Trends that are likely to emerge include digital becoming a paying habit; entry of new non-tech savvy consumers into the digital space; and further progress on financial inclusion, it added.

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