Technology research and advisory firm Information Services Group lowered its forecast for global deals activity this year as the new coronavirus pandemic impacts trade worldwide. And this may not bode well for India's IT sector.
The U.S.-based firm expects annual contract value for global managed services—that offer additional support in terms of networking and hardware—to decline 7 percent in 2020 against a 3.2 percent growth projected earlier, according to a media statement.
The advisory also forecasts the global “as-a-service” segment, which offers services and products on the cloud, to grow at 12 percent now against 23.5 percent estimated earlier.
“We saw strong growth in the first two months of the quarter, but a noticeable tail-off in March as the reality of the Covid-19 pandemic hit the market,” Steve Hall, president of ISG's Europe, Middle East & Africa region and partner (digital advisory services) at the company, said in a statement.
The advisory expects 60 percent of its enterprise clients to delay their planned tech spending for at least 90 days in response to Covid-19 concerns.
The novel virus has so far infected more than 1.5 million people worldwide, prompting nations to seal their borders to curb its spread. The International Monetary Fund has already declared a recession.
Impact On India IT Sector
Bank of America Merrill Lynch
- ISG's statement implies a 10 percent decline in global deal activity in 2020, with the fall being most pronounced in the quarter ending June.
- Travel and hospitality are expected to be severely impacted because of the virus.
- Given the timeline of abatement of the virus “still remains fluid”, it may be early for Indian IT firms to provide updates on client spends and budgets for the year.
- Annual guidance from the likes of Infosys Ltd. and HCL Technologies Ltd. will be “accompanied by assumptions around removal of lockdowns and extent of economic impact”.
Also Read: Three Sectors Remain Unscathed (So Far) From Covid-19 Hit
CLSA
- There could some pressure on pricing as well since about 60 percent of clients have requested 20-30 percent discount over the next two to four months.
- IT services providers are currently evaluating these requests on a case to case basis.
Morgan Stanley
- IT companies' delivery centers are struggling to adapt to work-from-home and could be monetised.
- About 40 percent of these centers are present in India.
Also Read: In Charts: India IT Sector During The 2008 Crisis and Now
Axis Capital
- There may be near-term headwinds but the Covid-19 crisis is likely to accelerate digital initiatives and adoption of cloud and automation services.
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