IT Budget Expected To Accelerate In Calendar Year 2024, Says JPMorgan

Clients' IT budget is expected to rise to 4.1% in calendar year 2024 from 2.7% in CY23, but could slow down to 3.5% in CY25, according to a JPMorgan report issued on Tuesday.

The brokerage recently surveyed 166 Chief Information Officers, with an average information technology budget of $739 million. It includes 54% of enterprises with more than $50 million in annual spending.

Expectations Of CIOs On IT Spends In CY24

Among the surveyed CIOs, one-third of them expect to delay or defer their IT purchases to the second half of the calendar year 2024. The deferment would largely be because of uncertain macroeconomics, geopolitics and the US election.

One-fourth of them expect to accelerate on tech investments, which would largely be led by catch-up on technology, while the balance expects no change to the pace of IT spends.

Client Spending With Existing Vendors 

The survey suggested that 8% of CIOs using Tata Consultancy Services Ltd. as a vendor will increase their IT spending with them. It reported a similar number for Cognizant Technology Solutions Corp. and Capgemini at 11% and 10%, respectively, while for Infosys it was flat.

In contrast, 9% of CIOs using Accenture Plc as their vendor would want to reduce their IT spend with them, it said. Another risk to Indian IT firms comes from in-sourcing, where 41% of the CIOs surveyed would want to increase in-house spending.

Talk Of The Town: Generative AI

Spending on generative AI, as a percentage of clients' budgets, is expected to go up to 14% from the current 5% over the next three years.

While the majority of CIOs are not altering their spending, one third of them are reprioritising IT spending away from legacy and system upgrades to fund Gen AI investments.

JP Morgan's Preferred picks 

The brokerage house prefers defensive stocks with dividend support, such as TCS and Infosys and growth outperformers like Persistent Systems Ltd., Coforge Ltd. and L&T Tech Services Ltd.