Increased technological intensity, induced by the Covid-19 pandemic, will help Indian information technology (IT) services firms tide over the crisis, according to a research report.
The report by stock brokerage firm Motilal Oswal Financial Services comes at a time when IT firms in the country are set to report first quarter financial results, with TCS scheduled to be the first one on Thursday.
The manner in which top tier IT firms, such as TCS, Infosys, Wipro and HCL Technologies, handled the work from home (WFH) requirement for more than 10 lakh employees showed the resilience of the firms, the report said. The companies also ensured productivity, governance and cybersecurity, while maintaining client business continuity, it added.
“Indian IT was more resilient compared to internal IT teams (and) captive offices of clients and some global vendors. While there is dislocation across verticals and slowdown in discretionary spends in the near term, there is going to be higher spending on areas such as collaboration tools, cybersecurity and cloud adoption,” the report said.
The Mumbai-based brokerage firm said that in many verticals, digital channels evolved from being secondary, nice-to-have options to primary channels, and in some instances, the only channels. This has accelerated digital rollouts, it said, adding that the merger and acquisition-led IT integration spends, which are anticipated in the near term, will help IT companies bolster their topline during a tough period.
The firms are focusing on their resilience, the shift in consumer preferences and initiatives such as automation, remote working and legacy technology optimisation, the report said.
“While the next few months should be difficult, these companies are confident that the deep relationships with customers, partners, enviable scale and the diversified mix should help them navigate better. In addition, the steady expansion of the addressable market through the launch of new services, products and platforms should be of help now,” the brokerage firm said.
The $190 billion IT industry is looking at first-ever year-on-year decline in revenue during the current financial year as Covid-19 pandemic wreaked havoc with most major western economies.