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As companies rethink spends, IT braces for weaker India numbers

Amid a slowdown, companies are holding back on technology spends, which will impact their growth in India.

Updated: Oct 18, 2019, 08.49 AM IST
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In May, Gartner estimated that India’s end-user spending on IT services could grow by 9% to $15 billion in 2019.
BENGALURU: IT companies are bracing for slower growth in their India business, as companies hold back on technology spends to adjust to a slowing economy.

While the country does not constitute a large proportion of IT companies’ revenue, it is nevertheless a key growth market, with firms such as Cognizant and Tata Consultancy Services (TCS) looking to expand their business locally.

“The volatility in India has been because it is project related, but there is also a slowdown in the private sector business,” TCS CEO Rajesh Gopinathan told ET.

TCS’ strategy in the country hinges on bringing innovative solutions from its global portfolio to Indian companies. In the second quarter, TCS’ India revenue grew 7.7%, slower than average. TCS’ revenue from India clocks in at more than $1 billion per year, and the company had previously said a majority of it comes from the private sector. TCS also counts parent entity, the Tata Group, as one of its major clients. In the previous financial year, TCS received about Rs 2,600 crore in revenue from its parent, ET had reported earlier.

In May, Gartner estimated that India’s end-user spending on IT services could grow by 9% to $15 billion in 2019.

IBM, which receives over $5 billion in revenue from the India market, said that the economic slowdown is likely to impact technology spending for some sectors.

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“The automotive sector is in slight trouble here — in the current cycle, there is a bit of a lag there. Depending on the imperative of the industry, that could decide whether they want to invest in IT now or wait before they go in,” said Kamal Singhani, managing partner, global business services, IBM India/ South Asia.

However, some sectors such as telecom need to invest in technologies to stay relevant, he said.

Earlier this year, IBM signed a $700-$800 million deal with telecom operator Vodafone and it is working with Airtel on a blockchain based do-not-call register.

On Thursday, TCS disclosed that its deal with Vodafone-Idea had been extended for another five years. It did not disclose the terms of the deal.

Infosys said that even though the size of its India business was small, it would remain selective in taking up deals. “India business is a small percentage... we are selective in what we want to do. So, from that perspective, we have not really seen any slowdown, but we will continue to be selective in what we want to bid for and execute,” said Pravin Rao, the Bengaluru-based company’s chief operating officer.

Infosys’ cross-town rival Wipro, however, remains optimistic about technology spending in the country. “India is a big market and everybody is spending on technology. So, slowdown is not an issue for Wipro. Our issues are Wipro-specific. We have brought in global expertise in delivery, like using Designit. That whole restructuring is a tough thing to do. It is also repositioning of the brand,” said Abidali Neemuchwala, the firm’s CEO.

The slowdown in spending is restricted to some segments that are facing economic pain, while others still continue to invest, analysts said.
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