Higher digital spends likely to boost IT budgets in 2019, say experts

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Budget 2019 : Clients of big information technology (IT) services companies are likely to increase their budgets this year, after not doing so for the past few years, claims experts and analysts tracking the sector. Discretionary expenditure in new technologies, needed to stay relevant, is going to be the source of the budgetary expansion.

According to experts and analysts, most outsourcing deals in 2019 will be led by new technologies, which will be bundled with traditional services. This will lead to a bigger size of outsourcing contracts.

A recent report by Gartner claims global IT spend would cross $1 trillion (Rs 70.5 trillion according to exchange rates on Wednesday) in 2019 — a growth of 4.7 per cent. This is good news for the export-driven IT-services industry in India, which is now better placed to corner a larger share of this augmented budget after increased investments in expanding their digital as well as consulting capabilities.

“At this time, we are seeing a continuation of last year’s robust spending on IT-related investment in the first two quarters of this year. Most of the demand will come from verticals such as energy and engineering apart from insurance, consumer-packaged goods, and retail,” said Peter Bendor-Samuel, founder and chief executive officer of global research firm Everest Group.

After remaining flat, IT spending had picked up momentum in the second half of 2018.
Bendor-Samuel, however, said though the banking, financial services and insurance sector would continue to spend IT-services players might not benefit, thanks to “insourcing” — clients using technology in-house at their offshore centres.

Despite the projection of a slower pace of growth, analysts said the slowdown would be mostly in legacy side of business. Those companies with higher digital capabilities would bag more number of contracts. “The big change in 2019, compared to 2018, is that adoption of cloud technology and everything as a service,” said Sanjoy Sen, doctoral research scholar at Aston Business School, UK. He said despite every solution being used as a service, IT spends are set to grow.

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