Tech spend in India to shrink by 4.8% if lockdown gets extends beyond June

If the lockdown continues beyond June, tech spending in India may contract by up to 4.8% this year, with only a mild recovery to 1.4% growth in 2021, a new report said on Friday.

The sudden sharp contraction and slow recovery will entail contraction across all tech spending categories in 2020 and make even slow growth in 2021 arduous, according to the report by global market research firm Forrester.

"A real risk of tech spending contraction looms large. An inability to contain the outbreak in a timely manner will cause serious damage to economic activity in India due to reduced consumer spending and labor productivity," said Ashutosh Sharma, VP and Research Director, Forrester.

In an optimistic scenario, where India comprehensively rescinds its lockdown in June and resumes full-tilt economic activity by July, businesses and governments in India will spend a bit more (1.2%) on technology in 2020 than 2019.

The lower growth, however, will affect all spending categories but hit hardware, software, and IT consulting services the hardest.

"IT outsourcing will remain resilient. Most CIOs that we spoke with described the current state of tech activity as "suspended animation." They have put their existing IT activities on hold and plan to recalibrate spending plans frequently," Sharma emphasised.

An early recovery would put India Inc. in a good place to resume its tech spending in 2021, rising by 8.4% over 2020.

CIOs and business technology budget-holders need to strike a balance between the dual objectives of conserving cash and investing in adaptability to help their firm not just survive, but also adapt and grow, according to the findings.

"Most firms we speak with have come to terms with the unprecedented nature of the pandemic and expect to be dealing with a different world once it's over. Some firms are beginning to reprioritize initiatives and conserve and reallocate their IT budgets," the report mentioned.

The pandemic will serve as an eye-opener for leaders rooted in traditional, conservative approaches to IT as they see their more digitally mature peers respond to changing environment better.

In the medium to long term, the pandemic will force Indian firms to become lean by moving away from manual work and expensive real estate and embracing digital and automation, said the report.