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BW Businessworld

IT’s Time For Optimism

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The year 2012 was full of challenges and tense for economies all over. Budgets for IT were under constant scrutiny. Comparatively, 2013 has begun on a positive note. Clients seem to be relaxing their budgets and not holding back too much on expenditure. With recession loosening its grip a bit and clients re-strategising their market measures, IT companies are expecting a better year ahead.

Offshore Insights’s recent interaction with 270 companies sheds light on their future IT expenditure — on infrastructure, software, hardware, Saas, big data, mobility, etc. Most clients even feel that there is a reduction in risk in the home market. According to our survey, close to 50 per cent of companies believed that the year could be somewhat challenging or remain challenging. Last year, over 80 per cent held a negative view. Almost 45 per cent were of the view that the situation in 2013 would fall between somewhat good and very good.
As a corollary, more than 50 per cent of the firms are likely to increase their IT spends compared to 2012. However, the increase in expenditure is expected to fall short of the widespread positive sentiment. Still, the expected spend will be far better than it was in previous years. While spending will see an uptick this year, it will  not be uniform across IT sectors. IT infrastructure will continue to see tight budgets, with clients cutting their hardware spend. In the case of software, it is good news; it is the area which is likely to benefit the most from the loosened purse strings. App integration, modernisation and enterprise app services will see significant growth; big data will also grow, though moderately.

However, the demand for mobile apps will taper off. So firms concentrating largely on emerging technology will be in for a disappointment as technologies expenditure continues to lag. In the new year, traditional services will continue to be dominant while emerging technologies and services are likely to play a smaller part.

Even though companies want to try new technologies along with upgrading existing applications, and while there is indeed a hype around big data and mobility concepts, yet, according to 30-35 per cent of companies, the budget allocation for them is very low (almost at the base level). The reason being, there seems to be more of an inclination towards experimenting and testing the waters first before taking the plunge. So, in 2013, companies will focus on business processes; more than 60-65 per cent of companies will want to streamline their processes.

For this, they want and expect IT to deliver measurable value for the expenditure incurred. They also want to extend spends on packaged apps, especially newer functionalities.

While the year will see an increase in IT budgets, the focus will remain on clients’ savings, the same as in previous years. Besides, there has been an increase in the level of client dissatisfaction due to vendors’ lack of cooperation, low investment in vendor-client relations, poor service quality and late delivery, inability to respond to changing business needs and inflexible pricing, among others. To manage these vendor problems and work with select, quality players, most clients have begun working on the following initiatives:
  • Plan to consolidate the number of service providers
  • Re-negotiate with existing suppliers
  • Shortening the length of vendor contracts and opting for selective sourcing methods
  • Increasing use of fixed-price model before switching to true output-based pricing
These steps are leading to the gradual stabilisation of the offshore market. The expectations from IT are also changing gradually; clients are now looking to extract greater business value from IT; expect greater domain capability and business innovation. So the cards are laid on the table, the time is right and things are looking up. All that is required is for vendors to seize the opportunities and offer clients solutions that are deemed value for money.

(This story was published in Businessworld Issue Dated 28-01-2013)