Is IT industry in the lead or in trouble?

Covid 19

If we take stock of the overall situation and all branches of the industry, it might be argued that the IT industry falls in the ranks of those that are not directly affected by the ongoing pandemic. Projections go as far as predicting that — in the long run — this industry will also be one of those that could benefit if they are not directly associated with the most affected sectors — tourism, hospitality, transport, and the like.

Does this mean that IT is in the lead or in trouble with regard to the situation? Both could be said to be true. IT companies that are associated with tourism and travel will assuredly come up against major setbacks and dire consequences. If household and personal incomes take a downswing, any spending beyond essential will follow suit, which could impact IT companies in the entertainment arena.

The global information technology (IT) services industry can expect to see a decline in total revenue of up to 3–4 percent, because the business slowdown brought about by the coronavirus pandemic is taking its toll across the world. Considering that India is the primary contributor to global IT services, a downslide of nearly four percent in global IT spending is likely to have an effect on India as well. Without taking into account India's own IT industry, the estimated rate of decline will see India lose more than five billion US dollars worth of IT services exports alone. This could be a significant pivotal moment because the global economic downturn has driven the world into recession, with many executives subject to salary cuts and layoffs. As a large number of India’s non-residents who work in IT services with global industry giants, this is a major cause for concern.

According to IDC's market analysis projections, the impact on the overall global IT industry will become clearer as the year unfolds, and by then the scope of this impact on India will also become apparent and specific. In line with these predictions and considering how significant the IT industry is for India, the slowdown in overall IT spending around the world could cost India billions of dollars.

The IDC analysis also reveals that — although hardware companies will face maximum impact — the effect will also spill over to the software and services industry worldwide. According to the India Brand Equity Foundation, the Indian IT and BPM (business process management) industry contributed USD 177 billion in fiscal year 2019, of which USD 137 billion came exclusively from exports, or overseas projects launched by India’s IT giants.

Although it is difficult to anticipate how the IT industry could grow or deteriorate in total through fiscal year 2020 (on account of the coronavirus outbreak), the numbers are quite bothersome. With the alarming projections showing the probable long-term cost to the world, it remains to be seen how global IT players like TCS, Cognizant, Infosis, Vipro, and other industry stakeholders are innovating and adapting to new economic parameters with a view to overcoming the negative consequences. Given that the entire tech industry has suffered a major blow, the impact on IT services might turn out to exceed the preliminary estimates.

Here are some examples from the IT world (source: TrendForce)::

  • - The production of mobile phones is projected to plummet by 12% Apple has confirmed supply chain issues that will affect production delays and postponements
  • - All major IT trade shows have been canceled (Mobile World Congress in Barcelona being one of the biggest)
  • - A number of fiber-optic cable manufacturers are located in Wuhan, the epicenter of the outbreak, and together they account for around 25% of the global output. The 5G network rollout in China is likely to be delayed because of the lack of fiber-optic cables
  • - The DRAM and NAND flash memory market will probably remain unaffected considering the high level of automation in factories
  • - Laptops, smartwatches, and speakers will see the biggest downswing compared with the initial production plans

Ognjen Škoba
According to Ognjen Škobo, co-founder and CEO of Kroon, the IT industry is defined as an industry in which companies rely on technology to deliver services to their customers, which is to say that this sector includes companies from a range of industries.

“It’s evident that the situation has hit the travel and transportation industries more than others, and companies in these domains are bearing the brunt of the recession, regardless of being IT-adjacent or not. For some industries like FinTech, EdTech, and the like, the situation is not so grave. The need for such tools and forms of work, entertainment, education, and communication is peaking and their features are more appreciated. When it comes to Serbia, similarly to other markets, the survival of the fittest principle will apply to the industries and companies affected the most, and as for IT companies whose operation is rooted in outsourcing, I don’t see the need for quality services and teams declining. Technology will remain the primary tool for problem solving, and talent will continue to be in short supply.

As always, the precise reach of the pandemic’s consequences can only be speculated. However, if we focus on some of the positive outcomes that this situation will bring, we hope to see increased awareness around pollution and global warming, scrutiny and change regarding existing relationships in society, the way we live and work, and changing priorities in society,” says Ognjen Škobo.

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