How IT Sector Is Shaping For 2020 - Expectations & Challenges

Amidst all the speculation, global research firm Garter says the Indian IT market is likely to surpass the current growth rate in 2020. The IT sector is expected to grow by 5.5% in 2020, touching a market size of US$ 105 trillion-plus.

Despite an ordinary 3rd quarter and a visible multi-sector slowdown, a good 1.8% rise is predicted next year. The report was largely bullish about global clients contributing to IT spending.

The global cloud investment is likely to go up 8 times its current size as we enter 2025. Notably, it hit US$ 36.7 billion in 2018. CiOL spoke to Vibhav Gaur, CBO, EbizON to understand IT sector expectations and challenges in 2020.

Outlook for 2020

Even though the Gartner projection looks largely on spot with Cloud investors driving in major growth, conventional IT services in India look to struggle. Companies investing in RPA and AI, on the other hand, would stay afloat if they keep the ball rolling.

Deep down at the HR level, Indian IT MNCs would continue to rope in fresh graduates with ease. With large MNCs resorting to layoffs (what they call right-sizing) especially at the mid-senior level positions, it is likely to benefit small IT businesses and start-ups.

Closure of middle and senior level positions would be swifter. This also means quality recruitment at a relatively lower cost for these companies.

The expectation in 2019 that couldn't happen and perhaps may get resolved in 2020

If you see, 2019 started on a good note with the general budget promising a native AI program along with the introduction of the National AI portal. The approving of National Policy on software products was seen as an added incentive for product-based IT companies.

However, it failed to achieve the expected. We did albeit see initiatives from software companies towards adopting cloud, automation and progressive technologies in AI but for most, it was a struggle.

A big blow came on November, 19 when Nirmala Sitharaman tabled the Taxation Laws (Amendment) Bill, 2019 in Lok Sabha that culled Software Development from 15 corporate tax rates.

The Make in India initiative announced on September,19’ that provisions for 15% income tax rate for fresh investments done in manufacturing should have applied to software product development as well.

Companies are already finding it difficult to transit from the typical IT model that included service, support, infra and testing to an aggressive software and product & cloud approach.

The next year is expected to begin on a stronger note. Now that the companies understand how global IT business is shaping up, more tech-enabled cloud unicorns in E-commerce, Logistics and Fintech should come to the fore in 2020.

The key expectations in 2020

More investment is required in Cloud, AI, and Automation which should be backed up by an aggressive action-packed approach from the IT sector.

Make in India initiative should include Make Software Products in India as well, with 15% tax rates similar to manufacturing.

With experiment time slowly getting over, most small and mid-sized software service companies should try to close bigger deals for digitalization in 2020.

Innovation centers of MNCs and investor-driven start-ups to accelerate deep into cloud-based software product development focused primarily on the Indian market.

Not only this will speed up the overall software industry but it will instill confidence in delivering next-generation IT projects.

Key challenges 2020 and beyond

Indian IT companies, in the long run, need to focus on new-age technologies. Those who have already started should stay invested. Businesses should do away with the button-down approach avoiding traditional IT undertakings.

Even with more than 10 start-up unicorns from Delhi-NCR, we have not been able to replicate the IT clout which otherwise has seen the enormous global interest over the years in South. Quick muscle is required in setting up major-league delivery centers in the North.

The role of the government is going to be equally vital in encouraging start-ups and small businesses. At a time when most sectors are experiencing poor demand and economic slowdown, this will be of great significance.