Disruption in related sectors to mute IT growth in FY21

Business disruptions, and the collapse of sectors such as travel and tourism owing to the COVID-19 pandemic are set to impact the growth of the IT sector this year, according to analysts. They believe that the ongoing lockdown and pause on economic activity is bound to impact the sector negatively. Hiring in the IT/ITeS sector is bound to see a major impact by the ongoing COVID-19 pandemic that has resulted in a countrywide shutdown till April 14.

According to brokerage firm Sharekhan, enterprises that function as clients of IT companies have been issuing travel advisories and implementing work-from-home (WFH) measures. The report says that despite strong business continuity planning and robust service and delivery model, the lack of infrastructure and logistics and client’s confidentiality clauses will impact the delivery of projects.

"We believe most enterprises are also expected to delay the allocation of budgets to new programmes due to severe business disruptions. Further, clients of varied industries such as travel, hospitality, airlines, retail, hi-tech, oil & gas, financial services, and manufacturing will be hit," it says.

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Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas points out, "The outbreak has led to business disruptions. This could impact on new deal wins/addition of new accounts. IT companies with high exposure to these impacted verticals are likely to be impacted by the curtailment of IT spending from clients."

Hota suggests that lower discretionary spending amid COVID-19 along with interest rate cuts in the US (potential impact on spending from BFSI clients) means that they expect a slowdown in overall growth rate for IT companies in FY2021.

IT hiring

In terms of hiring activity, HR solutions firm Teamlease says that hiring in IT companies has slowed down over the last 2 weeks, mainly because managers do not want to meet any candidates for face to face meetings. Sunil C, Head, Specialised Staffing, Teamlease says, "Most services companies have temporarily put a freeze on hiring as they want to gauge their end customers' plan considering the overall slowdown in the economy. The current situation is definitely impacting the business."

Zairus Master, CEO of Shine.com states that the pandemic impact would drive demand in sectors such as healthcare, e-commerce and online delivery portals see a gradual increase in demand.

He says, "With remote working becoming the norm, it is likely that we will see more demand for specific talent in the field whether it is IT professionals to develop software and apps for remote working or customer support executives to guide people on how to use them."

Neha Bagaria, Founder & CEO, JobsforHer holds a contrarian view in this gloom. She says that hiring and onboarding processes are continuing as-planned during this work-from-home period, albeit virtually. "We are continuing interviews via video conferencing tools in order to achieve their hiring goals. Most of the hiring in the IT sector happens in this season."