Speculating On Tech Business Growth

How will the tech business growth be this year?

Indian IT services companies are expecting a steady growth in business prospects in 2023 amid slowdown fears globally. Mid-tier and small software service providers are confident of sustaining the growth curve through their niche offerings. This is despite the fact that enterprises are prioritising investment to get quick returns and shying away from investing in new digital projects.

Some IT leaders have offered their thoughts on the prospects of tech business growth.

“The demand for technology-led solutions has increased manifold. As some part of the world moves towards recession, companies are looking at ways for working their money harder. They want to assess the value of money that adds to the sales, profits, acquisitions, customer satisfaction, and other aspects. As re-prioritisation of investment happens, it is definitely leading to demand for more technology-led insights, especially leveraging data analytics,” said Sandeep Pandey, Cofounder & CEO, Skewb Analytics, data analytics company.

The data analytics-focussed IT firm is confident of sustaining its previous year's growth rate in 2023 as more enterprises are adopting its data analytics, AI and machine learning-powered IT solutions for actionable insights. “2022 was a good year for us as many enterprises adopted our marketing analytics platform. This year, we want to double our count of customers,” Pandey added. The company currently counts logistics startup Delhivery, Cloudnine Hospitals and other such marquee names as its clients. Though it operates in India as of now, it is in the process of opening its offices in the US shortly and is actively looking at the European continent, especially the UK as part of its geographical expansion.  

Another mid-tier IT company Hoonartek also has an optimistic outlook on growth prospects in 2023. However, the company said revenue growth would stabilise this year after two years of hyper-growth induced by the COVID pandemic.

“Usually, the number of cost takeout deals increases during the period of economic slowdown. However, in the segment we operate in, demand remains robust. We may see some kind of slowdown in decision-making by clients. But I am optimistic about our growth prospects,” said CEO of Hoonartek, Peeyoosh Pandey.

The company, which aspires to be a $100 million worth firm in FY27, has a sound geographical presence in India and the UK and is planning to increase its revenue contribution from the US. Currently, the US contributes 10 per cent to its overall revenues, which the company aims to increase to around 50 per cent in the next five years.

Gartner has forecast overall IT spending to grow by 2.4 per cent over the last year, touching $4.5 trillion in 2023. It has indicated that though inflation is eroding the buying power of consumers, negatively impacting spend on devices, overall enterprise IT spending is likely to remain strong.

“A turbulent economy has changed the context of business decisions and can cause CIOs (Chief Information Officers) to become more hesitant, delay decisions or reorder priorities. We’ve seen this in action with the reshuffling taking place among some B2B companies, especially those that overinvested in growth. However, IT budgets are not driving these shifts, and IT spending remains recession-proof,” Gartner said in January 2023. According to the research firm, the IT services segment (the segment in which most Indian IT firms operate) is expected to grow 5.5 per cent this year, while the software segment is projected to grow 9.3 per cent during this period.

“Slowdown in the global economy has increased focus on cost savings by enterprises. That is the reason, several large cost takeout deals are coming to the market. In this perspective, large firms will be major beneficiaries. However, mid-tier companies with their niche offerings will continue to grow despite the slowdown seen in digital deals,” said the IT outsourcing advisor Pareekh Jain, Founder, Pareekh Consulting.

A similar sentiment has already been reflected by many mid-tier companies in recent quarters. Announcing third quarter results ended December 2022, the management of mid-tier companies LTIMindtree has indicated that demand for digital projects remains sound along with cost take-out deals.

“We are seeing good deal traction as clients look to do both. There is a cost takeout play as well as there are deals where clients are continuing on multi-transformation programmes, whether it be in the digital and cloud arena or the R&D arena. So, we’re seeing both those expenditures,” Sudhir Chaturvedi, President and Executive Board Member, LTIMindtree said during the post-results analyst call.

Therefore, the technology market globally is likely to throw open opportunities for all kinds of players irrespective of size. Indian IT players, therefore, are better placed to cash in the emerging opportunities and can expect a positive tech business growth.

--By Swaminathan B

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