Gartner revises downward global IT spending projections; attrition to have longer tail
Gartner has projected global IT spending to grow at 4% in CY22 vs. 5.1% projected earlier. The report also mentioned that talent crunch in the global IT industry is expected to have a long tail (till the end of CY23).
Global IT spending is projected to grow at 4% in CY22 to US$4.4 trillion. Communication services (33% of the mix) is projected to grow at only 0.3% now in CY22 vs. earlier projections of 1.3% while IT services (28.7% of the mix) are expected to grow 6.8% now in CY22 vs. earlier projections of 7.9% growth. Devices, enterprise software and data centre systems are expected to grow at 1.9%, 9.8%, 5.5% now vs. earlier projections of 3.3%, 11%, 4.7%, respectively, earlier.
Gartner estimates that talent crunch in the industry would have a longer tail. The commentary seems to be different from Indian IT companies, which were expecting attrition to start tapering down in a couple of quarters from now. The continued talent crunch means that employee costs will be at elevated levels in the medium term, which would put pressure on margins of the companies. On the flip side, can this make price hike stronger for IT companies? IT companies have been asking for price hikes and are in active discussions with clients for the same. However, meaningful price hikes are yet to come. Birlasoft, with one of the highest attritions in the industry at 31%, started getting price hikes (3-4% in renewal deals and high single digit in new deals), which could indicate that price hike could be around the corner. However, it would be interesting to see whether the price hikes would be gradual or accelerated in nature.
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