May 14, 2020
Effects of COVID 19 on IT industry
- In 2020, COVID -19 is the biggest fear in the World. COVID – 19 outbreaks world economy. COVID-19 creates a pandemic situation in the world. COVID-19 breaks the world economy and lots of businesses are shut down. Peoples are lockdown in their homes.
- COVID-19 also affects IT (Information technology), ITES, Banking, Manufacturing, service providers, and finance sectors.
- IT the industry is the only way to grow the economy of the world. Companies allow their employees to work from home facilities in the IT industry.
- IT spending forecasts indicate continued demand for cloud infrastructure services and a potential increase in spending on specialized software. Forecasts also anticipate increased demand for communication equipment and telecom services as organizations encourage employees to work from home, and schools move to online courses.
- Most organizations do not have a tech stack in place for a reliable business continuity plan (BCP). Due to enhanced remote work scenarios, the IT department will play a large role in future BCPs and will need help from IT service providers in procuring devices, setting up a resilient, flexible and secure network, disaster recovery system, IT security, etc.
- The need forever after access to data and automation will enhance the focus on network equipment and communication as never before, speeding up 5G network deployments and adoption of 5G equipment.
- Indian IT service industry is expected to see an adverse impact for the short term due to the COVID-19 outbreak with the sector clocking a lower growth of 3 to 5% in the current Financial Year, According to rating agency ICRA. ICRA previously expected
the sector to grow at 6-8 percent. With the slowdown in growth during the first half of 2020-2021, the margins will also be negatively impacted before a likely recovery in next the financial year, ICRA said in a statement.
- However, the credit outlook for Indian IT companies remains stable led by healthy free cash flows cushioning short-term disruptions with significant liquidity in the form of surplus investments generated out of past cash flows.
- On the supply side, Indian IT services will face issues such as travel restrictions to developed countries as well as the closure of office/work from home at various offshore development centers as well as onshore, thereby impacting the movement of labor. At the initial stages of projects, Movement of labor at the client’s site is essential while later the same can be managed remotely, ICRA explained. New projects to be commissioned will be delayed by a minimum of 3-6 months, while projects in the pipeline will also face delays, the agency continued. The margins for the Indian IT services are already facing challenging operating environment characteristics by continued pressure on commoditized IT services, wage inflation, higher onsite costs necessitated by visa curbs as well as lower discretionary spend by corporate, ICRA said.
- IT and IT-enabled services companies in India may have to trim their workforce on hire more flexible staff as part of a cost-cutting measures with projects getting delayed due to the COVID 19 pandemic.
- If COVID-19 becomes a long-term phenomenon, all companies will have to bear the brunt with varying degrees of impact. Startups are already feeling the heat as they are unable to bear the losses. For the IT sector, a lot of business comes from Outside of India with high exposure to the US and Europe, So it even more uncertain.
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