You can certainly say a lot about the Indian IT sector, but 2022 has provided beyond doubt that it does not suffer from motion sickness. After the rollercoaster that the Indian IT sector has been on for the past year, anyone would be doubling over and throwing up their insides.
Not Indian IT though. It has been steadfast and has held on with gritted teeth.
What is the future of IT companies in India?
2022 was characterised by mass lay-offs in most of the tech giants across the world. According to Crunchbase, more than 1 lakh tech employees lost their jobs in the United States.
If you look at the global markets, the figure is much worse. More than a thousand tech companies have slashed over 2.3 lakh jobs in the last year alone, as reported by TrueUp. And it’s expected to continue in 2023.
In comparison, India has fared much better.
For starters, while the lay-offs in the US have been uniform across companies of different market caps, in India, most of the firing has been restricted to startups. According to The Quint, about 18 thousand jobs were eliminated in 2022.
Secondly, most of the companies that were affected were those that expanded their operations mainly during the pandemic. The heavy-weights, who have been around for a couple of decades, managed to stay true to their course and remained unaffected during the pandemic.
Let me explain.
You see, during the COVID-19 lockdown, the world took to work from home for the first time. There was a sharp rise in the usage and demand for tech services. For example, e-commerce saw a huge boost, social media networks saw immense growth in users, and ed-tech companies saw an entire market being created out of the blue!
You can imagine the unexpected joy that was bestowed upon tech companies. I mean, it was the silver lining in the otherwise dark and gloomy storm clouds that COVID-19 brought upon us.
As a result, most companies in IT and software scaled up in a big way. It was fast, aggressive and created a lot of jobs.
But then, the world went back to normal.
We started going out again, and our screen time slowly went back to pre-pandemic levels. And tech companies around the world were forced to face a drop in demand. They had essentially staffed up for a requirement level that no longer existed.
This is why tech companies are now starting to scale back and cut back on the excess staffing recruitment over the past two years.
Will the IT sector grow in 2023?
According to Gartner, spending on the Indian IT sector is expected to rise by 2.6% in 2023.
The digitisation of business operations is an inevitable stage of a company’s growth. More and more Indian companies are starting to invest more to bolster their technology base, as they start to realise the long-term benefits.
The demand will remain. Now that most of the excess staffing has been trimmed, we can expect an increase in job security in 2023. This, in turn, will boost employee morale and efficiency.
One observation that brings optimism for the IT sector in 2023 is the fact that the effects of inflation have not really entered. According to John-David Lovelock, VP analyst, spending in the IT sector remains “recession-proof”!
However, one of the main challenges that the Indian IT sector will face in 2023 is a lack of skilled talent. This will be instrumental to guarantee growth in this highly competitive landscape.