'IT services will see double-digit growth soon'

By mid-2011, the Indian information technology services sector will be back to growth in double-digits, according to research and advisory agency, Gartner.

The sector may not touch the 30-40 per cent growth rates it witnessed before the slowdown, but an register above 20 per cent growth as it nears calendar year 2011, says Partha Iyengar, regional research head and Vice President, Gartner India.

Iyengar says while IT budgets would be flat for some time in 2010, there is a sense of urgency among clients to increase their cost efficiencies and hence a push towards outsourcing and offshoring.

"This is also evident in the closure of sale cycles. During the slowdown, deal closure time had gone up by a few months but are now back in the range of three to five months. For instance, we had a call from a client in Europe who were asking for at least 100 people in the next two months. They wanted to close the deal as soon as possible," he says.

IT spending, too, is expected to reach $3.4 trillion in 2010 -- a 4.6 per cent increase from 2009, according to a new Gartner report. Although modest, this projected growth represents a significant improvement from 2009, when worldwide IT spending declined 4.6 per cent.

Iyengar says the growth was anticipated. (Software body Nasscom now says the IT industry will grow at 14-17 per cent in FY11). "The key difference during this slowdown and the earlier one is the sense of urgency among clients," he explains.

Iyengar also feels the demand scenario is not only sustainable but the level for outsourcing will go back to 2008 levels. Deals in the range of $100-300 million are also back on table for discussion, he says.

"Unlike in the previous recession, the decision to outsource was on hold, not the projects. It was just put on hold. Now, these projects have been fast-paddled."

But, Iyengar qualifies this by also saying that while demand is returning, concerns from the supply side remain the same.

"How do you ramp up your hiring activity and even if you are able to get the numbers, will they be skilled enough? The only silver lining is that the firms did have some time to get their supply side in order," he concludes.

On the political climate in the US, Iyengar opines that the decision to offshore work primarily depends on the financial and cost needs.

"But, what is commendable is how Indian IT firms are moving up the value chain by expanding into US geographies," he says.