The IT sector is one safe bet for the investor community, and why not, it contributes about 8% to the country’s GDP. But the recent dip in the Nifty IT index post TCS earnings was rather scary for the street. The rising attrition rate and a dip in deal wins also stands as an issue. The question now is, how bad can it get?
Are Deals Drying Up?
The IT industry is always said to be on a firm footing when it comes to deal wins. These deals are crucial because they make up the revenue for the companies. A research by Gartner said that global spending on IT would grow by over 9% in the next three years. This means big bucks for the IT firms. TCS won $7.6 billion in new deal wins, while Infosys grabbed $2.15 billion deal wins during the July-September quarter. If you see the numbers, it’s less than what is expected. In recent quarters, there has been a moderation in the mega-deal wins for the IT companies. Something to think about despite the optimism charged by the analysts.
During the lockdown, in order to reduce the losses made due to the COVID-19, IT firms went ahead with job cuts. The same companies are now struggling to hire workers. IT companies are witnessing the majority of the resignations at the junior level, given unchanged salaries for years. Another reason behind the rising attrition rate is startups. These companies are full of funds and offer a higher salary to software engineers. They also expect a brighter future in startups because of the changing tech landscape in India.
What’s To Become Of The IT Industry?
Infosys’ management said that the demand commentary is strong and that there’s a bright prospect. Current issues of attrition rate will persist if salaries are not hiked. Meanwhile, deal wins will remain slightly on the lower side, given that the economy is still not back at its strong foot. Other than that, analysts remain optimistic about the sector based on its motive of digital transformation.