Bengaluru: Global information technology (IT) services spend in 2017 is projected to grow 2.3% to $917 billion, estimates Gartner Inc., lower than its earlier estimate of 4.2% and the 3.6% growth recorded in 2016, on account of protectionist policies, especially in the US.
The lower IT services spend does not bode well for the country’s $150-billion software services sector which is already facing challenges posed by newer technologies, such as cloud computing and blockchain, making many companies alter the way they do business.
Worldwide IT spend in 2017 is projected to grow 1.4% to $3.46 trillion, down from Gartner’s earlier forecast of 2.7% on account of the strength of the US dollar. Despite the revised guidance, overall IT spend globally will be 0.4% higher than last year. “The modest changes to the IT services forecast this quarter can be characterized as adjustments to particular geographies as a result of potential changes of direction anticipated regarding US policy—both foreign and domestic,” Gartner said in a press release on Monday.
“The strong US dollar has cut $67 billion out of our 2017 IT spending forecast,” said John-David Lovelock, research vice-president at Gartner. “We expect these currency headwinds to be a drag on earnings of US-based multinational IT vendors through 2017.”
The IT services market accounts for $21 billion of the $67 billion decline in Gartner’s latest estimate. Data centre systems, enterprise software and communication services are the three other segments that have now been estimated to grow at a slower pace than the earlier estimate, said Gartner. Personal computers, tablets and mobile phones, classified as devices, is the only segment which Gartner expects will grow at a faster pace.
Since the start of the year, Indian IT firms have been rattled by some of the decisions made by the administration of President Donald Trump. In addition to some of the legislation aimed at changing the way America allows companies to bring in engineers from abroad, the new Trump administration has made two policy changes. In March, the US government did away with a provision that allowed fast-track processing of H-1B work visas. Earlier this month, the US put out a stricture asking companies when they bring in a foreign computer engineer under an H-1B visa to prove that the employee is performing a “speciality occupation”.
Equity analysts said the protectionist measures could be worrisome for Indian IT firms. “This event shows that protectionist measures can be put in place even without passing new legislation and impact IT companies as early as in FY18,” Sagar Rastogi and Utsav Mehta, analysts at Ambit Capital, wrote in a 5 April note.
In February this year, industry body Nasscom surprised many when it delayed giving a growth projection for 2017-18. Nasscom cited regulatory changes in the US and uncertain macroeconomic outlook as the reasons behind pushing back its annual growth estimates for the sector.