Against forecasts of 56% growth in enterprise IT spend in this period, final figures showed a decline of 17%—and the slide would’ve been higher, if not for heavy spending by the IT industry itself
"The light at the end of the tunnel is the headlamp of an oncoming
train."
Murphy’s Law
Tongues have been wagging, and furiously—for enterprise IT spending plans
and predictions have gone into a tailspin. Against projections of a 56% increase
in IT spend by top Indian blue chips in 2002-03, final figures point at a
sobering 17% decline in IT investments. The bigger blow—there are few signs of
a turnaround anytime soon. In fact, if not for heavy IT spending in 2002-03 by
IT companies themselves, the slide would have slipped further into the red.
IT
Spend by Verticals
2002-03(%)
2003-04(%)
All
-17
7
Finance
(Banks)
2
-21
Manufacturing
-27
78
IT
34
100
Pharma
-1
22
Services
-12
13
Insurance
-43
25
Telecom
-40
-20
Govt
-25
9
RED INK ALL AROUND:
It was only banks and IT companies themselves that prevented an across-the-board
spending slide in financial 2002-03. The coming year (2003-04) is not very
promising either, with growth expected to be at a meager 7%.
There are only two methods to get to absolute numbers—one, to get to the
vendors, and talking to the top IT companies; and two, to approach top Indian
enterprises and take a look at their spending pattern in the year just ending,
and get a fix on their budgeted plans for the forthcoming year. Sticking to its
annual Megaspenders survey, Dataquest enlisted the services of IDC India to
approach CIOs in top Indian enterprises with an elaborate questionnaire. The
findings were similar to those presented last year—"Disappointing".
Last year’s survey had reflected the upbeat mood of CIOs, who had predicted
a 56% growth in IT spend—signifying an end to the slowdown and a return to the
days of rock ’n roll. However, go back to Murphy’s Law at the beginning of
this story—that welcome light at the end of the tunnel can belong to a train
which flattens everything in its way, as it did our projections made last year.
Some sobering numbers Against an upward swing of 56% in IT spend projected for 2002-03 (Megaspenders
2001), there was a fall of about 17% in actual IT spending. As for projections
for 2003-04, CIOs are going cautious with numbers this time around—expecting
to ramp up their IT spend by a careful 7%. As for the verticals that kept the
flag afloat (see box), it was the IT industry itself that kept things from going
disastrously wrong, netting a 34% increase in IT investments. The only other
vertical to show positive growth in IT spend was the BFSI (banking, financial
services and insurance) space, which showed a 2% increase over IT spend in the
previous year.
And it was public sector banks and insurance companies that placed the
biggest orders in 2002-03, with four of the top five spenders coming from this
space. The top corporate IT spender in 2002-03—Punjab National Bank, with IT
investments of Rs 180 crore. Last year’s leader LIC (Rs 140 crore IT spend in
2001-02 [DQ estimates]) was still strong at #3 this year, with Rs 105 crore of
spend this time around. Canara Bank, Bharti Cellular and Central Bank of India
made up the exlusive Top Five Club.
However, the other verticals that had shown so much promise in the previous
year and projected a steady climb in the ongoing year fell by the wayside, as
the slowdown and tighter pockets put a crimp on spend and placed all but must
ambitious plans on ice. Surprisingly, though, the vertical that was fell most in
terms of projections and actual investments was insurance—43% short of
forceast spend. Telecom (-40%), manufacturing (-27%) and the government space
(-25%) were the other laggards.
However, there’s solace in these numbers—they reflect plans deferred,
meaning investments in 2003-04 would be healthy and would give the domestic
market the shot in the arm that it so badly needs. Barring telecom and banking—most
banks have matured their IT infrastructure requirements, with the exception of a
few PSU players—most other verticals should see renewed spending.
As for where most of these monies will go, it is hardware that continues to
top the CIOs’ agenda—with 42% of overall spend expected to go here.
The services segment is also poised to see heavy growth, with many
enterprises focusing on outsourcing and cost-cutting. The pertinent question—will
2003-04 live up to its projections? Going by the maxim of once-bitten,
twice-shy, we can daresay CIOs have made far more realistic forecasts this time
around!
For all the findings of Megaspenders 2003, read on...
