IT services sector to reach $230-$240 bn by FY22: UnearthInsight

The Indian Information Technology (IT) services sector is likely to reach $230-$240 billion by FY22, largely driven by growth amongst top 15-20 Indian IT services firms on the back of robust GCC and captive industry growth. In FY22, tier-2 firms are growing much faster on the back of pricing, agility and partnerships.
 
The spurt in revenue is expected to continue in FY23 and FY24, according to a recent report by metrics benchmarking and market intelligence firm UnearthInsight on IT Industry Q3 Insights and FY22 Forecast. It further states that the total contract value continues to show strength due to digital transformation, platform implementation, product and cloud implementation deals across BFSI, retail and healthcare clients.
 
The IT services sector also reported a decline in net margins by 60-80 basis points driven largely by measures taken to retain talent such as salary hikes, hirings, stock options, long-term increments, upskilling/reskilling training and increased sub-contracting costs and travel and facility costs.
 
The UnearthInsight report estimated 56-57 per cent employee costs/wage bill (Excluding contractors) across Tier I and Tier II players and this is expected to go up by 0.5 per cent-1 per cent in FY23.
 
As per this report, the industry also eyes a revenue growth of 19-21 per cent in FY22, which is the highest-ever for the Indian IT services industry. Besides this, the Indian IT industry continues to increase its workforce on the back of robust growth and revenues.
 
Meanwhile, the IT Industry Q3 Insights and FY22 Forecast report stated that the IT services industry will hire around 350,000-360,000 freshers by over 30 IT services firms in FY22, accounting for 14-18 per cent of freshers in total headcount.

The report underscores, “Indian IT industry is majorly focusing on hiring freshers. Millions of people have been employed by India’s booming IT industry, which has also greatly increased the country’s GDP. Hundreds of thousands of students now desire to work for massive IT firms every year.”
 
So, what are the companies doing to retain the newfound talent? Companies have announced a slew of measures such as salary increases, stock options, promotions, long-term incentives, higher skill increments, upskilling/reskillng training, etc across quarters. The report further forecast 8-12 per cent average wage hikes by tier-1 and tier-2 competitors along with around 15-20 per cent of the employee promotions for retention.

Despite this, the industry continues to witness a rise in attrition with 22.3 per cent in Q3, which is expected to be between 22 per cent-24 per cent in Q4. The attrition situation is, however, likely to improve in FY23 with rates coming down to 16 percent-18 percent. Rising attrition in IT companies continues to be driven by rising demand for new-age digital skills across industries.
 
Companies are taking various steps to attrition on a priority basis. These steps include increase in fresher hiring, wage hikes/counter offers, focusing on reskilling or wage hikes in the range of 25-40 percent post deployment to new skill and upskilling their current workforce.
 
How are these companies faring on the technology front? “On technology side, key IT firms are witnessing excellent growth in their cloud and product and platform business whereas penetration of low-code and no-code platforms is gaining significant momentum,” said founder and CEO of UnearthInsight Gaurav Vasu. 
 
IT sector’s revenue growth is led by technologies like cloud, data and analytics/AI, product and platforms and solutions like Low Code, No Code. Within the cloud, AWs is the fastest growing segment. Azure and IBM Infra follow closely. Practices like CloudStrike, Snowflake, GCP, CLOUDNXT.NOW and Alibaba are gaining traction at TCS, Wipro, Tech Mahindra, Infosys and HCL.

Also read: Cognizant Q4: Revenue up 14.2% on-year

Also read: Economic Survey 2022: IT services sector grows by 2.1% to clock $178 bn revenue in 2020-21