As recessionary clouds hang over the United States, chief information officers are re-budgeting to control costs. In such a scenario, cloud computing, security software and digital transformation will continue to be top priorities for CIOs, according to a latest report from Morgan Stanley. The report comes amid the likelihood of cuts in data center construction and consulting projects if the macro environment deteriorates.
According to Morgan Stanley’s 2Q22 CIO survey, expectations for IT budget growth for 2022 were 4% (vs. 4.2% growth expected in 1Q22 and 4.1% growth cited by DSI for 2021). Also on the service side, forecast IT budget growth for 2022 was 3.5%, down for the third consecutive quarter), the report said.
When it comes to India’s IT services players, the report suggests there will be limited short-term impact, but FY24 feedback will be crucial.
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“The takeaway for Indian IT: The disconnect between macro (spending moderation) and micro (positive business feedback) continues. In the near term, growth should be strong at 1HFY23, so short-term expectations may not be in jeopardy; however, the key will be the growth outlook for FY24,” the report said.
The survey was conducted via telephone and online interviews with 100 decision makers representing 100 enterprise information technology organizations in May and June 2022. Sixty-five respondents were from the United States and 35 from Europe.
In a recent Business Standard report, analysts agreed that if a recession were to occur, the impact on India’s IT services players would only be evident in the second half of the year.
“If IT budgets get tight; big companies always try to research lower cost options first. Although overall volumes may fall, Indian IT services and products companies are well positioned to make further gains, gain market share and emerge even stronger from this phase of economic uncertainty,” said Peter Schumacher, founder and CEO of Value Leadership Group.