The Unforeseen Impact of Coronavirus on IT Services

IMPACT OF CORONAVIRUS ON IT SERVICE

The coronavirus pandemic has brought the modern world on the verge of a catastrophe that it has witnessed never before. The pandemic has affected manufacturing, operational and services sector equally. It is true that manufacturing and operational sectors are still functioning to a certain extent due to the persisting demand, especially in the field of medical and healthcare. But it is the service sector that has been adversely affected.

Among the services, the impact of Coronavirus on IT services has been unprecedented and experts say that it is just the beginning and it is going to be worse than the financial crises of 2008. As per a study estimation, the annual contract value for globally managed services to decline 7% in the year 2020 against a 3.2% growth projected earlier.

The advisory also predicts the worldwide “as-a-service” segment, offering products and services on the cloud, growing at an estimated 12% from now against 23.5% forecasted earlier.

Recession is at the Gate

“The first two months of the quarter witnessed a robust growth, but shifted to a conspicuous tail-off in the month of March as COVID-19 epidemic hit the market,” as quoted by Steve Hall, the president of ISG’s Middle East, Europe and Africa region and digital advisory services partner at the company.

The advisory would recommend 60% of it’s enterprise clients to postpone their scheduled tech spending for the next 90 days amid economic concerns over COVID-19 pandemic.

The virus has infected over 1.5 million people across the world, pursuing nations to seal down there borders in order to curb the spread. The IMF (International Monetary Fund) has already declared that the world economy has entered a new phase of recession.

Related – How Computer Networking can Help Fighting Coronavirus?

The Impact of Virus Outbreak on Indian IT sector

As per the statement released by ISG, most of the decline in the global deal activity would be witnessed within the quarter ending in the month of June 2020. Amid the outbreak, it would be the travel and hospitality sectors that would be adversely hit by the virus.

But while dealing with the question, how Coronavirus affected IT services in India, most of us believe that as the IT services are relying on the Internet, it would not be as badly hit as the travel and hospitality sector. But what people overlooking is the fact that these services are hired by the clients that are functioning across the world with specific budgets and spends for the year. As the virus is “still at large”, and the lock-down is in function in all the major cities of the world, it is difficult for the clients to get benefited by the services offered online by the Indian firms as there is not much of the options to re-channelize the received services.

The Reports on the Impact of coronavirus on IT services

 Let us see what the reports of some of the most recognized capital market and investment companies in the world have to say about the impact of Coronavirus on IT services.

CLSA:
There would be some severe impact on pricing as nearly 60 % of the clients have requested 20 % to 30% discount for the period of next 2 to 4 months. Most of the reputed IT firms in India are presently analysing the requests over case to case basis. The situation about pricing of the services would become clear in the next one or two months.

Morgan Stanley:
Now, most of the service creation centres of these IT companies’ are located over digital portals and that is the reason why can even opt for work from home routine. It is the common practice during the lock-down period not only in India but various other parts of the world. But the real challenge is faced by the delivery centres of these companies, as they are struggling to keep up with the pace and could be monetised in the due course of time. It is a fact that nearly 40% of these centres are located in India.

Axis Capital:
The impact of Coronavirus on IT services would be near-term headwinds; however the COVID-19 crisis is possible to accelerate the introduction of more digital initiatives and acceptance of automation and cloud services at a larger scale.