IDC Study Predicts Slowdown in Indian IT Spending for 2023: What's Driving the Change?

Highlights

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• IDC predicts slower IT spending growth in India in 2023 due to inflation, currency devaluation, supply chain constraints, staffing shortage, and global economic weakness.
• Consumer IT spending fell in Q4 2022 due to rising prices, resulting in overall growth of 2.1% in 2023.
• Enterprises are concerned about price increases, staffing shortages, supply chain constraints, and global economic weakness affecting business revenue.
• Infrastructure spending had a successful year in 2022 but will slow in 2023 as enterprises prioritize the as-a-service consumption model for infrastructure purchases.
• IT services spending is expected to increase by 8.7% in 2023 to improve customer engagement, launch new products/services, and improve operational efficiency.
• Key trends and opportunities for IT spending in India in 2023 include hybrid work models, digital workplaces, AI, analytics, IoT, blockchain, customer experience, digital commerce, digital transformation, and growth of digital-native businesses and startups.
• Despite the slowdown, India remains one of the world's fastest-growing IT markets, offering significant potential for IT vendors and service providers who can provide value-added solutions and services.

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According to a recent study by IDC, Indian firms are expected to slow down their IT spending in 2023 due to various factors, such as rising inflation, currency devaluation, supply chain constraints, staffing shortage, and weakening global economy. The study, titled 'Worldwide Black Book: Live Edition', projected that Indian IT spending (by enterprises, service providers, and consumers) will grow 4.7% in 2023 to $86.7 billion in constant currency, down from 5.8% growth forecasted in October 2021.

The study also revealed that consumer IT spending, which includes purchases of devices such as mobiles, tablets, personal computers, wearables, and peripherals, declined drastically in Q4 2022 due to rising prices and pulled down the overall growth to 2.1% in 2023. Enterprises making IT budgets are concerned about price increases, staffing shortage, supply chain constraints, especially on the networking side, and the impact of the weakening global economy on business revenues.

"Rising inflation and currency devaluations made technology investments costlier. Enterprises focused on immediate needs by either stretching or prioritizing budgets. But with worries around the weakening global macroeconomic situation, spending growth has moderated," said Vinay Gupta, Research Director, IT Spending Guides, IDC Asia/Pacific.

The study also noted that infrastructure spending (server, storage, and networking equipment) had a banner year in 2022 with investments by enterprises and service providers, but will slow down in 2023 due to a moderating economic outlook. Enterprises aim to drive efficiencies, optimize cost using automation tools and prioritise as-a-service consumption model for infrastructure purchases avoiding significant capital expenditure investments.

IT services spending is projected to grow 8.7% in 2023, driven by enterprises' need to increase customer engagement and satisfaction, launch new products/services, and improve operational efficiency to drive revenue growth and profitability. Enterprises' increasing adoption of cloud and co-location services drives the managed services market. Project-oriented services are guided by the need for system integration and IT consulting services but are susceptible to declines in business confidence.

The study also highlighted some of the key trends and opportunities for IT spending in India in 2023. These include:

- The rise of hybrid work models and digital workplaces will boost demand for devices, collaboration tools, security solutions, and cloud services.

- The adoption of artificial intelligence (AI), analytics, internet of things (IoT), blockchain, and other emerging technologies will accelerate as enterprises seek to gain competitive advantage and drive innovation.

- The focus on customer experience (CX) and digital commerce will increase as enterprises seek to retain and acquire customers in a post-pandemic world.

- The demand for digital transformation (DX) services will remain high as enterprises seek to align their business processes, culture, and technology with their strategic goals.

- The growth of digital-native businesses and startups will create new opportunities for IT vendors and service providers.

The study concluded that despite the slowdown in IT spending growth in 2023, India remains one of the fastest-growing IT markets in the world and offers significant potential for IT vendors and service providers who can deliver value-added solutions and services that address the evolving needs and challenges of Indian enterprises.