The frail economic recovery in the US and the persisting sovereign debt crisis afflicting the Euro zone have been weighing heavily on emerging economies, of late. Besides exports of manufactured goods, proceeds against the foreign consumption of services to developed markets are also under pressure. Gartner Inc., a leading US-based IT research and advisory company, recently forecast a slowdown in global IT spending in 2012, as companies grapple with slower growth and economic uncertainties in developed markets. The technology research house expects global IT spending to increase in 2012 by a modest 3.8 percent over the projected IT related spending of $3.7 trillion, in 2011. This growth had been in double digits, over the past few years. This looming slowdown in an otherwise robust industry is bound to impact the IT- Business Process Outsourcing companies (BPO) of the emerging economies. The top ten locations for offshore IT-BPO services in the Asia-Pacific, as identified by Gartner last year, included the likes of India, China, Australia, Singapore, Malaysia, and Thailand. These countries accounted for a bulk of emerging economies IT spending of $1.013 trillion in 2011. It would be interesting to see how India - the leader of the pack so far - copes with this impending growth deceleration. Though Indias IT exports are growing, its relative share of global IT exports has declined, notes Gartner. Moreover, the growth momentum of the Indian IT industry could be checked in the wake of issues like wage inflation, currency fluctuations, local attrition rates, and financial irregularities. This has also got Indian tech giants worried. The CEO of Infosys, the Indian software giant, told investors last month, "We remain very, very cautious because if you look at the US, there are macroeconomic challenges; there is unemployment. If you look at Europe, you have turbulence. It is unpredictable. Our clients remain very cautious. They are scrutinising their investments, while they are taking short-term decisions; they are hesitating to take long-term decisions". In order to increase their global market share in 2012, Indian IT firms may likely sacrifice their revenues or margins. Gartner expects Indian market shares in Japan and Europe to decline. However, the US market, which accounts for over half of the revenues of the Indian IT industry, is expected to grow moderately, owing to nominal growth in IT spending by key US sectors like banking and financial services. Peter Sondergaard, Gartners global head of Research, told Indian CIOs and IT leaders earlier this week in Mumbai that clients would respond differently to this slowdown compared to 2008. "This time, any slowdown in spending will be more specific to certain industries and countries. Indian providers who have developed a strong vertical focus and have been able to differentiate will do well." While the Indian IT exports may likely come under pressure, it appears that the IT spending in India might just provide some breather to their IT industry. Gartner projects IT spending in India to grow by 9.1 percent to $79.8 billion in 2012, as Indian corporations and enterprises are expected to invest more in IT. IT-BPO sector is modern Indias success story. Come 2012, the resilience and viability of this flagship sector would be seriously tested by events taking place in the Indian economy in general, and those in the US and Western European economies in particular.
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