Last Updated : Aug 26, 2020 10:28 PM IST | Source: Moneycontrol.com

COVID-19 impact | TCS, Infosys to gain the most as clients step up IT spending, says report

According to Gartner, outsourced IT services spend will increase to 6-8 percent between 2021-24, from 4-5 percent in the last 10 years due to acceleration in digital transformation spending

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TCS and Infosys will be at the forefront of these changes given their comprehensive offerings, ability to win large integrated deals, and process capability

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Indian IT services providers Tata Consultancy Services (TCS) and Infosys would benefit the most from the accelerated IT spending by their clients across sectors, according to a report by Kotak Institutional Equities.

The report states that companies have accelerated their spending in innovative capabilities to reduce operating costs, reimagine customer experience, and move to newer business at the back of the COVID-19 pandemic.

According to Gartner, outsourced IT services spend will increase to 6-8 percent between 2021-24, from 4-5 percent in the last 10 years due to acceleration in digital transformation spending.

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TCS and Infosys will be at the forefront of these changes given their comprehensive offerings, ability to win large integrated deals, and process capability, the report added.

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Apart from these two, HCL Technologies and Wipro too have robust digital infrastructure layer that they will be able to leverage.

These companies have also partnered with cloud hyperscalers like Google Cloud, Azure and Amazon Web Services and software-as-a-service providers to help their clients through the digital transformation journey, and are in the right space to help their clients at the back of the pandemic.

However, there is a catch. While clients are migrating to cloud at much faster pace, IT companies are unlikely to get the full benefit.

The report said while cloud service providers may see a 20-33 percent growth, the related growth for IT service providers would be low. “The surge post-COVID-19 can create new opportunities though not of the scale witnessed with cloud hyperscalers,” the report added.

In terms of customers, retail clients are investing in online platforms as shops were closed due to the pandemic to drive sales. Large retailers such as Lowes and Kohl are investing in digital platforms to increase online sales. For instance, e-commerce sales increased from 6 percent in FY19 to 8 percent between January and June for Unilever. For Nestle, the report said, e-commerce penetration increased from 8.5 percent in FY19 to 12.4 percent now.

Healthcare companies are ramping up their telehealth and telemedicine capabilities as the pandemic and lockdown have pushed the demand for these services. The US healthcare company Anthem’s on-demand telehealth solution surpassed one million visits in early April.

For travel and hospitality firms, contactless experience is necessary, and companies like Marriott have facilitated contactless check-in and mobile chats to reduce face-to-face interaction.

First Published on Aug 26, 2020 10:27 pm