IT companies' digital spending to increase by 13% to over $26 billion in 2024

Representative image

Information technology (IT) companies could expect digital spending to increase by 13 percent to over $26 billion in 2024 on the back of clients prioritising organisational efficiency and optimisation projects.

This is a huge jump compared to a growth of just around 5 percent to $22.9 billion in the previous year, according to data accessed by Moneycontrol from TeamLease Digital.

The anticipated jump in digital spending will be a shot in the arm for information technology (IT) companies as the sector has faced sluggish demand due to macroeconomic challenges.

“IT has been the front runner when it comes to adapting AI (Artificial Intelligence), and AI is one of the enablers when it comes to digitisation so it's a hand-in-glove situation,” said Krishna Vij, business head-IT staffing at TeamLease Digital.

Digital spending by clients broadly means revenue from new-age businesses such as cloud, products, and platform services that leverage these technologies. However, this definition differs from one company to another.

Businesses across sectors such as tourism, travel, retail, e-commerce, and automotive are increasingly investing in digital technologies, particularly AI and cloud-based solutions, to drive operational efficiency and optimise their processes. "On the one side, we are replacing jobs and creating more opportunities in the job market. Second is that you're automating multiple tasks by bringing in more technology intervention across," said Vij.

The data reveals that overall IT spending will increase by over 13 percent to $138.9 billion. The biggest jump in absolute numbers will come in from IT spending on devices, which will grow by 17 percent to $55.8 billion.

Chief executives of IT companies have been increasingly calling out that AI, particularly Generative AI, has been gathering pace in the recent past.

Last week, Accenture reported Gen AI bookings worth over $900 million in its third-quarter earnings. This takes the total Gen AI bookings to $2 billion for the fiscal year to date for the world’s largest IT company.

“Most clients are coming to the realisation of the investments needed to truly implement AI across the enterprise, starting with a strong digital core,” the Dublin-headquartered firm’s Chief Executive Officer Julie Sweet told investors on June 21.

Also read: Mixed bag for Indian IT: What Accenture's earnings imply for TCS, Infosys, others

The shift towards AI and cloud computing is not just about adopting new technologies, it's also about addressing the demand-supply gap in skilled professionals. Vij highlighted that there are almost 6 lakh professionals that are required by the industry as against the current number of only 4 lakhs, which implies a 51 percent demand-supply gap for AI professionals.

She further said that IT companies are not only investing in technology but also in upskilling and training programs to bridge this gap, to ensure that they have the necessary talent to leverage these technologies effectively.

India has almost 750 million internet users, which is continually increasing. This will open up a massive market for a wide range of digital services, platforms, apps, and solutions.

This rise in digital spending is expected to create a ripple effect, enhancing productivity across various industries.

"Companies are heavily investing in AI-related platforms because of the overall return on investments. They are also directing discretionary spending towards these technologies," Vij further said. This trend shows the importance of AI not only in the tech sector but also in transforming other industries.

The increasing demand for AI professionals has led to a discussion on the need to revamp the education system and increase industry-academia partnerships. "Our education system needs to be revamped, and there is a significant need for industry-academia partnerships to build a workforce that is ready for the future," Vij said.

The emphasis on AI and cloud technologies is set to remain a central theme in companies’ strategic initiatives even as they continue to solve the complexities of digital transformation. The market projections for AI are optimistic, which means a continuous flow of investment in these technologies.

"The market projection across AI is very heavy, and this will continue to be there," Vij said, indicating a robust demand for AI-driven digital spending.

Also read: Only 10% of 300-400 Gen AI implementations have scaled, delivered value, says TCS