Indian cos to cut IT spend by up to 30%

Indian enterprises in the several key sectors are seen cutting spending on information technology by up to 30% this year as they try to cope with lower demand for their products and services in a slowing economy.

IT heads at leading banks, retailers and public sector companies have started deferring new technology investments, such as on unified communication, and pared annual IT budgets, Chief Information Officers (CIOs) and analysts say.
Economists estimate India’s GDP growth to moderate to 7-8% in 2008-09 from 9% in the previous financial year. ET spoke to five CIOs in the banking, finance, retail and government verticals, who confirmed that that the budget cuts were underway.

“We have postponed our investment in unified communications infrastructure, which could have cost us a few crore,” the IT head of a leading public sector bank said requesting anonymity. His bank spends over Rs 100 crore annually on IT, and he said that it could be down to around Rs 75 crore this year.

Last year, Indian companies spent almost $ 5.6 billion (Rs 26,600 crore) on software services and applications. Total domestic spending on IT, including hardware and BPO services, was around $16 billion for the year ended March 2008. “CIOs are cutting their budgets by anywhere between 20 and 30%, and in some cases even more,” said consulting firm Browne and Mohan managing partner TR Madan Mohan.

The domestic market, which grew at over 25% last year, is expected to slow down to a 15% rate this year because of lower enterprise IT spending, Mr Mohan added.

Many retailers, who were running pilot projects evaluating new technologies such as RFID, have halted them. “The management does not have patience for pilots anymore. I have been asked to stay away from all new investments and only focus on maintaining the existing systems,” a CIO said.