IT firms to face heat as global enterprises put digital projects on hold

As enterprises globally apply the brakes on many ambitious digital projects, IT services companies, which derive a higher share of their revenues from digital services, are set to face the heat. This is also expected to impact the deal pipeline of these companies in the second half of this financial year.
 
Digital initiatives of several global enterprises have been cancelled or postponed in the last couple of months as the Covid-19 crisis has prompted firms to halt non-revenue-generating ventures. “There is acceleration in shutting down of digital initiatives of enterprises that are either loss-making or are not core operations of these companies. This is being done as companies are looking to conserve cash to tide over the crisis,” said Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting. 
 
Globally, bigger firms are already going on a fundraising spree. While Boeing has raised $25 billion through a bond sale, Lufthansa has entered into an initial agreement with the German government on a 9-billion-euro bailout deal.
 
Experts said drying up of new digital projects would start reflecting in the deal pipeline from the second half of this year. “Almost every IT services company will be impacted in some form or other due to disruption in digital projects. Major impact will be seen in the short term, mostly during the second half of 2020 when the pipeline starts shrinking,” said Hansa Iyengar, principal analyst, digital enterprise services, at global consultancy firm Omdia.