Wednesday, January 26, 2022

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Cloud migration taking precedence in IT

Cloud migration refers to moving digital data and applications to a platform that offers customers greater flexibility and reduced maintenance cost

Due to the pandemic-led explosion in online activity, cloud migration has taken precedence in spends among IT clients.

Indian IT services providers are gung-ho on the improving prospects of cloud migration technology, and so are investors in their stocks. Experts have indicated that in the post-covid era, they see increased traction in this segment.

Cloud migration refers to moving digital data and applications to a platform that offers customers greater flexibility and reduced maintenance cost.

At a recently held IT investor forum by HDFC Securities Ltd, the management of technology giant Tata Consultancy Services Ltd said that the percentage of large enterprises that were on public or hybrid cloud was only 17 to 20 per cent at the start of FY21. However, post-pandemic, it is at 30 to 35 per cent. At the same forum, peers Infosys Ltd and Wipro Ltd said they are seeing increased demand for cloud migration.

Tier-II IT companies Mindtree Ltd and Corforge Ltd are also betting on increased revenue from cloud transformation. The Coforge management said it has closed multiple large deals in the $20 million-plus bracket that are focused on cloud migration and infra services. Coforge expects this service line to significantly lead its growth in the next two years.

But analysts at ICICI Securities Ltd have a note of caution. They said the long-term visibility on revenue generation from any technology change is limited despite the near-term optimism over cloud services.

A similar euphoria around block chain and internet of things over FY15-18 had failed to gain scale and contribute meaningful revenue over the medium term, they said in a report on 4 March. “In the current context, this makes us more cautious as the entire consensus optimism seems to be baked into the longer-term even as near-term revenue trajectory (FY20-23) remains constant or lower”.

IT services companies for 2021 and 2022 are broadly similar to where they were pre-covid Gartner’s IT spending outlook and analysts pointed out.

Of course, ICICI’s is more or less a minority view. But it’s worth noting that for some global companies, such as Accenture Plc., even though their cloud services business is doing well, their revenue guidance does not factor in a surge in overall growth.

Analysts at domestic brokerage house Edelweiss Securities Ltd said increased adoption of cloud migration by customers presents a $1 trillion opportunity for the global tech services industry. For global outsourcing, this could translate into $250 billion worth of revenue and approximately incremental revenue of $175 billion for Indian IT services. Edelweiss estimates that this could result in doubling of export revenues from the existing $150 billion or a five-year revenue CAGR of 16 to 17 per cent for Indian IT firms. CAGR is short for compound annual growth rate.

Also read: Transformation of BFSI industry with cloud and AI combo

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Khushbu Soni
Chief Editor - CIO News | Founder & CEO - Mercadeo


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