BANGALORE: Technology budgets of large American corporations are expected to increase in 2014, with the proportion of outsourcing spends set to grow even faster as the world's largest economy stabilises, companies and analysts said. 

 

Departmental store chain Target, expects its information technology spends to increase in the coming year, while credit card company American Express said some of its key business decisions will depend on technology. Analysts who spoke with ET said that the number of large outsourcing contracts open for competition will be much higher compared to this year. 

 

Expectations of higher spending bodes very well for the $75-billion (Rs 4.6 lakh core) Indian software export sector where growth is beginning to pick up after a lull over the past few years. The US is the largest market for the industry, fetching over 50% of its sales. 

 

"We do expect our capital expenditures for IT and distribution this year will increase and likely be as high as capital expenditures for new stores and remodels," a spokesperson for Target wrote to ET. The Minneapolis-based discount-retailer spent $1.3 billion on new stores and remodels in 2012, compared to $982 million on technology. Target spokesperson said more and more retail customers today use technology to research, recommend and purchase products. 

 

This is in contrast to the conservative spending attitude that companies were forced to adopt until recently due to macro economic challenges, including slowdown in manufacturing and financial services sectors in the US. This had a direct impact on the growth of the Indian IT expect sector. Last two quarters had seen some thawing in the attitude, with some analysts calling it a demand revival. 

 

"Labour arbitrage based work — offshore outsourcing — would go up in the coming year as there is more freedom to spend," said Peter Bendor-Samuel, founder and chief executive of consulting and research firm Everest Group. He expects outsourcing spends to grow by 10% to 12% in 2014, compared to 6% to 8% this year. 

 

Overall technology spending in the US is set to rise 5% in 2014, according to research firm IDC. 

 

Credit card firm American Express, one of the top clients for Tata Consultancy ServicesBSE 0.75 %, Cognizant and Infosys, said technology will play an increasingly significant role in shaping its business decisions as well as those of other US companies in the coming year. 

 

Quoting an American Express survey, Jay Cary, company's vice-president for digital and global corporate payments said that 44% of companies are looking to better integrate existing information systems while 41% were looking to acquire or deploy new applications or analytical tools. 

 

The survey was conducted among 100 senior finance executives at US companies. "Finance executives absolutely see the value of information for driving crucial decisionmaking that improves efficiency, cuts costs and improves overall effectiveness," Cary said in an emailed response. 

 

"While short term considerations are keeping investments moderate, we anticipate IT spends and sentiment to continue to align." Traditionally, companies in the US finalise their budget decisions by the first week January. 

 

Mumbai-based equity research firm Prabhudas Lilladher said software firms have ramped up their hiring process as they anticipate higher amount of outsourced work in the coming year. "We believe that after a gap of nearly two years, we are seeing clients enter into the IT budgeting session on a positive note," analysts at Prabhudas Lilladher wrote in a client note. The brokerage also expects industry body Nasscom to raise sector forecast to above 15% in the next FY, compared to the 12-14% projection for the year to March 2014.

 

Sourse : Times of India