A slowdown in IT industry growth has been felt by almost every organization across industries, with a direct adverse impact on their productivity levels. The spillover impact of the huge investment made on IT infrastructure resulted in slower growth and lesser economic benefit during the entire period of research.
The impact of IT infrastructure developments is quite visible in the business segment. Let us have a look at the IT Industry Growth Rate per country: The UK has seen a marked slowdown in IT growth rate, mainly due to the exit of the main players from the region like Google.
Some of the major players who were very much active in UK market such as Imagination, Argos and Unite were forced to exit the region due to the impact of budget cuts on the back of recession.
This led to a growth in the IT outsourcing market, which was further fueled by an increase in the number of corporate clients who started outsourcing to other countries such as India. Top ecommerce websites are moving towards the India.
Hence, the overall demand for professionals in IT industry increased and the shortage of professionals in this industry led to a marginal reduction in the Gartner's A-Growth Index. However, IT outsourcing has not been the only reason for the slowing down of the growth rate.
Rapidly falling oil prices have also had a profound impact on the IT sector in the euro area. It is estimated that a decline of more than 10% in crude oil prices over a period of three years can reduce the annual growth rate by about six percentage points to about two percent.
Even though it seems unlikely that oil prices will fall by more than the expected amount, it is clear that the impact of these price decreases will be felt by all the companies in the euro area including Germany, Italy and Spain.
The reduction in oil prices also means that the cost of living in the euro area will be adjusted upwards, making it more competitive for companies to employ labor and human resources from other countries.
One other important reason for the slowing down of the growth rate is the dearth of good qualified software development outsourcing personnel in the western Europe.
According to estimates, about half of the software development outsourcing companies in the west Europe are based in the United Kingdom. Most of the companies hire from third world countries such as India and Philippines because of labor costs, which are much lower than those in Britain.
These factors along with low wages of workers in these third world countries have reduced the number of individuals who can afford to migrate to the UK to take up employment as IT tech manpower.
On the other hand, there are some IT companies operating in the European countries that are opting to outsource some of their work to emerging Asian countries like India, China and Malaysia. The number of multinational companies moving their back office facilities to these countries has been on the rise over the past five years.
The increasing attractiveness of the IT industry in these countries coupled with the opening up of capital markets in these areas has made it a viable proposition for many business entrepreneurs. In addition to this, several multinational corporations from London, Japan and US have decided to set base their back office facilities in these emerging nations to reduce their cost base.
To conclude, there are a few factors contributing to the slowing down of the IT industry growth rate. However, the overall outlook is positive as the number of multinational companies continue to move their back office facilities to greener pastures.
In the last two to three years, India has emerged as one of the attractive outsourcing destinations for software developers. There are also increasing numbers of companies in the European countries outsourcing their IT work to Asia in order to cut down on their cost base.