Cloud spends up 80%, digital transformation 30% amid pandemic: Nasscom, McKinsey

The pandemic has accelerated digital adoption across industries, resulting in technology service providers witnessing a sharp growth in digital deals. 

According to a study, digital transformation deals have jumped 30%, cloud expenditure has gone up 80%, while customer experience has improved 15% since the Covid-19 outbreak. 

As per a report by Nasscom, in collaboration with McKinsey & Company, extensive acceleration in digital adoption by enterprises and a potential increase in outsourcing intensity due to remote working are contributing to the faster-than-expected recovery of the technology services industry. 

“Top Indian technology service providers have performed better than analyst estimates in the second quarter of FY21,” the report said.

Between January and July this year, native technological companies and digital reinventors, which see a revenue of over $3 billion, have captured 65% of the $6 trillion growth in market capitalisation, the report said, highlighting that technology is now core to future business recovery.

With an increased focus on hybrid workplace models, companies have also reported an uptick in the digital dexterity of their employees and are actively reviewing processes to identify opportunities for automation and digitisation, the report said.

CIOs are already reconsidering their technology spends in favour of digitisation, the report said.

“In the next normal, discussions with enterprise CIOs suggest that 70% of enterprises are looking to either increase or reprioritise their outsourcing spend, with business digitisation (including remote enablement) and cloud transformation being the top two spend priorities over the next 12-18 months. Nearly 50% of CIOs will be focusing on efficiency, resilience and optimising spend wherever possible,” Nasscom said in a statement.

The report suggests that the world has leapfrogged on digital adoption by three to five years in the past nine months, Noshir Kaka, senior partner and global leader of analytics at McKinsey & Company, said. 

“We are seeing an increased emphasis on digitisation across verticals and our analysis shows that 80%+ of the near-term spending may be driven by Covid-19 resilient digital offerings,” Naka said.

The report surveyed 30 enterprise CIOs across industries, to offer a “microscopic near-term view of the future of technology services in the next 12-18 months and a telescopic view of its long-term shift over the next three-five years”.