The scenario is nowhere as dire as it is for some of the other sectors, but IT services firms will feel the pain that many of its customers are grappling with, in the aftermath of COVID.

Consultancy firm Gartner expects aggregate IT spend by organisations across the world to decline by roughly $300 billion in FY21.

Continuing CNBC TV18's coverage to assess the impact of COVID-19 on Indian IT's financials, we did a dipstick survey across the senior executive management of India's top 10 IT companies. Here is what we found:

Hit across 5 key sectors; US clients to cut spending the most

Most IT executives we spoke to said the biggest spending declines would bein industries like retail, travel, transport and hospitality, which bore the brunt of lockdowns. But banking and financial services (BFS), despite being operational and an essential service in this period is also seeing massive cuts in spending.

"Some large BFS clients have either paused discretionary spending or halved it altogether;" said one of the executives.

"Large BFS clients in US are cutting down spending. Since Indian IT has a large exposure to them across the North America and Europe, the impact will be more than the cuts seen in sectors like travel hospitality."

Currently, there is no clarity on when any of these sectors will rebound but companies are hopeful that spending will start picking up in September.

Those surveyed expect manufacturing to start reviving October onwards. Geography-wise, spending is expected to fall the most in US followed by UK and the Rest Of Europe. IT spends in Asia Pacific and the Middle East are also shrinking, the top 10 Indian IT companies don't have much exposure to these regions.

Clients seek discounts, WFH worries

Another impact of COVID-19, aside from spending cuts, is that of clients seeking discounts in billing rates, sometimes as high as 40 percent.

The executives CNBC-TV18 spoke to said pricing will be hit all through FY21 and into F22 as well.

"It (pricing) may stablize only by mid FY22;" said a senior management executive. "We will invest significantly in digital centric outsourcing deals, but volumes may not see pre-COVID levels for a while," he added

A section of clients, especially BFS, is getting edgy about the Work From Home model. They have cited security concerns and are demanding that the Work From Home percentage be curtailed for their projects as many areas are relaxing lockdown norms.

Subcontracting staff let go

Companies like TCS, Infosys, HCL Tech and Wipro have spoken in their earnings call about how cutting down on subcontracting costs will be key while trying to cut costs and maintain margins. Most of the executives that CNBC-TV18 spoke to indicated that subcontracting costs are already being slashed. Around 70-80 percent of employees in subcontracting roles across onsite and onsite have been let go. Sub-contractors are specialised employees hired for specific roles for a limited period of time.

Clients in sectors like nonessential retail, transport and travel have started asking for furloughs (leave without pay) for project staff.

"Clients in these sectors have had next to zero revenues since February/ March. They have asked for employees working on their projects to go on leave without pay. Till May end, companies were able to afford the difference, but now clients are asking for the furloughs to be extended till August. In such a situation, we will be forced to ask some employees to go on leave without pay till they are put on other projects," an executive said.

While most IT companies are trying hard to ensure no employees are let go of, employees in between projects or on the bench will be under the scanner and could face the axe in some companies.

First Published:May 29, 2020 12:21 PM IST