IT industry Outlook 2021: Year of Optimism, Adaption, Digital and Reset

IT industry outlook 2021

Year 2020 will be recalled in our history for some of the most unanticipated events ranging from healthcare crisis, pandemic, loss of human lives and livelihoods, global economic damages, geopolitics, cyber-attacks causing disruption, anxieties, social unrest, inequalities and devastation.

The crisis is however far from over. The recent news on the mutation of the coronavirus into highly contagious new variants are not only alarming but also bringing new degree of uncertainty in the environment. While the GDP growth projection for 2021 by IMF are giving some sign of relief for global recovery however the bad news is it would take a minimum of 2 years for the majority of economies and every country (excluding China) to reach back to the pre-covid levels. The economic activities, people mobility coupled with fiscal and monetary policies adapted by each country would drive the recovery based on the efficacy and effective distribution of coronavirus vaccine during 2021. There is a broader optimum across industries for growth. The year 2021 is expected be the cautiously optimistic year for many industries and players serving it including the IT industry that is largely dependent on other industries. Since the pulse of other industries are going to drive the growth of IT industry, it is important for IT players to observe the activities, trends, timings and revivals of other industries along with careful evaluation of potential opportunities in each industry.

Managing pandemic fatigue with right strategy, focus and agility

The pandemic fatigue have already drained companies, employees, intermediaries, suppliers and other stakeholders psychologically, financially, physically and emotionally. The uncertainties, anxieties are still around and are likely to drive the organizational habits and behavior in the next year. 2021 will be a year of choices, a year of making careful business bets and technology decisions that companies need to make to thrive. The products and services would definitely take new shapes and forms with digital channel becoming the most preferred choices and mainstream channels for almost every industry.

While the overall economic recovery is likely to take a U or K shape (rather than V, W or L shape), the customer sentiments would drive the growth in each industry. Few industries would recover at faster pace and may experience V shape recovery. If your company is servicing or part of such industries then you are lucky, otherwise it is advisable to look for adjacent industries that you can pivot quickly so that you are not impacted by slowness in your industry. Again it is not an easy decision to pivot but a matter of choice and survival. Full potential is achieved by pushing Growth, Margin, and Optionality to their limits based on a series of triggers. McKinsey has summarized the strategic choices available to companies in 2021 very precisely below that companies can use a guiding framework for making decisions as we transition to the New Year.

Source: McKinsey (2020)

Digital technologies helped many industries during 2020 to survive and thrive by offering remote working (work from home), running the business remotely, collaboration, digital sales, servicing, marketing, new digital offerings, digital payments and settlements.

The same patterns would continue and govern the year 2021 for major industries at least during the first half of 2021; and mostly would be influenced by human behavior and psychology of virus inflection, risks and perception around efficacy of vaccines.

There is going to a fair degree of volatility and uncertainty during the entire 2021. The right strategy is key for companies to pick right themes, assess customer sentiments, industry growth, buying patterns and develop appropriate digital offerings and sell to different buyers’ segments. Pharma, Telecom industry are the only industries that would gain the most during year 2021 once the virus fear subsides and vaccine rollout, distribution and usage picks up. The players that can read the pulse of customers and market timely would be the one that would thrive in the post pandemic era.

Assess recovery cues, customer sentiments carefully timely

“Sense and respond with agility” and “Adapt and adjust” would define the winners during 2021. While these proverbs are in use for quite some time, it has become most relevant in the current pandemic times especially when every industry has taken a hit during the pandemic and everyone wants to bounce back as quickly as possible. How quickly one picks the customer and market cues, buyer’s behavior, market changes, customer spending patterns, pivot with new offerings/services and react with agility would decide the market winner. As there is so much of volatility in the market and likely to continue for year 2021, very few players would act with swiftness and the majority of other players in the market would behave cautiously considering the more things change, the more they stay the same. Risk management has always been the DNA of every business including gambling business, so the actions of many companies are much more predicable for year 2021. The optimism alone may not be a driving force for a complete turnaround in various industries.

While the timing of recovery would vary from industry to industry, there are few areas in each industry that would witness a shift in customer demands, spending patterns post pandemic. Companies must focus on using appropriate tools and technologies to assess such demands without overlooking the underlying risks. Below are the factors that could impact the 2021 growth across industries.

Source: (2020)

IT suppliers commonly operates in the common industries (as listed below) for revenue generation and growth. Below are some of the dynamics that IT players must assess in each industry carefully to check the demand and growth patterns, spending behavior of buyers during 2021.


Banking sector is likely to experience the major activities during 2021. The common categories include demand for new loans/credits/Mortgages across customer segments. While these functions has always been the bread and butter for banks, the changing dynamics includes managing new risk exposures and lower income customer segments post pandemic. The loan growth is expected across the banking segment globally (source: S&P global forecast) which eventually would give rise to higher NPA for many banks due to uncertainty in the environment and potential bankruptcies of large businesses. The RoAA (return on average assets) is likely to be flat or negative for the majority of banks globally (source: S&P global forecast) during 2021. In spite of higher activities, overall banking sector growth is expected to be slow, uneven and uncertain during 2021. Here are some of the areas that banks must focus on leveraging right technology.

  • Risk Management, Underwriting and handling of NPA’s
  • Retail and corporate lending/Mortgages, Letter of credits etc
  • Digital KYC and New customer engagement models
  • Open banking, Digital Payments and cybersecurity
  • Managing employee productivity and wellness


Property & Casualty (P&C) Insurance sector has witnessed much lower impact than the life insurance industry during pandemic times. Global Life industry contracted by over 4.5% in year 2020 whereas P&C industry maintained a 1% positive growth during current year (source: Swiss re). The defaults in payments related to life, annuities and term products were hard hitting for life insurers compared to the impact on property and casualty insurers. While there were higher business interruptions impacting combined ratios for commercial insurers, the personal lines were relatively stable. In 2021, global P&C industry is expected to grow at about 3.6% whereas global life insurance is expected to grow at about 3%. Overall insurance industry is expected to rebound and grow strongly in 2021. Here are some of the areas that insurers must focus on leveraging the right technology.

  • New product innovations for low income/economically hit customers
  • Commercial Underwriting, Sales and distribution and self-servicing
  • Dynamic pricing factoring pandemic and price sensitivity
  • Product bundling across P&C, life and healthcare for driving sales


The commitment and care of the healthcare industry during pandemic times has been exemplary, unparalleled and commendable. The caseload of the healthcare industry would continue during 2021 post the mass rollout of vaccines and demand for other healthcare services. While the cost of healthcare is expected to shoot up significantly during 2021, the government actions and regulations would drive the outlook in each respective countries. Patient volumes would remain constrained during 2021 due continued fears about coronavirus exposure, inflections and uncertainty. The outlook for not-for-profit and public healthcare sector is expected to be negative on constrained revenue, rising costs (source: Moody). The private healthcare players are expected to witness some momentum in healthcare services due to the vaccine progress, rollouts but not enough to push the growth and profitability for overall healthcare systems. Here are some of the areas that healthcare players must focus on leveraging the right technology.

  • Distribution and workforce management
  • Monitoring and virtual care services
  • Privacy, Safety and information security
  • Infrastructure development and management


The outlook for retail industry is expected to be stable during 2021. While the spending patterns towards in-store buying would be driven on the buyers’ sentiments towards efficacy of vaccine and safety in stores, the GDP growth in each country would definitely give a boost to customer spending and help retail industry grow inevitability. Some demand in retail would be governed by the “Revenge spending” that refers to purchase by consumers who have missed shopping at their favorite outlets due to the lockdowns. The outlook is expected to positive for the retail sector for 2021. Here are some of the areas that retail players must focus on leveraging the right technology.

  • Digital sales, touch-free distribution
  • Enhancing customer purchase experience (online, In-store)
  • Analyzing spending, demands to align fulfillment
  • Retail Supply chain management


The travel sector is going to take the longest time to recover across all industries. It was the hardest hit industry and may face challenges during 2021. Opening of economies, safety measures adopted by each country and ease in travel restrictions would drive the growth of the Travel industry. Business travels would still witness a bigger hit as companies would continue efforts on cost optimization whereas pleasure driven travels would see some marginal demand in 2021. The passenger’s sentiments towards travel, safety would govern the travel industry. The outlook is expected to negative for travel sector for 2021. Here are some of the areas that travel players must focus on leveraging the right technology.

  • Cost optimization
  • Demand Aggregation and servicing with other industry players
  • Packaged offerings with tailored values adds
  • New offering with safety and healthcare benefits

Real Estate / Housing

The banking sector lending, economic activities and surplus cash with ultra-rich segment would give some push to real estate sector but the growth is expected to be muted due to the limited purchasing power of the individuals and corporate players. The super-rich segment would take advantage of the market conditions, relatively lower prices and are expected to make investments in real estate for medium to long term benefits. The new infrastructure projects initiated by governments to give boost to the economy would further strengthen the real estate industry. Overall the real estate or housing market would be relatively stronger in 2021 compared to the previous year. The outlook is expected to positive for the real estate sector for 2021. Here are some of the areas that real estate players must focus on leveraging the right technology.

  • Customer experience and engagement
  • Inventory, Demand –supply Management
  • White labeling, aggregations, customer analytics
  • Campaigns, promotions and servicing


The telecom sector is expected to grow significantly during year 2021. The remote working, video and internet/online based servicing has given significant push and growth avenues for the telecom sector during the covid time. As the remote/work from home working model is expected to continue for many sectors, the need and demand for high speed network/network is inevitable. The emergence of 5G is going to give another boost to the telecom sector during year 2021. The speed, connectivity would decide the winner in the telecom sector that is highly competitive. The outlook is expected to positive for the telecom sector for 2021. Here are some of the areas that telecom players must focus on leveraging the right technology.

  • Network Management and customer base
  • Customer churn
  • Product innovation and pricing
  • 5G rollout and stabilization

HRTech/ Staffing

As the unemployment rates have started coming down in the major markets since last the two quarters, the staffing and HRTech industry is expected to grow during year 2021. The GDP growth, government stimulus and growth push across sectors would require skilled resources both in contract staffing and permanent placements. The talent shortage on niche and demand for digital skills would drive the growth of companies that are serving the staffing industry directly or indirectly coupled with innovative solutions that addresses the fragmentation of the market. The outlook is expected to positive for the HRTech/staffing sector for 2021. Here are some of the areas that HRTech/staffing players, and IT services firms that do white labelled/ad-hoc staffing services must focus on leveraging right technology.

  • Talent targeting, qualifications and swift onboarding
  • Virtual hiring and digital skill fulfilment
  • Talent engagement, Communication and collaboration
  • On the go and self-servicing capabilities

Digital technologies to drive market growth for every industry

The pandemic had pushed companies across the industry segment to adopt digital largely by force during 2020. Every industry has openly acknowledged the power of digital and technologies during the crisis time.

The business cannot survive and thrive without the right use of adequate technologies. The digital is expected to drive the online business models across industries, pushing development of new digital platforms, tools for engagement, servicing and adequate infrastructure to maintain and run digital business.

This is positive news for every IT players, as digital is the already a top agenda on every CXO’s charter for 2021.

The IT players must read the cues from every industry that they are servicing and devise tailored strategies for a different segment of its customers. The simple reasons being the challenges are unique to each industry and recoveries are expected to take off at a different pace during 2021 and beyond. While growth is on the mind of everyone, one must remember that there are still ongoing challenges on liquidity, capital and uncertainties in the market. This would force many industry players to operate in a “play-safe” model, thereby giving push to cost optimization themes. The “low risk, high reward model” would still be the preferred choice for many industry players.

As the remote and online working models are likely to flourish, the push for Collaborative and productivity tools would take the front seat. We already saw recent acquisition of Slack by Salesforce for $27.7 Billion that gives cues on the importance of engagement and collaboration in the new digital and online world for various industries. CRM (Customer Relationship Management) systems are transforming into CEM (Customer Engagement Management) systems

Top 7 Technology investment priorities for 2021

The IT trends and outlooks are relatively predictable for 2021 because of the climate and environment that every industry is undergoing in the current pandemic time. Cost optimization would force companies in various industries to adopt cloud and reduce higher in-premise infra cost/ internal data center cost. This would make the Cloud adoption as the most preferred options for CXOs during 2021. The remote operating models, online/digital sales and services business models would continue that would make digital engagement tools, portals and platform development as another investment areas for companies in various industries.

The digital investment are on cards for almost every industry. In order to protect the online business and cloud infrastructure, the cybersecurity would automatically come as implied investment by CIOs in different industries. The recent “SolarWinds hack” that is a kind of “global supply-chain attack” would potentially impact many companies during 2021 as the software(s) of SolarWinds are used by thousands of companies worldwide as a popular “IT monitoring and management software” either directly or through their other core IT service providers. This would definitely push allocation of budget for the cybersecurity initiatives across companies during 2021. In addition, the software/tools that enables and enhance remote working experience seamless for its employees, would get budget allocation supporting collaboration, productivity and remote work Management. Here are the list of top 7 technology priorities areas that the IT players can expect from their customers during 2021 in various industries. These are in not in any specific order but would be driven based on the buyer’s industry, its recovery rate and the strategy adapted by each industry buyers.

Top 7 Technology investment priorities for 2021

We already have seen investment made by companies in year 2020 in enabling “remote work” and the same trend is expected to continue in year 2021. The online business model would require structured storage of information for future use and its analysis that would drive investment in data infrastructure especially for companies that wants to monitor buyer’s behavior, online activities and associated activities due to new engagements methods adapted by businesses.

The cost optimization would drive automation agenda for this year too and usage of automation tools are would witness higher traction during the upcoming year. In order to target a new or changing segment of buyers and customer and analyze business performance closely, the advanced analytics and artificial intelligence (AI/ML) based investment would catch momentum. Overall the nature of IT projects and associated investments are not going to change dramatically in the year 2021 as compared to the previous year.

What to expect in IT budgets during 2021?

The business environment is uncertain at the moment and likely to continue to be the same for next 1–2 quarters for the majority of companies in various industries during year 2021. This makes the environment “cautiously optimistic” for many players in various industries. While the digital investment would be there on cards for the majority of companies, however the urge for business growth may not necessarily give the push for additional budget allocation by the CXOs in various industries. The digital investment would definitely be supported by discretionary spending but this may get offset with the constrained spending on business as usual areas. Overall the IT budget for 2021 is expected to be similar to that of the previous year. IT players can expect a marginal increase of 3%-4% on IT budgets. Gartner in its October projections indicated the global IT budget increase of about 4% which is expected to get downward revision in the next revision cycle due to the ongoing pandemic uncertainties and questions around recovery of various industries.

Companies must allocate adequate digital budgets on key initiatives that would help them in supporting the new business models and online business in the current pandemic time. The services of the established mid to large size IT suppliers would be preferred during 2021. This may put additional pressure on small firms, startups and boutique companies. The R&D and innovation budgets are expected to get further cuts during the year 2021. The suppliers, supporting the business as usual (BAU) projects (aka as the AMS or Application Management Services) can expect significant “rate card” cut demand from their customers during the year 2021 that could be in tune of 10% to 25%.

The competition for cloud, digital, AI/ML will get fierce amongst IT suppliers operating within the same industry. The BPO (business process outsourcing) business is expected to pick up steam as many customers would scale up their low cost centers to optimize cost. The remote working model has already blurred the boundaries of onshore, nearshore and offshore, so scaling offshore is the safest bet for companies that relies on such operating model. Overall, it is going to be a muted growth for IT supplier servicing various industries. It is advisable for the CXO’s to go with a quarterly review and revision (instead of annual budgeting cycles) of IT budgets in year 2021 so that digital investments and other key investments are aligned with the ongoing market trends, recovery rate and other business parameters that are going to drive the 2021.

Final Thoughts

The 2020 will be remembered as a dark year in human history. The year started with darker side of virus attack in the form of coronavirus and ending with another darker side of virus mutation into contagious variants and cyber-attack of SolarWinds with potential global impact. The environment uncertainty is still persistent and is expected to continue for at least till the first half of year 2021. The corona vaccine announcements has given some hopes to the end of pandemic thereby bringing some optimism in the market but recent mutation news has put such hopes into questions again. The vaccine efficacy, mutation, its side effects and distributions would be the talk of the year 2021. The sentiments are getting positive gradually, however we must remember that the crisis is far from over and industries would take at least 2 years to rebound to pre-crisis level. 2021 will be the year of great reset. The vaccine economics would bring the trade deals back on the table and may give some push to global collaboration. The majorities of industries are going to benefits from this. The IT industry must capitalize on the opportunity to grow and excel in 2021. The recent news on mutation of the virus is expected to bring cross border restrictions back into equation with a new level of uncertainty, impacting the overall recovery projections of the IMF. While the environment is going to be uncertain, the cravings for growth and recovery would push various industries to innovate new products, services to align with changing market dynamics. Sensing the customer demands, purchase patterns and industry activities are going to be crucial for IT players to pitch the right offerings for its customers. “Sense-Adjust-Adapt-Deliver with agility” is the need of the hour for various players who want to make a difference during 2021.

Digital business is going to grow without any question across industries so IT players must act timely to take advantage of the situation, adapt and tailor customer aligned offerings. The competition is going to be fierce amongst IT suppliers and the companies that could sense the pulse of market, industries and customer demands will win the game in year 2021. Customers are most likely will be very pragmatic and cautious in spending amid the market uncertainty, so IT budget of customers are expected to be more or less similar as of the year 2020. The discretionary spending would be primarily on digital initiatives. Cost optimization initiatives would get triggered in customer environment automatically to offset the impact of additional discretionary spending. From IT priorities perspective, Cloud adaption, Digital engagement, cybersecurity, collaboration, Remote work management are expected to be the top investment categories by buyers in different industries. Overall, 2021 will be a year of Optimism, Adaption, Digital and Reset. Let’s hope for the best for year 2021 and be beyond!

Disclaimer: The views and opinions expressed in this article belong solely to the author, and do not belong to or reflect the opinions of the author’s employer, organization, committee or other group or individual. The content and information contained on this article should not be construed as nor relied upon as professional or legal advice. You as a reader of content or information contained in this article should not act, nor refrain from acting, based upon any or all of such content or information, but should always seek the advice of competent experts in your respective industries and appropriate jurisdiction.

Girish is VP-Digital at Collabera with 20+ year experience. He has led digital transformation for many Fortune 100 companies while at Wipro, DXC, HPE, Mindtree.