Is the IT sector heading for a recession in 2024-25? According to J.P. Morgan – there’s now a 35% chance of a U.S. and global recession before the end of 2024. Indian tech companies are already feeling the strain, with over 200,000 job cuts in 2023 alone – driven by economic slowdown and the rapid rise of AI. Also, if a recession hits, U.S. firms may reduce IT budgets – affecting outsourcing to Indian IT companies and stalling projects. In this guide, we’ll cover when the recession in IT might hit, its expected duration, and how the industry could recover. Plus, we’ll share tips to navigate these challenging times and emerge stronger.
What is Recession?
A recession is when an economy slows down for a period of time. It usually happens when –
- Businesses stop growing
- People lose jobs
- Spending drops
During a recession, companies may earn less money, leading to fewer jobs and less investment in new projects. Recessions can last for months or even years – but they eventually end when the economy starts to grow again.
About Recession in IT Sector
A recession in the IT sector occurs when technology companies face economic challenges – leading to slower growth and reduced spending. During this time, firms may –
- Cut jobs
- Delay projects
- And lower budgets
Did you know? The Indian IT sector experienced notable downturns during the global economic recessions of 2001 and 2008.
- 2001: The dot-com bubble burst led to a global recession – severely affecting the Indian IT sector.
- 2008: The global financial crisis hit the Indian IT industry hard. Companies like Infosys, Wipro, and TCS saw slowed growth, fewer new contracts, and workforce reductions.
Despite these downturns – the Indian IT sector recovered both times.
Is IT Sector in Recession Right Now?
So, is it recession now?
Well, the IT sector globally and in India is under pressure – but not officially in a recession.
Global Level
While the IT sector isn’t officially in a recession globally – it’s experiencing significant slowdowns. Many companies have cut jobs due to rising costs, economic uncertainty, and the increasing adoption of AI. Let’s take a look at some statistics.
- According to Layoffs.fyi – over 130,000 tech employees were laid off in 2024. Companies like Microsoft, Cisco, and Intel have announced job reductions.
- Cisco is preparing for another round of significant job cuts – possibly exceeding the 4,000 positions it eliminated earlier.
- In July, Intel also announced major layoffs – planning to cut more than 15,000 jobs – which is over 15% of its workforce.
- Last month, Microsoft quietly cut around 1,000 jobs over the past two months – mainly in its mixed reality and Azure divisions.
- Similarly, the software company UKG announced it would lay off 2,200 employees – which is 14% of its workforce.
- However, despite this – the global IT spending is projected to reach $5.26 trillion in 2024 – a 7.5% increase from 2023 – according to Gartner.
These are signs of economic stress, but not a full recession yet.
India
The Indian IT sector isn’t in a formal recession – but it is facing challenges. Global economic issues, reduced outsourcing, and layoffs are affecting major companies like TCS, Infosys, and Wipro.
Fears of a U.S. recession due to rising unemployment have raised concerns for India’s IT services sector – which had been seeing growth after Q1FY25.
However, the sector continues to adapt and hasn’t experienced a complete downturn. Let’s take a look at some statistics about IT recession 2024.
- By August this year – at least 8,000 people were laid off by 32 companies across India.
- Paytm had the highest number of layoffs this year – letting go of at least 3,500 employees in June.
- Companies like Unacademy and WayCool have also had to downsize. Unacademy cut 250 jobs – and WayCool laid off 200 employees.
- The Nifty IT index dropped by 3.26% – with major IT companies’ stocks falling.
- Tata Consultancy Services (TCS), India’s biggest IT services company – saw its stock price fall 4% during intraday trading.
- Infosys’ share price dropped by 5.6% during the day, HCLTech ended 2.96% lower, while Wipro’s stock fell by 3.35%.
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Recession 2024 When Will It Start?
Experts are predicting a potential recession could begin globally in late 2024 – with a probability of around 35%, according to recent forecasts. This probability increases to 45% by the end of 2025.
In India – while there are concerns about economic slowdowns – the IT sector and overall economy show resilience. Many analysts believe that a formal recession may not occur – but challenges could arise in sectors reliant on global markets. The situation will depend on how global economic conditions evolve throughout 2024.
When Will IT Recession End?
If a recession in the IT sector begins in late 2024 – it could last for about 6 to 12 months – depending on how quickly economic conditions stabilize. Recovery will largely depend on improved demand for technology services and innovation in key areas like AI and cloud computing.
In India, if the global IT recession impacts the sector – recovery may also take 6 to 12 months. The resilience of large IT firms and their ability to adapt to new technologies could help shorten the downturn.
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Factors Contributing to the IT Sector Recession
Several factors are contributing to the IT companies recession – including:
- Economic slowdown: A general decline in the economy can reduce spending on IT services – leading to lower demand.
- Rising inflation: Higher costs for goods and services can squeeze company budgets – causing cuts in IT spending.
- Interest rate hikes: Increased interest rates make borrowing more expensive – leading companies to cut back on investments.
- Job cuts in major companies: Layoffs at major tech firms create a ripple effect – reducing confidence in the industry and overall spending.
- Shift to automation: As companies adopt automation and AI – there may be less need for traditional IT roles, leading to job losses.
- Global uncertainty: Political and economic instability in key markets can make companies cautious about spending on IT projects.
- Changing consumer behaviour: Changes in how consumers use technology can shift demand away from traditional IT services.
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The Impact of Recession in IT Industry
The IT market recession can have several significant impacts, including:
- Job losses: Many IT companies may reduce their workforce – leading to significant job losses across the sector.
- Reduced outsourcing: Global clients might cut back on outsourcing IT services – affecting the revenue of Indian firms.
- Slower growth: The overall growth rate of the IT sector could slow down – making it harder for companies to expand and invest in new projects.
- Budget cuts: Companies may lower their IT budgets – impacting investments in technology and innovation.
- Shift in focus: Firms may shift focus to high-demand areas like cybersecurity and artificial intelligence to stay competitive.
- Pressure on startups: Smaller IT companies and startups could struggle more than larger firms – facing challenges in securing funding and clients.
- Market adaptation: The sector may adapt by enhancing skills and pivoting to emerging technologies to recover from the downturn.
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Tips to Deal with Recession in IT Sector
For IT Companies
To navigate the challenges of recession in tech industry – IT companies should consider the following tips:
- Focus on core services: Concentrate on your main offerings and improve their quality to retain clients and boost satisfaction.
- Adapt to market needs: Stay flexible and adjust your services based on current market demands and trends.
- Improve efficiency: Look for ways to cut costs and improve processes without sacrificing quality.
- Build strong relationships: Maintain good communication with clients to understand their needs and strengthen partnerships.
- Explore new markets: Consider expanding into new industries or regions that may have better growth opportunities.
- Plan for the future: Develop a solid strategy for recovery, including goals and actions for when the market improves.
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For IT Workers and Professionals
Employees and professionals can take these steps to stay resilient during a recession IT sector:
- Enhance skills: Invest in training to keep your skills up to date with new technologies and trends.
- Network actively: Build and maintain professional connections to open doors for new opportunities.
- Stay informed: Keep an eye on industry news and trends to anticipate changes in the job market.
- Consider freelancing: Explore freelance or contract work to diversify your income sources.
- Be open to change: Stay flexible and be willing to adapt to new roles or projects that may arise.
- Save and budget wisely: Manage your finances carefully to prepare for uncertain times ahead.
- Find better job opportunities: Explore job listings on Hirist to discover new roles that match your skills and aspirations.
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Future Outlook for the IT industry
The future outlook for the IT industry is positive, driven by growth in areas like –
- Artificial intelligence
- Cloud computing
- Cybersecurity
As businesses depend more on digital solutions, the demand for IT services is expected to rise. While there may be short-term challenges due to the economy – companies will likely invest in new technologies to improve efficiency. The increase in remote work and digital transformation will also support the sector.
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Wrapping Up
We hope this blog answers all your questions about the recession in IT sector for 2024-25. While the industry faces challenges – focusing on core services and adapting to new trends can help companies and professionals navigate these tough times. If you’re looking to boost your career during this period, be sure to visit Hirist – a great platform to find the best IT jobs in India.
FAQs
Will the IT sector boom in 2025?
The IT sector is expected to grow in 2025 – driven by demand for new technologies and services.
What is the recession indicator for 2024?
Key indicators include rising unemployment rates, reduced spending, and slowing economic growth.
What is the recession period in IT industry?
The recession period in the IT industry can vary but often lasts from 6 to 12 months.
How long do recessions last?
Recessions typically last between 6 months to 2 years – depending on economic conditions and recovery efforts.
Can technology and recession coexist positively?
Yes, technology can improve efficiency – helping businesses adapt and survive during a recession.