The metaverse ambitions of IT businesses may slow as clients become more wary

In order to assist clients in navigating this novel and ground-breaking technology, Indian information technology companies have been aggressively exploring and expanding their metaverse products from the beginning of 2022.

The metaverse is hailed as the mobile internet's replacement. A digital avatar can be used to engage with other people's avatars in this virtual, immersive environment.

Over 100 use-cases were created at the Metaverse Foundry, which Infosys founded. Tech Mahindra stated that it had 60 active metaverse projects in the works during the release of its Q1 earnings.

Client expenditure on cutting-edge technologies like the metaverse is expected to slow down right now amid global uncertainty and worries about a US recession, analysts and senior executives said. IT companies will need to proceed cautiously on this route.

According to Nachiket Deshpande, chief operating officer of Larsen & Toubro Infotech, "some industries are better-positioned to immediately benefit from the metaverse - gaming, media and entertainment, travel, and retail - while for a few other industries, the use-cases and roadmaps might not be immediately clear, and generally for organisations here, metaverse-related initiatives are part of discretionary spends."

He continued, "We anticipate some delay in these areas as money are reallocated to other technology projects that promise more immediate and noticeable results.

Global services firms that are creating advisory services or establishing retail metaverses for consumer corporations are among LTI's clients in the metaverse arena.

Dynamic Environment

Tech Mahindra, which has excelled in the new and futuristic technology sectors, is still optimistic about the potential in this industry while maintaining that the macroeconomic environment is still fluid.

According to Rohit Anand, chief financial officer at Tech Mahindra, "the Indian IT sector as a whole has managed to push against the fears of a recession here" with the help of the proper measures in place, such as controlling recruiting sprees and addressing inflationary pressure.

According to his observations of client encounters, there hasn't been a substantial change from how the year began.

"However, these settings are quite dynamic. Therefore, we must keep having these discussion interventions... and keep watching it, he stated.

Any effects of a US economic slowdown will eventually reach India, but only temporarily, according to Anand.

This occurs at a time when Mark Zuckerberg's Meta, a leader in the effort to create a metaverse ecosystem, has to scale down its rate of spending on similar projects to deal with margin concerns.

The enthusiasm and speed with which IT giants like Microsoft, Apple, and Google enter this market, as well as the quick development of related hardware and software products, are what make the metaverse significant for IT service and advisory firms. Because they are still in the exploratory stage, IT company clients must move quickly and take advantage of first-mover advantages.

Over the past few quarters, IT organisations have accelerated hiring for metaverse-related talents like AR/VR, blockchain, and AI to meet demand. A survey from the employment company Xpheno in March indicated that from January to March, there was an 8–10% growth in job opportunities in this field, with increases of as much as 80%.

At the time of publication, emails addressed to Tata Consultancy Services, Infosys, Wipro, and HCL Technologies asking for comment on their intentions for the metaverse had not yielded any responses.

Reserved Manner

Deshpande of LTI claims that the majority of his clients that are interested in the metaverse have either made their strategic investments and are implementing their plans at full speed or are acting more cautiously.

Their concerns are a result of the fact that there are currently many unknowns and fewer points of reference, he said.

Technology maturity and associated risks, user acceptance, and a lack of skill sets were cited as the main impediments in an LTI poll of 100 CXOs across North America. According to the poll, the majority of CXOs appear to think that widespread adoption will not occur for three to five years.

"It's safe to assume that the development and application of metaverse technology are still in their infancy... But with time, clearly defined measures for ROI, cost savings, and revenue growth will appear, prompting more organisations to clarify their plans for the metaverse, according to Deshpande.

The metaverse is currently in the exploratory stage, according to Ashutosh Sharma, head of research at Forrester Research India, and clients are only asking questions about it and possibly running a few pilot projects to see what works.

"At the same time, a lot of futuristic tech washing also happens," he continued, "in the sense that they'll claim that they've done this fantastic thing utilising this new shiny tech, but you'll discover it to be nothing but a tech-based answer dressed up in new."

Sharma claimed that huge economies are currently rather vulnerable as a result of skyrocketing inflation and sluggish GDP, which poses a significant risk in and of itself and would affect all service providers.

“But to cut the long story short, because of reduction in this discretionary spending, clients certainly would have cut down on some of these new experiments and experimentation,” Sharma added.

No Monetary Impact

Sharma continued by saying that while being cutting-edge, futuristic technologies like quantum computing and the metaverse only account for a very small percentage of IT companies' overall revenue—less than even 1%. Even if expenditure declines, current revenue streams won't be affected.

"This is something that is currently relatively new and research-focused. In an effort to draw customers, businesses try to leverage this technology. Service providers and clients are not significantly affected by decreased investments in them, he claimed.

Although the metaverse and Web3 have a lot of potential and opportunity in various industries, according to Mrinal Rai, chief analyst at technology research firm ISG, not much client expenditure is actually occurring there right now.

"Use-cases can be found in the banking and finance sectors, as well as in travel and transportation and, naturally, in entertainment, media, and gaming. Therefore, everyone is exploring the various pockets of opportunity in this sector. And when you refer to it as the metaverse, more than one technology is being used. The metaverse has building blocks, like as augmented reality and non-fungible tokens, he said.

Technologies that support such a setting, such augmented reality and virtual reality, he claimed, have been around for a while. Clients may not have the money to invest in the metaverse, but they are trying to implement AR-VR-based technology.

And many of these Indian IT service companies already have customers who use AR-VR technology for digital engineering, workplace collaboration, or even industrial designing, according to Rai.