Agile mid-tier IT firms outpace larger rivals amid accelerating AI shift

Mid-tier IT services companies have again outpaced their peers, which arelarge IT firms. From Tech Mahindra & LTIMindtree to Persistent Systems & Coforge, most mid-tier IT services firms reported better revenue growth in the second quarter of ongoing financial year (FY26).

This is significant because many analysts predicted earlier that mid-tier companies would be disrupted more than their bigger counterparts due to the prevailing AI (artificial intelligence) wave. If the results are something to go by, this has clearly not happened yet. Is there a possibility of this happening in the future? To understand this question, it is better to analyse the impact of AI on IT outsourcing industry globally.

Firstly, AI platforms and solutions are automating many tasks in the IT services industry. So, the revenue model of IT companies, which predominantly lays emphasis on Time and Material (T&M), is being disrupted. Such trend is playing out for both large and mid-tier firms.

Secondly, as productivity in project execution is increasing, the time line for completion is becoming shorter and the human resources used are getting lower. These two factors have started to cannibalise part of IT companies’ revenues.

Now, in the context of mid-tier firms, analysts have feared that as the client base is lesser than large firms and dependency on top clients is higher; the impact of AI will be greater. But that is clearly not happening. Mid-tier IT firms have again proved that their adaptability is way higher.

Most mid-tier companies have been successfully transforming themselves as AI-first companies. Many are developing their customised AI platforms over large language models (LLMs). Tie-up with AI-first companies is on full swing and they are also deploying capital aggressively to acquire emerging AI companies.

In this way, they remain closer to the client. Another interesting aspect of AI and generative AI (GenAI) is also supporting their initiatives.

In many ways, AI is democratising technology platforms. Now, even youngsters coming fresh out of college are able to build unique AI platform and hitting million dollar revenue in a year or less.

Such feature of AI is helping mid-tier firms as they are developing customised platforms for clients for winning outsourcing projects. In this way, they are insulating themselves from losing clients. While loss of revenue to AI-powered automation is happening for all players, they are able to generate new revenue sources through AI-powered offering.

Will this trend continue. Mid-tier firms, time & again, have proved that they are able to adopt and prosper amid different technology cycles. Be it cloud or digital, mid-tier IT firms’ performance have proved everyone wrong. In the current AI era, such agility of these companies is likely to play out fully.

However, diversification of geography, reduction of concentration risks coming from a few clients and constant innovations are the factors that will determine their future. For now, mid-tier IT firms are evolving decently with AI wave supporting their revenue growth than working as a speedbump.