Indian IT cos unlikely to get new digital projects
$160-bn worth deals would fall due for renewal in Q1 of 2023; Indian IT services firms could corner a large share of these multi-year deals in $100-500 mn range in near future
- Indian IT firms started winning many large cost takeout deals
- TCS leading the show
- Tata group company in Dec bagged $350-mn from British Telecom
- TCS, Infosys, HCL Tech & Wipro are expected to get lion's share of such contracts as compared to mid-tier firms
- However, mid-tier firms entering new areas of operations
Bengaluru: Major IT outsourcing contracts are likely to be getting renewed though clients are taking a 'wait and watch' approach towards new projects concerning digital initiatives. According to market experts, slowdown concerns will not derail growth story of Indian IT firms though moderation in revenue growth rate is likely in FY24.
"Ongoing large outsourcing projects worth multimillion dollars will eventually get renewed. It doesn't happen that the deal gets cancelled. That keeps the market afloat. What gets a hit is the new digital initiatives," Ashish Chaturvedi, Practice Leader (Supply Chain, Retail/CPG, Disruptive Tech) of HFS Research told Bizz Buzz.
"Slowdown is not that unhealthy but businesses may go on a wait and watch mode due to such concerns," he added.
Earlier, reports suggested that around $160 billion worth deals would come for renewal in the first quarter of 2023. Most industry watchers expect that Indian IT services firms could corner a large share of these multi-year deals ranging from $100-500 million that will be up for grabs in coming months.
Indian IT firms have started winning many large cost takeout deals with TCS leading the show. The Tata group company last month announced the win from British Telecom, the value of which is pegged at around Rs 2,500 crore (around $300 million).
As chances of such large deal wins increase, large IT firms like TCS, Infosys, HCL Tech & Wipro are expected to get lion share of such contracts as compared to mid-tier firms.
However, experts pointed out that mid-tier companies are entering new areas of operations to expand their revenue sources. "Though mid-tier companies may not participate in large deals, but they are entering into new areas of service offerings to expand their base. So, any slowdown will prompt mid-tier firms to expand their footprints in new areas," said Chaturvedi.
Indian IT services firms will start announcing their third quarter earnings from January second week. TCS will report its Q3 numbers on January 9. Brokerage firms expect third quarter numbers will be largely in line with market expectations though the commentary from the management is likely to be different.
"The commentary from the management will set the direction of growth in coming quarters," said an analyst. With Accenture guiding for muted growth numbers in the second half of this calendar year, Indian IT firms are expected to see growth moderating from July onwards.
Ongoing large outsourcing projects worth multimillion dollars will eventually get renewed. It doesn't happen that the deal gets cancelled. That keeps the market afloat. What gets a hit is the new digital initiatives
- Ashish Chaturvedi, Practice Leader (Supply Chain, Retail/CPG, Disruptive Tech) of HFS Research