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Small deals from EU big advantage for IT cos now

Many first time outsourcers are coming to the market with smaller projects that is leading to jump in small deals for Indian IT firms

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Small deals from EU big advantage for IT cos now
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10 Jun 2023 10:40 AM IST

Bengaluru Many new enterprises are entering the market to outsource IT work as ongoing slowdown creates severe cost pressure. Industry experts are of the view that these small-sized deals are mostly coming from the European region where companies are traditionally averse to outsource technology work to service providers.

This is leading to possibilities of increasing market share for those IT firms, which are bagging those deals. “Generally, during a slowdown many first-generation outsourcers come into the fray owing to cost benefits. Winning such contracts can lead to an increased market share,” Ashish Chaturvedi, a practice leader at HFS Research, told Bizz Buzz.

The rise in small clients has already been seen during the fourth quarter of last financial year. Infosys’ client in $1 million and above category rose to 922 by the end of March quarter as compared to 853 a year ago. Similarly, its clients in $10 million and above category increased to 298 in the fourth quarter as compared to 275 a year ago.

For market leader Tata Consultancy Services (TCS), clients in $1 million and above category increased by 59, while clients in $20 million and above category rose by 23 during the fourth quarter ended March 2023.

Meanwhile, the number of clients in the large deal category declined for most companies, while it remained static for some.

Top four IT firms- TCS, Infosys, HCL Tech and Wipro- saw an almost 40 per cent drop in large net client additions in the financial year 2022-23 as compared to FY22. These companies added 80 large clients, which are classified as deals in the $10 million to $100 million range in the fiscal ending 2023 versus 132 clients in FY22.

Sources in the know said that slowdown in discretionary spend is leading to ramp down in large projects. Even clients are not giving work orders despite signing large deals. This is one of the major factors in slow addition of large clients.

Meanwhile, many first time outsourcers are coming to the market with smaller projects that is leading to jump in small deals.

Global IT services industry is going through a slowdown with Indian IT industry likely to see growth rate similar to pre-pandemic level. No domestic large firm is expected to touch double-digit revenue growth in FY24. Brokerage firms are of the view that first quarter of FY24 is likely to be one of the worst quarters in terms of growth as demand situation has worsened in recent time.

Small Contracts A Big Deal

  • Rise in small clients already recorded in Q4
  • Infosys has 922 clients in $1mn and above category as compared to 853 a year ago
  • Its number of clients in above $10 mn rose to 298 from 275 a year ago
  • TCS, Infosys, HCL Tech and Wipro saw 40% drop in large net client additions
outsource IT work outsource technology work 
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