India’s IT services vendors wary of making long-term commitment to single vendors: GlobalData


Bengaluru: The evolving digital economy is leading to smaller and shorter deals for IT services vendors in India, which could reflect the fact that enterprises are increasingly becoming wary of making a long-term commitment to a single vendor, according to GlobalData, a data and analytics company.

GlobalData said that the average outsourcing contract deal size amongst the Indian IT services vendors has come down to $17.2 million in the first half of this year from $22.9 million during the same period last year.

Similarly, the average contract duration for Indian vendors has come down from 40.2 months to 35.8 months during the same period, it added.

“The trend is still in its infancy, which gives the Indian IT players sufficient time to adapt to the changing business environment and transform themselves,” said Nishant Singh, Head of Data for Technology and Telecoms at GlobalData.

Despite fears of an impending slowdown, the impact of Brexit and the lingering trade war tensions, the Indian IT outsourcing industry has been quite resilient for a while now, GlobalData said.

“Indian IT services vendors such as TCS, Infosys, Wipro and Tech-Mahindra have all shown steady revenue growth, with most other Indian vendors too having reported solid revenues in their recent quarters,” it said. “However, despite the consistent revenue growth figures, there has been a lingering anxiety around profitability in the Indian IT outsourcing industry.”

Singh said these apprehensions reflect in the Indian IT vendors’ latest financial reports, which show the profit margins of most of the IT vendors including TCS, Infosys and Wipro have shrunk.

Indian IT vendors are improving their capabilities through investment in digital technologies, partnerships, mergers and acquisitions, GlobalData said, but the fact however remains that the traditional business model of large offshore contracts is under threat now, more than ever and they need to move fast to offset the changing IT services landscape and counter this impending paradigm shift.


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