IT outsourcing contracts from unicorns set to fall
Of late, startups mostly unicorns had increased outsourcing contracts to IT services and engineering services firms; But ongoing financial crisis at startups will hit outsourcing contracts being awarded to tech companies
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- Most IT firms working with unicorns in their digital journey
- Indian startups facing a turbulent time
- Over 10K staffers fired by startups
- Cos with focus on edtech, fintech may see client-specific issues
Bengaluru: IT outsourcing contracts from unicorns of the startup world are likely to dip this year as funding crunch has led many startups across the world to tighten their seatbelts through various cost optimization measures.
Unicorns (startups valued over $1 bn) have increased their engagement levels with global IT services players with multi-million dollar outsourcing contracts being given to IT firms in recent years.
"Unicorns have increased their engagement with IT services and engineering services firms by outsourcing many IT operations. This was a growing trend in recent years. However, with funding crunch and global economic uncertainty, startups may hold back their IT spending. If this happens, we may see slowdown in such contracts in coming quarters," said Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting.
Starting from global giant Accenture to Atos to L&T Technology Services, many IT services and engineering services companies are currently working with many successful startups in their digital transformation journey.
For instance, Accenture and health-focused platform-as-a-service startup League are working together to improve digital health infrastructure. Similarly, Accenture is working with another near unicorn Climeworks that works on the carbon removal space.
Similarly, British healthtech startup Huma has entered into a five-year strategic global partnership to shift healthcare and clinical trials from hospital to home. This partnership mandates integration, enabling global go-to-market deployments apart from deployment of these solutions at scale globally.
Go-Jek, the South East Asian multi-service technology platform is engaged with Thoughtworks in innovating and launching new products and platforms.
Among Indian companies, L&T Technology Services has secured a $100 million electric air mobility deal from US-based Jaunt Air Mobility.
While some of the deals are on public domain, most IT firms are currently working with unicorns in their digital adoption journey.
However, sources said that the deal amount is very less of the total order book to make any substantial impact.
"Any downturn will not move the needle as in percentage term, the deal amount is not that big of total orderbook. However, slowdown in this burgeoning segment doesn't augur well for the whole industry," said a source.
Meanwhile, another source said that companies with focus on verticals like edtech, fintech or such specialized ones may see client-specific issues in coming quarters.
Indian startup ecosystem is going through a turbulent time with more than 10,000 staffers being fired from their jobs in the last three months. While edtech startups are the most affected ones so far, even other startups with high cash burn rate have begun to face the heat in recent months.
However, with funding crunch and global economic uncertainty, startups may hold back their IT spending. If this happens, we may see slowdown in such contracts in coming quarters
- Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting
