IT cos eye more mkt pie as slowdown bites

Overall, the growth rate has fallen for the global IT services industry. But companies can compensate for such decline by providing more cost benefits to higher number of customers. This way, they can increase their market share. Moreover, companies taking more onshore and near-shore work will grow faster than their peers - Pareekh Jain, founder, Pareekh Consulting, tells Bizz Buzz

Indian IT firms are taking various initiatives to beat the decelerating growth trend seen in the global IT industry through increasing their market shares. Experts said that those companies will emerge as winners in this downtrend, which will gain more wallet share from existing client bases.

“Overall, the growth rate has fallen for the global IT services industry. But companies can compensate for such decline by providing more cost benefits to higher number of customers. This way, they can increase their market share. Moreover, companies taking more onshore and near-shore work will grow faster (than their peers),” Pareekh Jain, an IT outsourcing advisor & founder of Pareekh Consulting told Bizz Buzz.

In the last fiscal year, growth rates of all industry players have come down drastically from double digit growth rates seen in previous fiscal years. Among large firms, market leader-TCS saw a revenue growth of 3.4 per cent in FY24. While Infosys’ revenue grew 1.9 per cent during this period, Wipro’s revenue from IT services saw a fall of 4.4 per cent in FY24. HCL Tech posted a total revenue of $13.27 billion, which was an increase of 5 per cent over the past fiscal in a constant currency basis.

Not only large IT firms, even mid-tier IT services companies have also seen revenue growth coming down to single digits from high double digits (15 per cent or more) seen in previous fiscal. Management of most companies have indicated that fall in discretionary spending is leading to lesser number of digital deals in the market. As several Indian companies draw more than half of their revenues from digital deals, the downturn in digital deals is hitting them hard.

Experts in the know said that IT firms are taking up deals of smaller sizes than their usual ones to increase client base.

“Large firms are taking up deals which used to be taken up by mid-tier firms earlier (in terms of sizes). Thus, companies are trying to overcome the slowdown blues by increasing their client base,” said Jain.

Sources in the know said that many companies are also diluting their operating margin profile in order to gain market share and push up growth.

“Management of many engineering services companies have indicated that they are more comfortable with current margin profile than increasing it in coming quarters,” said an industry source. This is a phenomenon, which is going to play out in coming quarters as companies are more keen to accelerate revenue growth than improving margins, the person said.