IT Cos Stare At Tepid Discretionary Spend

Accenture’s results showed that there was a little change in the demand environment. Large scale digital transformation projects are still a far cry as discretionary spend has not picked up as expected earlier - Pareekh Jain, Founder, Pareekh Consulting, tells Bizz Buzz

Bengaluru: Indian IT firms are less likely to see revival in discretionary spending in the next financial year as indicated in the recent Accenture results. They may also have to manage their order book with many smaller size deals as large-size digital transformation deals are likely to remain elusive in the coming quarters.

According to market experts, Accenture’s second quarter results are a reflection of status quo in the market place without much change in the demand environment. This has dashed hopes of swift recovery in the next financial year, they opined.

“Accenture’s results showed that there was a little change in the demand environment. Large scale digital transformation projects are still a far cry as discretionary spend has not picked up as expected earlier. However, enterprises are spending more on AI & generative AI-powered projects, which is a good sign,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting, told Bizz Buzz.

Last week, Accenture reported a revenue of $16.7 billion, an increase of five per cent in US dollars during the second quarter. Its consulting revenue stood at $8.28 billion, an increase of three per cent over the same period last year. Its managed services revenue- the segment in which Indian IT firms operate- saw a robust eight per cent growth $8.38 billion during this period.New bookings during the February quarter were decreased by three per cent to $20.9 billion sequentially.

“The decline in consulting order book shows that enterprises are cautious in spending in new initiatives. This is happening as enterprises are uncertain about future growth in the current macroeconomic environment,” Jain added.

Brokerage firms also echoed similar sentiment. “We were optimistic that the ensuing macro improvement could lead to increased tech spending and growth acceleration in the beginning of 2025. However, since then, elevated uncertainty around US tariffs, global macros, and geopolitics have weighed on tech spending,” brokerage firm, Emkay wrote in a note.

Meanwhile, increased deal bookings in Generative AI space shows that clients are spending more on this technology. Accenture’s new bookings in Generative AI (GenAI) contributed $1.4 billion, or 7 per cent, of the company’s $20.9 billion in new bookings during the second quarter.

“The number of clients embracing GenAI is increasing significantly, and we are starting to see some tangible examples of scale in data and AI,” CEO of Accenture, Julie Sweet has said.