IT Spend Revival In US Augurs Well For Indian Cos

Order book of TCS is really good and the management has said that discretionary spend is coming back. So, TCS’ performance shows a positive trend - Pareekh Jain, Founder, Pareekh Consulting, tells Bizz Buzz

Bengaluru: Revival of discretionary spend with improving performance in the North America will lead to better performance of Indian IT players in 2025, but many client-specific issues and vertical-focussed challenges will remain.

Analysts pointed out that TCS’ Q3 performance indicated that a revival in demand environment is underway, but it is not broad-based yet.

“Order book of TCS is really good and the management has said that discretionary spend is coming back. However, the number of clients in different slabs has come down. Similarly, verticals like manufacturing and healthcare saw challenges in terms of client spend. So, TCS’ performance shows a positive trend,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting, said.

“However, it might not be broad-based across verticals and geographies. But encouraging growth in the order book brings good news for the overall industry,” he added.

During December quarter, TCS’ orderbook stood at $10.2 billion compared with $8.6 billion in the previous quarter and $8.1 billion in the year-ago period. Such jump in the order pipeline indicated that discretionary spend by clients was coming back to the market. This augurs for the Indian IT industry.

“The point we wanted to emphasize here is the total contract value (TCV) growing after two quarters and in North America, BFSI, CPG, and this gives us the confidence in the medium term. I mentioned BFSI and consumer business, but we have observed early trends in few other verticals as well. Overall, this is what gives us confidence,” TCS CEO, K Krithivasan said.

Meanwhile, there is a high likelihood that while North America will perform better this year, Europe is likely to slow down. Moreover, emerging geographies like India, Latin America, Middle East are expected to see sound technology spend in the current calendar year.

“In the last one year, most of the large deals had come from Europe. This year, we see some kind of slowdown in European nations given that the major economies in the block are facing slowdown. However, TCS management has noted that emerging economies like India, Middle East and Latin America are performing better,” said Jain.

During the third quarter, among geographies, North America saw a decline of 2.3 per cent YoY basis, while UK reported a growth of 4.1 per cent for TCS. India as a geography continued to perform well for TCS on the back of BSNL deal ramp up.

TCS has won a contract worth around Rs15,000 crore from BSNL for deploying 4G networks across India. Management of TCS has said that apart from BSNL deal, the IT firm is also winning other outsourcing contracts to complement the trend.