Recession-led cost drive to benefit IT cos
Indian IT firms among biggest beneficiaries of IT deal consolidations in the last 2 yrs as large enterprises outsource large contracts amid cost pressure arising from the Covid pandemic
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Bengaluru: A possible recession may slowdown IT spend globally, but also has some silver linings. Experts are of the opinion that large cost takeout deals are likely to come in the way of Indian IT services firms as seen during the initial days of the Covid pandemic.
Such slowdown may also lead to market share gain by large domestic players as seen in FY22.
"All IT companies are cautious now with large IT companies seeing slowdown in order book. Big IT firms have been impacted more in recent quarters as large transformational deals were missing. However, if a recession strikes, possibility of large cost takeout deals coming to the market can't be ruled out," said Pareekh Jain, an IT outsourcing advisor & founder, Pareekh Consulting.
Indian IT firms have been among the biggest beneficiaries of the IT deal consolidations in the last two years as large enterprises outsource large contracts amid cost pressure arising from the Covid pandemic.
A recent study by HFS Research showed that at least half of the top global deals were won by Indian IT players with large services providers including Tata Consultancy Services (TCS), Infosys, HCL Technologies and Wipro being the major beneficiaries.
While Infosys won a $3.2 billion worth large deal from Daimler and a $1.5 billion contract from Vanguard, TCS bagged large deal worth $1.5 billion from Walgreens Boots Alliance (WBA) and a $2.3 billion deal from US research firm Nielsen.
Similarly, Wipro won a $700 million contract from German wholesaler Metro during this period.
Riding on the wave of mega deals, all large IT firms reported robust revenue growth in FY22. However, such deals are missing from the first quarter of current financial year as the pandemic receded across the world.
During previous global slowdowns, it had been seen that more IT work had been outsourced to Indian IT firms as companies cut cost to remain profitable. That was the reason that mega cost takeout deals have been awarded to Indian service providers in 2020-2022 period.
As the world stares at a possible recession in the United States and Europe, many industry insiders opined that domestic IT firms may gain market share as more such deals may come in their ways in coming quarters.
In the last decade, the market share of Indian IT firms has doubled as compared to their global counterparts.
India-headquartered IT services companies have doubled their revenue market share to 28 per cent by FY21 from 13.9 per cent in FY11, according to HDFC Securities.
