The evolving digital economy is eventually leading to smaller and shorter deals for IT services vendors in India, a reflection of the fact that enterprises have become conscious of the need to be agile and are thus increasingly becoming wary of making a long-term commitment to a single vendor, says GlobalData, a leading data and analytics company.
GlobalData reveals that the average outsourcing contract deal size amongst the Indian IT services vendors has come down from US$22.9m in H1 2018 to US$17.2m in H1 2019. Similarly, the average contract duration for Indian vendors has come down from 40.2 months to 35.8 months during the same period.
Nishant Singh, Head of Data for Technology and Telecoms at GlobalData, says: “The trend is still in its infancy, which gives the Indian IT players sufficient time to adapt to the changing business environment and transform themselves.”
Despite fears of an impending slowdown, the impact of Brexit and the lingering trade war tensions, the Indian IT outsourcing industry has been quite resilient for a while now.
Indian IT services vendors such as TCS, Infosys, Wipro and Tech-Mahindra have all shown steady revenue growth, with most other Indian vendors too having reported solid revenues in their recent quarters.
However, despite the consistent revenue growth figures, there has been a lingering anxiety around profitability in the Indian IT outsourcing industry.
Singh concludes: “These apprehensions reflect in the Indian IT vendors’ latest financial reports, which show the profit margins of most of the IT vendors including TCS, Infosys and Wipro have shrunk.
“Indeed, Indian IT vendors are improving their capabilities through investment in digital technologies, partnerships, mergers and acquisitions. For Indian IT Services vendors, the fact however remains that the traditional business model of large offshore contracts is under threat now, more than ever and they need to move fast to offset the changing IT services landscape and counter this impending paradigm shift.”
Notes to Editors
- Comments provided by Nishant Singh, Head of Data for Technology and Telecoms at GlobalData
- Information based on GlobalData’s IT Contracts Database of over 38,000 IT services contracts worth US$600bn, plus over 3,900 software contracts in 17 sectors, 54 IT service types and 48 IT solution areas covering 136 countries
- This report was built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis conducted by GlobalData’s team of industry experts
4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.
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