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.”