ETtech
India's IT Outsourcing Industry Sees Pick-Up in Deal Momentum Amid Revival in Banking and Financial Sectors
New Delhi [india], December 1 - The Indian IT outsourcing industry witnessed a surge in deal momentum during the quarter to September, with almost 60 deals signed across various sectors, according to data from BNP Paribas. This marks a gradual revival of the sector, driven largely by increased demand from the banking and financial sectors.
The uptick was particularly notable for key IT services players, with major firms such as Infosys and Accenture securing significant deals in September alone. Infosys secured six deals each with Proximus group, LIC, and Metro Bank, while Cognizant grabbed three deals with Kombit, England and Wales Cricket Board, and Mecwacare.
Industry experts attribute the increase in deal momentum to the revival of key banking and financial sectors globally, particularly in North America. With US inflation under control and interest rates set to decrease further after the recent presidential election, analysts are optimistic about the upcoming cycle.
"This is heading into a year's budgeting cycle with a far higher certainty as inflation is coming under control and Fed rate cuts are no longer speculative but underway," said Kumar Rakesh, associate director at BNP Paribas and author of the report. "We see a much stronger dollar, which augurs well for our sector."
Total deals in managed IT services increased by 15.1% year-on-year to $26.7 billion in the September quarter, driven largely by increases in mega-deal activity and longer deal durations. While some analysts are cautious that holiday season may lead to a lull in the second half of the financial year, many companies expressed upbeat comments about the sector's future prospects.
"We see a bit of softening after December and March due to holiday season. However, deals in October show that momentum is returning," Rakesh added.
Several major deals were announced across various sectors, including finance, retail, and healthcare. Notably, Tata Consultancy Services (TCS) secured projects from the Department of Social Protection and Insper, while Infosys signed with Old National Bank and Zooplus.
Industry observers believe that the resurgence in deal momentum is an indication of the long-term relevance and strength of the Indian IT outsourcing industry, as well as stickiness of client relationships. However, some experts caution that without more information on specific deals, including renewal vs. new business focus, duration, and scope, it's challenging to gauge the real impact on key aspects such as revenue, margins, and digital transformation.
Despite this, analysts remain optimistic about the sector's prospects for the year ahead. BNP Paribas' September report notes that "September was an exceptionally busy month in terms of deal-win announcements by IT Services firms," with a 3M rolling sum of deal signings remaining strong as a leading indicator of deal values.