Contract Renewals For Indian IT Firms Down By 32% This Year: Will This Lead To Losses?
How Did This Happen?
The latest report by Everest Group, which tracks global ITS and BPS contracts, suggests that the IT services and business process service contracts worth only $32 billion are expected to be renewed in the next two years, down by over a third from last year’s renewal expectation worth $49 billion.
Normally, the IT service providers like TCS, Infosys, Wipro, Cognizant, and HCL get 96-98 percent of their business from existing clients or renewals.
As the renewal opportunity is down this time, they may have to hardsell to get new business to grow.
The Vice-President, Everest, told BusinessLine, Yugal Joshi said, “Selling newer business is harder and, therefore, will need innovative and different practices. This will include building differentiated capabilities in highly commoditized markets where it is tough for service providers to stand out,”.
Competition With Newcomers
former vice-chairman of Cognizant, Lakshmi Narayanan also agrees saying that established IT players will face competition from mid-tier companies for new deals.
According to him, there is some amount of anti-incumbency, too, in the outsourcing space and established players are being forced to give way to new-comers.
The situation was already visible during last fiscal year when top Indian players struggled to ramp up new client addition.
Not Only Deal But Value Also Affected
It’s not only affecting the number of deals, but the value took a beating too.
As per this trend, during the first six months of FY21, most deals were below $1 million.
However, during the second half did the companies manage to strike deals in the $50-million and $100-million band.