India’s top software exporters are set to compete intensely with local and overseas peers for a sizeable share of the estimated $16 billion of global IT services large deals that will come up for renewal in the next six months.
In an environment marred by slowdown in technology spending, these big-ticket renewals -valued over $250 million each- will trigger a slugfest among domestic and multinational companies, said industry experts.

Up for renewal is the $1-billion deal from Japanese med-tech firm Olympus Corp — currently serviced by Wipro — as well as Vodafone Idea’s $750-million contract and AT&T’s $2-billion one, both of which are now with IBM Corp.

Domestic Edge

A similar-sized contract from the US Department of Energy, which is with Accenture, will also be running out. Other notable US federal contracts that will come into the market are from the Cyber Command, valued at $900 million and held by Perspecta; Nasa’s $500-million with Science Applications International Corp (Saic Inc); and Axa Sun Life’s $843.5-million one being serviced by Capita, among many others, according to data shared by IT research firm Omdia with ET.

Indian IT firms are expected to put up a tough fight for these contracts, many of which are now serviced by global multinationals. “Indian firms have an edge here, as customers are still in the cost optimisation mode, which is a strength (of Indian IT firms),” said Pareekh Jain, chief executive, EIIRTrend, an outsourcing consultancy.
India’s top technology outsourcing companies have also rapidly increased their market share since 2019. They are well-placed to bid competitively for many of these renewals, having won large deals right through the difficult post-pandemic market.
In addition, “Indian IT vendors stand a better chance to win renewals against global mid-tier IT companies that have not developed their GenAI and cloud capacities as rapidly over the past five years,” said Jain.

Over the past four quarters, large Indian IT majors such as Tata Consultancy Services (TCS), Infosys, Cognizant and HCLTech have sealed several large and mega deals, including with Phoenix Group ($700 million), Nest Technologies ($1 billion), Danske Bank ($454 million), Liberty Global ($1.6 billion), CoreLogic ($1 billion) and Verizon ($2.1 billion), among others.

Cloud & AI

Experts are of the view that clients will look for vendors who can bring in a layer of new-age technology to their solutions.

Hansa Iyengar, senior principal analyst at Omdia, feels businesses will be eager to pump money into the “new shiny object,” such as AI, automation and cloud, at the expense of foundational transformations. “Margins, however, will be squeezed from infrastructure deals, legacy transformation and maintenance contracts,” she said.

Omdia data show IBM Corp’s 2019 deal with Spanish bank Banco Santander ($700 million) and Capgemini’s 2014 deal with French nuclear energy major Areva ($1.4 billion) are also coming up for renewal.

Most of these contracts are multi-year cloud modernisation, application development and maintenance deals from global telecommunications, manufacturing, banking financial services, and insurance as well as energy and utility majors, which end over the next six months, Iyengar said.

Also read | After a dry spell, IT sights green shoots with higher budget for 2024

Heightened Competition

The renewals are expected to be intensely competitive as technology clients turn more cost-conscious amid macroeconomic turbulence. The number of renewals and extensions has increased since the previous year, and deal wins will be critical.

Mrinal Rai, principal analyst at ISG, pointed out that a lot of clients are going for competitive bids to renew projects. “And given the marginal increase in client satisfaction metrics over the past few years, most incumbents tend to lose competitive renewal bids,” he said.

Cost optimisation continues to dominate sourcing decisions, with a pullback on discretionary spend persisting. ISG expects to see enterprises continuing to evolve and experiment, especially with the new AI technology.

Many renewals are coming in at lower rates, with smaller scope but longer terms, said Everest Group chief executive Peter Bendor-Samuel. “In other words, many deals are being renewed for less per year, but over a longer contract life,” he said. This explains the IT sector’s commentary about revenue leakage, which is an attempt to explain this divergence to their investors without creating alarm, according to Bendor-Samuel.

India’s top software exporters are set to compete intensely with local and overseas peers for a sizeable share of the estimated $16 billion of global IT services large deals that will come up for renewal in the next six months.
In an environment marred by slowdown in technology spending, these big-ticket renewals -valued over $250 million each- will trigger a slugfest among domestic and multinational companies, said industry experts.

Up for renewal is the $1-billion deal from Japanese med-tech firm Olympus Corp — currently serviced by Wipro — as well as Vodafone Idea’s $750-million contract and AT&T’s $2-billion one, both of which are now with IBM Corp.

Domestic Edge

A similar-sized contract from the US Department of Energy, which is with Accenture, will also be running out. Other notable US federal contracts that will come into the market are from the Cyber Command, valued at $900 million and held by Perspecta; Nasa’s $500-million with Science Applications International Corp (Saic Inc); and Axa Sun Life’s $843.5-million one being serviced by Capita, among many others, according to data shared by IT research firm Omdia with ET.

Indian IT firms are expected to put up a tough fight for these contracts, many of which are now serviced by global multinationals. “Indian firms have an edge here, as customers are still in the cost optimisation mode, which is a strength (of Indian IT firms),” said Pareekh Jain, chief executive, EIIRTrend, an outsourcing consultancy.
India’s top technology outsourcing companies have also rapidly increased their market share since 2019. They are well-placed to bid competitively for many of these renewals, having won large deals right through the difficult post-pandemic market.
In addition, “Indian IT vendors stand a better chance to win renewals against global mid-tier IT companies that have not developed their GenAI and cloud capacities as rapidly over the past five years,” said Jain.

Over the past four quarters, large Indian IT majors such as Tata Consultancy Services (TCS), Infosys, Cognizant and HCLTech have sealed several large and mega deals, including with Phoenix Group ($700 million), Nest Technologies ($1 billion), Danske Bank ($454 million), Liberty Global ($1.6 billion), CoreLogic ($1 billion) and Verizon ($2.1 billion), among others.

Cloud & AI

Experts are of the view that clients will look for vendors who can bring in a layer of new-age technology to their solutions.

Hansa Iyengar, senior principal analyst at Omdia, feels businesses will be eager to pump money into the “new shiny object,” such as AI, automation and cloud, at the expense of foundational transformations. “Margins, however, will be squeezed from infrastructure deals, legacy transformation and maintenance contracts,” she said.

Omdia data show IBM Corp’s 2019 deal with Spanish bank Banco Santander ($700 million) and Capgemini’s 2014 deal with French nuclear energy major Areva ($1.4 billion) are also coming up for renewal.

Most of these contracts are multi-year cloud modernisation, application development and maintenance deals from global telecommunications, manufacturing, banking financial services, and insurance as well as energy and utility majors, which end over the next six months, Iyengar said.

Also read | After a dry spell, IT sights green shoots with higher budget for 2024

Heightened Competition

The renewals are expected to be intensely competitive as technology clients turn more cost-conscious amid macroeconomic turbulence. The number of renewals and extensions has increased since the previous year, and deal wins will be critical.

Mrinal Rai, principal analyst at ISG, pointed out that a lot of clients are going for competitive bids to renew projects. “And given the marginal increase in client satisfaction metrics over the past few years, most incumbents tend to lose competitive renewal bids,” he said.

Cost optimisation continues to dominate sourcing decisions, with a pullback on discretionary spend persisting. ISG expects to see enterprises continuing to evolve and experiment, especially with the new AI technology.

Many renewals are coming in at lower rates, with smaller scope but longer terms, said Everest Group chief executive Peter Bendor-Samuel. “In other words, many deals are being renewed for less per year, but over a longer contract life,” he said. This explains the IT sector’s commentary about revenue leakage, which is an attempt to explain this divergence to their investors without creating alarm, according to Bendor-Samuel.