The healthcare business of India’s IT companies has been silently spearheading the $250 billion industry’s growth, being a bright spot at a time when key verticals such as financial services, retail and hi-tech have been under pressure for almost two years now.

Digital transformation in the healthcare sector is driving this business for IT firms, analysts said. These are mostly small and medium deals, but the volume is high, and unlike in other verticals, the deal activity has not seen the post-Covid spike or the slowdown that followed.

“The healthcare tech services market is disconnected from the commercial market like banking,” said Peter Bendor-Samuel, chief executive at consulting and research firm Everest Group. “It is more closely related to the government services market. Healthcare is significantly funded by government spending which has kept increasing.”

At IT market leader Tata Consultancy Services, the life sciences and healthcare vertical’s contribution to total revenue grew 2 percentage points in the past two years, partly offsetting the impact from a slowdown in the BFSI (banking financial services and insurance) segment.Its nearest rival, Infosys, too is posting strong growth in the vertical serving the life sciences sector. As per the company’s annual report for fiscal 2024, the share of life sciences in its total business grew the fastest after manufacturing. The contribution of financial services, meanwhile fell to 27.4% from 29.8% in FY23.

Infosys has ambitions to take its life sciences revenue to $2 billion in the next three years from the current $700 million, HFS Research chief executive Phil Fersht told ET recently.

Wipro reported a strong 7.2% year-on-year expansion in its health vertical revenue in the first quarter of FY25. In fact, it was the only vertical among the seven of the Bengaluru firm that posted growth.

Healthcare tech services spending did not see the kind of acceleration that most markets had seen during Covid, said Everest Group’s Bendor-Samuel, adding: “…and they are not getting the impact of the post-Covid pullback that other sectors have experienced.”

Pareekh Jain, chief executive of EIIRTrend, an engineering insight platform, said healthcare has not just been one of the fastest growing verticals in IT services but also among engineering services in the last few quarters. In engineering services, healthcare grew more than 17% y-o-y in the last two quarters.

Explaining why billion-dollar deals are a rarity in the healthcare vertical, he said: “The priority here is digital transformation, so the growth is driven by a large number of small to medium size deals.”

According to Bendor-Samuel, the healthcare sector is not experiencing the same need to restructuring which other sectors are required, and hence billion-dollar deals are very few.

Not just the large IT firms, even smaller companies are seeing strong tailwinds in their healthcare verticals. At Persistent Systems, the healthcare practice today is slightly shy of $100 million a quarter and it has grown more than 50% year on year.

Sonata Software recently said as part of its strategic five-year plan to achieve $1.5 billion in annual revenue, it has made targeted investments in the healthcare & life sciences vertical, making it one of the firm’s fastest-growing business units. Another IT firm, Coforge, said the recent acquisition of Cigniti will help the company get three new verticals including healthcare in its business.

The healthcare business of India’s IT companies has been silently spearheading the $250 billion industry’s growth, being a bright spot at a time when key verticals such as financial services, retail and hi-tech have been under pressure for almost two years now.

Digital transformation in the healthcare sector is driving this business for IT firms, analysts said. These are mostly small and medium deals, but the volume is high, and unlike in other verticals, the deal activity has not seen the post-Covid spike or the slowdown that followed.

“The healthcare tech services market is disconnected from the commercial market like banking,” said Peter Bendor-Samuel, chief executive at consulting and research firm Everest Group. “It is more closely related to the government services market. Healthcare is significantly funded by government spending which has kept increasing.”

At IT market leader Tata Consultancy Services, the life sciences and healthcare vertical’s contribution to total revenue grew 2 percentage points in the past two years, partly offsetting the impact from a slowdown in the BFSI (banking financial services and insurance) segment.Its nearest rival, Infosys, too is posting strong growth in the vertical serving the life sciences sector. As per the company’s annual report for fiscal 2024, the share of life sciences in its total business grew the fastest after manufacturing. The contribution of financial services, meanwhile fell to 27.4% from 29.8% in FY23.

Infosys has ambitions to take its life sciences revenue to $2 billion in the next three years from the current $700 million, HFS Research chief executive Phil Fersht told ET recently.

Wipro reported a strong 7.2% year-on-year expansion in its health vertical revenue in the first quarter of FY25. In fact, it was the only vertical among the seven of the Bengaluru firm that posted growth.

Healthcare tech services spending did not see the kind of acceleration that most markets had seen during Covid, said Everest Group’s Bendor-Samuel, adding: “…and they are not getting the impact of the post-Covid pullback that other sectors have experienced.”

Pareekh Jain, chief executive of EIIRTrend, an engineering insight platform, said healthcare has not just been one of the fastest growing verticals in IT services but also among engineering services in the last few quarters. In engineering services, healthcare grew more than 17% y-o-y in the last two quarters.

Explaining why billion-dollar deals are a rarity in the healthcare vertical, he said: “The priority here is digital transformation, so the growth is driven by a large number of small to medium size deals.”

According to Bendor-Samuel, the healthcare sector is not experiencing the same need to restructuring which other sectors are required, and hence billion-dollar deals are very few.

Not just the large IT firms, even smaller companies are seeing strong tailwinds in their healthcare verticals. At Persistent Systems, the healthcare practice today is slightly shy of $100 million a quarter and it has grown more than 50% year on year.

Sonata Software recently said as part of its strategic five-year plan to achieve $1.5 billion in annual revenue, it has made targeted investments in the healthcare & life sciences vertical, making it one of the firm’s fastest-growing business units. Another IT firm, Coforge, said the recent acquisition of Cigniti will help the company get three new verticals including healthcare in its business.