Indian IT majors are signing more deals this quarter than earlier, indicating a good pickup in demand momentum after a deep lull, and many more strong deal wins are on the cards with the US Federal Reserve reducing interest rates.

The country’s key IT services providers globally signed at least 33 deals in July and August, data sourced by ET showed. Tata Consultancy Services alone has announced four deal wins including Ireland-headquartered fashion retailer Primark, Rolls-Royce, Sydney Marathon, and most recently McDonald’s Philippines in the first two months of the second quarter.

Its closest rival Infosys-which signed the second highest number (three) of deals in July after Cognizant-has closed agreements with Sector Alarm, Delaware Department of Labor, TDC Net, ServiceNow, Metro Bank, and Finnish Postal service provider Posti group.

“Our deal tracker is indicating that deal signings have sequentially improved in the September 2024 quarter, and cost saving continues to be the dominant theme for deal signings,” said Kumar Rakesh, associate director at BNP Paribas. “Over the last two years, when enterprises started prioritising cost savings, deal tenures have increased as these are typically longer tenured contracts,” he added. Rakesh expects discretionary IT services demand, which has remained on pause for over five quarters, to start picking up now that the US central bank cut interest rate by 50 basis points (0.5%) last week.

Further, since the projects are shorter tenured contracts, similar sized deal signings could result in an improvement in annual contract value (ACV), key to revenue generation. The country’s third largest player HCLTech has announced a large project with Xerox and another deal with Germany’s apoBank, while smaller peer Wipro announced at least three deals including one with German automotive supplier Mahle and another with John Lewis Partnership.

Fifth largest IT firm Tech Mahindra also bagged two deals – with Doha telecommunications firm Ooredoo and Marshall Group for aerospace innovation.

Experts said demand is coming back even though at a slower pace with smaller-sized and tenured deals. There are also some transformative deals. “The turnaround of the services industry has got delayed. Though there are not many tailwinds, some deals of meaningful sizes have got signed, which can influence revenue for 2025 for specific providers,” said Yugal Joshi, partner at IT outsourcing consultancy Everest Group.

Large deals closures across the industry continue to remain subdued as they involve upfront costs which would impact margins and therefore take longer to translate into revenues.

“Demand is improving but at a slow pace,” said Sumit Pokharna, vice president at Kotak Securities.

“Most enterprises are focusing on cost takeout deals, given the current environment. It’s a win-win for both. Some enterprises are resuming transformation initiatives, with a select list of strategic vendors benefitting from expanded partnerships, leveraging their muscle across maintenance and modernisation services. These deals have longer decision-making timelines and convert to revenues gradually,” he said.

Indian IT majors are signing more deals this quarter than earlier, indicating a good pickup in demand momentum after a deep lull, and many more strong deal wins are on the cards with the US Federal Reserve reducing interest rates.

The country’s key IT services providers globally signed at least 33 deals in July and August, data sourced by ET showed. Tata Consultancy Services alone has announced four deal wins including Ireland-headquartered fashion retailer Primark, Rolls-Royce, Sydney Marathon, and most recently McDonald’s Philippines in the first two months of the second quarter.

Its closest rival Infosys-which signed the second highest number (three) of deals in July after Cognizant-has closed agreements with Sector Alarm, Delaware Department of Labor, TDC Net, ServiceNow, Metro Bank, and Finnish Postal service provider Posti group.

“Our deal tracker is indicating that deal signings have sequentially improved in the September 2024 quarter, and cost saving continues to be the dominant theme for deal signings,” said Kumar Rakesh, associate director at BNP Paribas. “Over the last two years, when enterprises started prioritising cost savings, deal tenures have increased as these are typically longer tenured contracts,” he added. Rakesh expects discretionary IT services demand, which has remained on pause for over five quarters, to start picking up now that the US central bank cut interest rate by 50 basis points (0.5%) last week.

Further, since the projects are shorter tenured contracts, similar sized deal signings could result in an improvement in annual contract value (ACV), key to revenue generation. The country’s third largest player HCLTech has announced a large project with Xerox and another deal with Germany’s apoBank, while smaller peer Wipro announced at least three deals including one with German automotive supplier Mahle and another with John Lewis Partnership.

Fifth largest IT firm Tech Mahindra also bagged two deals – with Doha telecommunications firm Ooredoo and Marshall Group for aerospace innovation.

Experts said demand is coming back even though at a slower pace with smaller-sized and tenured deals. There are also some transformative deals. “The turnaround of the services industry has got delayed. Though there are not many tailwinds, some deals of meaningful sizes have got signed, which can influence revenue for 2025 for specific providers,” said Yugal Joshi, partner at IT outsourcing consultancy Everest Group.

Large deals closures across the industry continue to remain subdued as they involve upfront costs which would impact margins and therefore take longer to translate into revenues.

“Demand is improving but at a slow pace,” said Sumit Pokharna, vice president at Kotak Securities.

“Most enterprises are focusing on cost takeout deals, given the current environment. It’s a win-win for both. Some enterprises are resuming transformation initiatives, with a select list of strategic vendors benefitting from expanded partnerships, leveraging their muscle across maintenance and modernisation services. These deals have longer decision-making timelines and convert to revenues gradually,” he said.