Business Standard: January 07, 2019
Bengaluru: Information technology (IT) services players globally are snapping up contracts worth around $80 billion because these are coming up for renewal this year.
Even though a vast chunk of these deals are in defence, historically Indian players have been the major beneficiaries in the renewal market, garnering share each passing year.
Especially given the fact that a number of deals to be renewed are in areas such as banking, financial services and insurance (BFSI), telecom, technology and communication, and hi-tech, there are traditionally the sweet spots for Indian IT services majors such as Tata Consultancy Services (TCS) and Wipro. “Historically, domestic IT firms have grown their market share with every renewal for the past 20 years. So, it is good news for the Indian IT industry,” said Pareekh Jain, IT outsourcing advisor and founder of Pareekh Consulting.
According to Peter Bendor-Samuel, founder and chief executive officer of global research firm Everest Group, while almost half of the $80.6 billion worth of deals are in the government space, the other sectors that will see maximum renewal are BFSI (20 per cent), and technology and communications (10 per cent). As has been in the past, the maximum number of the deals getting renewed is from the US, followed by Europe.
Analysts tracking the sector are of the opinion that both Indian and global IT services players will fight fiercely to garner a bigger share of these IT outsourcing deals. However, lesser presence of Indian IT players in government contracts space, especially in defence, will result in a smaller universe of deals for them. Given the momentum in the large deal space over the past one year, analysts also expect TCS and Accenture are well-placed to grab some of these deals, apart from other Indian IT services providers.
“Winners in this race for renewals will be firms that have a clear value proposition around business transformation space. Currently, we see TCS and Accenture as the clear winners in the modernisation and business transformation spaces, respectively,” said Bendor-Samuel. Some of the large deals coming for renewal include Defense Information Systems Agency of the US government, where contracts worth over $2.5 billion are due for renewal in 2019-20.
This IT infrastructure contract is currently serviced by Verizon. Similarly, in the BFSI segment, contracts worth over $500 million of Swiss Re will come for renewal, where the incumbent is DXC Technology. “For Indian IT services providers, the size of the opportunity will be around $30 billion as they have less presence in government and defence segments. However, even an addressable market of $15-20 billion is big enough for the Indian players,” added Jain.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.