For IT $16 billion deal feast on the table - MilectoFor IT $16 billion deal feast on the table - Milecto

Renowned software export companies from India are preparing to face intense competition from both domestic and international competitors in order to secure a substantial share of the $16 billion in global IT services contracts that are expected to be renewed in the following half-year.

With reduced technology expenditures, industry experts anticipate that these considerable contract renewals, each worth over $250 million, will ignite a competitive battle among both domestic and multinational firms.

One of the contracts that is up for renewal is a $1 billion agreement that Wipro is currently managing with the Japanese medical technology giant Olympus Corp. In addition, IBM Corp. presently oversees two contracts worth a combined $750 million each: one with Vodafone Idea and the other with AT&T.

The internal advantage within the country

Due to the fact that multiple important contracts that were previously handled by global giants are getting close to being renewed, Indian information technology businesses are getting ready for a fierce confrontation. One of the most profitable opportunities is presented by these contracts, which include those from the United States Department of Energy, Cyber Command, NASA, Axa Sun Life, and other organisations. Using their expertise in cost optimisation, which is a major asset in the present market climate, Indian companies are ready to compete fiercely for these transactions, as shown by data that was supplied by Omdia, a company that specialises in information technology research.

Experts such as Pareekh Jain, CEO of EIIRTrend, have pointed out that Indian information technology businesses have a competitive edge, particularly when compared to mid-tier global IT companies that have not made significant improvements in Artificial Intelligence (AI) and cloud capabilities during the previous five years. Tata Consultancy Services (TCS), Infosys, Cognizant, and HCLTech are among the leading Indian information technology companies, and their position has been further strengthened as a result of their enhanced market share and successful bids for significant contracts.

The fact that these huge Indian information technology businesses have been able to achieve significant agreements with companies such as Phoenix Group, Nest Technologies, Danske Bank, Liberty Global, CoreLogic, and Verizon over the course of the last year demonstrates their capacity to compete and succeed in the market that has emerged after the epidemic.

Cloud & AI

Experts in the field say that clients will give more weight to sellers whose solutions can incorporate cutting-edge technologies. An Omdia senior lead researcher named Hansa Iyengar says that companies are increasingly putting their money into the newest technologies like AI, robotics, and the cloud, which could delay more important changes. She says that even though there will be more money for these “shiny new objects,” profit margins may go down because of the focus on deals for infrastructure, old changes, and support contracts.

Based on Omdia’s data, contracts like IBM Corp’s deal with Banco Santander in 2019 ($700 million) and Capgemini’s deal with Areva in 2014 ($1.4 billion) are also due to be renewed. Iyengar says that these contracts, which are mostly multi-year deals for cloud modernization, application development, and maintenance in fields like manufacturing, banking, financial services, insurance, energy, and utilities, will end in six months.

Heightened Competition

Renewal of technology contracts is becoming more competitive as customers prioritise cost-effectiveness in the face of economic uncertainty. When compared to the previous year, there has been a considerable increase in the amount of renewals and extensions, making each deal victory critical.

Clients are increasingly seeking competitive bids when renewing contracts, according to Mrinal Rai, a senior analyst at ISG. He observes that, despite minor gains in customer satisfaction indicators, incumbents often struggle to keep their contracts in competitive renewal circumstances.

The focus on cost optimisation continues to influence sourcing choices, resulting in a decrease in discretionary expenditure. ISG predicts that organisations will continue to adapt and experiment, particularly with emerging AI technologies.

Everest Group CEO Peter Bendor-Samuel identifies a pattern in which many renewals are negotiated at cheaper rates but with longer contract periods and restricted scope. In essence, although the annual payments may be lower, the agreements are for longer periods of time. He observes that the debate concerning income leakage in the IT industry seeks to explain this discrepancy to investors without alarming them.

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