The landscape of India’s technology outsourcing industry looks poised for a significant transformation. As revealed by recent insights from UnearthInsight, non-European and non-US markets are projected to contribute 30% to global IT revenues by 2030. Key players include Japan, Australia, the Middle East, and the domestic market.
Major Indian IT firms like TCS and Infosys are already benefiting, but challenges persist in gaining significant market share in emerging markets. Rapid expansion and strategic investments by Indian majors are essential.
The outlook highlights the need for a nuanced approach, recognising this revenue as an additional boost, rather than a complete offset for the industry’s declining growth in North America and Europe.
Currently, the US and Europe contribute a substantial 75-80% to the global IT services market, with the remaining 20-25% dispersed across 70-80 countries. However, projections suggest a notable shift, anticipating that non-European and non-US markets will contribute 30% to global IT revenues by fiscal 2030.
This transformation is not merely statistical, but signifies a broader shift in the industry’s dynamics. The traditionally dominant Anglo-American influence in India’s US$ 245 billion technology outsourcing sector is expected to become more cosmopolitan, with the global business share of other regions climbing from the current 20-25% to an estimated 30% by the end of this decade.
Geographically, Japan, Australia, the Middle East, and the domestic market (India) are identified as key players in altering this landscape. Despite the expected increase, average contract values in these regions might lag behind those negotiated by Anglophone clients.
Contribution of Major Players
Leading Indian IT giants, such as TCS and Infosys, have already witnessed an uptick in revenues from markets outside the US and Europe. TCS reported a revenue increase from US$ 1.14 billion to US$ 1.22 billion in the second quarter of this year, while Infosys saw growth from US$ 564 million to US$ 585 million during the same period.
Omdia’s IT Services Contracts Database highlights that upcoming large contract renewals, especially those exceeding US$ 500 million, are concentrated in the US, Europe, UK, France, Spain, Germany, India, and Japan.
Hansa Iyengar, senior principal analyst at Omdia said, “In recent years, Indian Systems Integrators (SIs) have been gaining ground against incumbents (in these markets), a trend that is expected to continue.”
She further added, “However, there’s a higher likelihood that these contracts will be fragmented into smaller components due to a sustained cautionary approach, significantly impacting the total contract value (TCV).”
Challenges arise in achieving significant market share in emerging markets, with strong incumbent players posing hurdles for global IT services firms like Accenture, Cognizant, and Capgemini. Indian majors, traditionally equipped with smaller local sales teams in these regions, are rapidly building their presence.
Future Outlook
According to Gaurav Vasu, founder and chief executive at UnearthInsight, “They (Indian IT majors) haven’t invested strategically or acquired in emerging markets to shift the market shares in the next few quarters.”
He added that Indian providers ramped up efforts in the emerging markets only in the last three to four quarters when spending slowed down drastically in the US and Europe.
Opportunities in emerging markets, driven by public sector spending, are identified in regions such as Australia, Japan, Africa, and 11 countries in the Middle East.
During the past two fiscal quarters, the Indian IT majors like TCS, Infosys, Wipro and HCLTech among others have reported a slowdown in the primary markets of North America and Europe.
However, it’s acknowledged that the revenue from these markets is an addition rather than a complete offset for the declining growth in North America and Europe.
The evolving dynamics of the global IT services market, with a forecasted 30% contribution from non-European and non-US markets by 2030, necessitate strategic investments and a nuanced approach from Indian industry IT players to get the most out of this opportunity.
