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Here’s why 50% IT companies may lose part of their deals

Source | GADGETS NOW : By Jochelle Mendonca

MUMBAI: With over $200-billion worth of IT deals up for renewal in 2017 and 2018, digital and automationwill slice off a third of the contract, and nearly half the incumbent IT providers will lose part of the work, highlighting the challenge faced by Indian IT firms as they chase growth.

As deals from Citigroup to BNP Paribas go up for rebid, companies from Infosys to IBM have said though customers expect cuts on their current contracts, they are not immediately spending the savings on transformation investments.

IT consultancy ISG said the situation has become competitive as more players chase a decreasing value of deals.

Intensified competition
“We expect that the renewals market will see intensified competition, largely between incumbents that are driving self-disruption through innovation and automation to bring more client value even before the contracts terminate and niche providers who focus on business problem solving,” Dinesh Goel, India head at ISG, told ET.

Goel said over 5,500 deals were expiring across geographies and verticals in the next two years, and these renewals would affect the course of the industry for the next three to five years.About 48% of these contracts are in EMEA, 41% are in the Americas and 11% are in Asia-Pacific.

Bright side
There is also a bright side for Indian IT players. Of the 10 top deals coming up for renewal in the next two years, Indian IT companies have a stranglehold on only one, giving them a chance to lure away business from rivals.

Deals from BNP Paribas, National Australia Bank, Allianz and airline software company Sabre are up for rebid and currently being serviced by multinational companies.

Only a Citigroup BPO deal is mainly serviced by an Indian company. Tata Consultancy Services had bought Tata Consultancy Services’ business process outsourcing unit in 2009.

Complicated situation
The Indian IT sector has been reeling from the impact of Britain’s vote to exit the United Kingdom.

Cognizant has cut its guidance three times this year, Infosys has done so twice and Tata Consultancy Services posted its worst second-quarter growth in over a decade.

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