Japan, Australia and the Middle East and the home market, among others, will largely help alter the geographic mix. To be sure, average contract values in these geographies will still be relative stragglers in comparison with those finalised by Anglophone clients either side of the Atlantic.
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According to data from technology research firm UnearthInsight, the US and Europe currently contribute 75-80% of the global IT services market while the rest 20-25% is spread across 70-80 countries. This share is likely to increase to 30% by fiscal 2030 said Gaurav Vasu, founder and chief executive at UnearthInsight.
Both TCS and Infosys have increased revenues from the rest of the world (markets outside US and Europe). While TCS drew revenues of $1.22 billion at the end of second quarter this year up from $1.14 billion at the end of Q2 last fiscal, in the case of Infosys it increased from $564 million to $585 million in the same period.
Omdia’s IT Services Contracts Database also said that a majority of upcoming large contract (over $500 million) renewals in the next year are centred in the US, Europe (including the UK, France, Spain, and Germany), India, and Japan.
“In recent years, Indian Systems Integrators (SIs) have been gaining ground against incumbents (in these markets), a trend that is expected to continue,” said Hansa Iyengar, senior principal analyst at Omdia.
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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), she added.
The emerging markets have strong incumbent players which has made it difficult to achieve over 5% market share for both global IT services firms such as Accenture, Cognizant, Capgemini. This is also true for Indian majors traditionally having smaller local sales teams in these geographies.
They are, however, building it up rapidly as the market activity is increasing and the US and Europe are going through a slowdown.
“They (Indian IT majors) haven’t invested strategically or acquired in emerging markets to shift the market shares in the next few quarters,” said Vasu of UnearthInsight. Indian providers ramped up effort in the emerging markets only in the last three to four quarters when spending slowed down drastically in the US/Europe, he added.
Opportunities in emerging markets like Australia, Japan, Africa and 11 countries in the Middle East are largely driven by public sector spending, Vasu said.
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.
The revenue which comes outside of North America and Europe is definitely an addition for the companies but is unlikely to offset the declining growth from North America and Europe, said Peter Bendor Samuel, chief executive of Everest Group.
“The large transactions which often come from these regions take time to ramp and hence their impact is spread out. TCS is the best positioned Indian pure play to benefit from these markets, however, Wipro and Infosys also have a significant presence in most of these markets,” he said.
Areas such as the Middle East are clearly picking up strength but the sizes of these markets are relatively modest when compared with North America or Europe, he said.