Our Terms & Conditions | Our Privacy Policy
These are challenging times for India’s $280-billion software services sector. Not only do they face slowing spends by their overseas clients, they are also grappling with the impact of artificial intelligence (AI) on pricing. The threat of a sharp slowdown in the global economy following the tariff wars has prompted large consumers of technology — companies and banks — to work with fewer vendors, and any expenditure that’s not critical is being postponed. They are also looking to drive hard bargains, passing on their pain to vendors. By some estimates, spends may not increase by even 4-5% in 2025-26 owing to project deferrals, cancellations, and delayed decisions.
Also, experts say pricing is already under pressure having come off by as much as 20% for some deals as customers reassess their options in a tough and uncertain business environment. In fact, even renewing a deal at a good price seems to have become harder. Clients are pushing vendors to drop rates, pointing to efficiency and productivity gains from AI. With top customers consolidating their vendors, smaller Indian information technology (IT) firms are vulnerable as it’s going to be much harder for them to win deals.
Indeed, this is a time that will separate the men from the boys. While pricing models are changing due to the increasing adoption of AI, not all are necessarily a losing proposition. As Venugopal Lambu, CEO designate at LTIMindtree, has explained, pricing could now be as per engagement rather than based on the FTE or full-time equivalent. As such, although the price point may be different, it could be more profitable. Companies must, therefore, fine-tune their strategies to get more out of projects at a time when the competition will only get more intense. For instance, they must reckon with the possibility of giants like Amazon, Microsoft, and Google, which are among the largest technology partners both for clients and service vendors, using their tremendous financial muscle to grab more of a share of the shrinking pie.
India’s tech majors have had two rough years in a row, turning in very ordinary performances. The outlook for the coming year is understandably not the brightest. Infosys, for instance, has indicated it would grow revenues by 0-3% in 2025-26 (excluding the contributions from latest acquisitions), clearly pencilling in some deterioration in demand. But most companies have seen reasonably strong deal flows and should be able to execute these well. Unfortunately, the job market will be badly hit with the brunt of the slowdown probably being borne by freshers. While the top five IT players added 12,718 employees in 2024-25, meeting their hiring targets, it was small consolation since they had pruned their workforce by nearly 70,000 in the previous year.
At a time when the environment looks tricky, employers are likely to be cautious. To be sure, those well-versed with the latest technologies, including AI, will find well-paying jobs. Being AI-proficient is critical because while cost arbitrage may continue to play a big part in the economics of software firms, value-addition is now going to play an even bigger role. To be sure, GCCs or global capability centres are in the market for IT professionals and have the potential to hire in big numbers. But with a workforce of nearly six million, it is the IT space that can create the opportunities. India’s software players must show they are capable of beating the best.
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.