Mid-Tier IT service firms in India gain market share

Mid-tier IT service firms in India’s $254 billion information technology sector have been capturing market share from industry giants as clients reduce discretionary spending due to inflationary pressures and economic uncertainty, according to analysts.
Job in IT service companiesUnlike larger rivals such as Tata Consultancy Services (TCS) and Infosys, mid-tier IT firms focus on short-term deals aimed at helping clients cut costs rather than pursuing large-scale projects. This strategy has proven effective in an environment of slowing demand in key markets like North America and Europe, Reuters news report said.

“LTIMindtree, Coforge, Mphasis, and Persistent Systems are increasingly viewed as challengers in winning Fortune 500 accounts, aiding the share gain process,” stated Kotak Institutional Equities. Analysts Kawaljeet Saluja, Sathishkumar S, and Vamshi Krishna from Kotak suggest that these smaller companies could further outperform their larger rivals once discretionary spending improves.

This trend positions mid-tier IT firms favorably as they attract budget-conscious clients in an economic climate where U.S. interest rates are expected to remain high for an extended period. According to the industry body Nasscom, overall revenue growth in the sector more than halved to 3.8 percent in the last financial year.

“In the current macro environment, clients are increasingly looking at service providers that deliver services at lower and predictable costs with better business outcomes,” said Avinash Baliga, a partner at consulting firm Avasant.

Persistent Systems CEO Sandeep Kalra and Mphasis CFO Manish Dugar confirmed their companies’ market share gains. India’s larger IT firms did not respond to Reuters’ requests for comment. “We are able to hold our own and win against the larger peers as clients are looking for competency and not scale,” Dugar told Reuters.

Data from BNP Paribas, shared exclusively with Reuters, shows that the market share of India’s top five IT firms fell by 17 basis points in 2023, reflecting the progress made by mid-tier IT firms. Despite this, the top five IT firms still controlled 88.35 percent of the market as of December 2023 among the top 10 firms.

In April, Infosys forecast fiscal 2025 revenue growth between 1 percent and 3 percent in constant currency terms, while most analysts had expected growth in the range of 2 percent to 5 percent.

“Due to the sheer size they have reached, larger players have given muted guidance,” said Ashok Soota, founder of mid-tier IT firm Happiest Minds Technologies, which also gained market share. “We need to be humble about this as our market share is relatively small on the grand total.”

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