IT Firms To See Growth Bounce-back In Q2 At The Back Of Digital Transformation

Increased tech spending by clients in digital transformation and the resulting deal momentum will drive growth for Indian IT services for the quarter ending September 2020, say analysts.

This optimism was what reflected in the rally of Indian IT stocks that jumped by 50 percent, on an average, between March 2020, when the pandemic struck, and September 2020.

TCS will kick off the IT firms’ earnings season on October 7, followed by Wipro, Infosys and HCL Tech on October 13, 14 and 16, respectively.

What can we expect?

Growth: Q2 saw better deal momentum across IT services firms, aided by vendor consolidation and increasing spend as clients shifted to the digital sphere in a short period of time.

For instance, Infosys closed two significant deals, Vanguard and Consolidated Edison, for digital transformation. TCS won deals from life insurance and pension consolidator Pheonix  Group for client analytics tool,  and retail firm Morrisons. Wipro won an automotive software engineering deal from Marelli and HCL Tech the Ericsson deal.

Girish Pai, Head – Research, Nirmal Bang Securities, said in a note that these clients shifted the spending from internal  IT , selling, general and administrative (SG&A) and hardware, to outsourcing and digital. This means that global clients prioritised tech spend to speed up the digital transformation processes such as migration to cloud.

Source: Moneycontrol

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