IT services firms are witnessing a significant rise in deals up to $30 million, as clients are prioritising immediate return on investment (ROI), adopting AI technologies, and as companies across geographies such as the Middle East and Asia-Pacific are increasingly looking to improve their digital infrastructure.
Industry giants like Infosys, Tata Consultancy Services, Wipro, and LTIMindtree have all observed a noticeable increase in the volume of smaller deals.
Infosys’ chief financial officer, Jayesh Sanghrajka, said after the September quarter earnings that the company saw a “double-digit increase” in deals below $50 million during the quarter.
“Since discretionary spend was muted and cost-cutting was prevalent, companies are now looking for immediate ROI. This has resulted in smaller deal sizes,” said Pareekh Jain, founder of Pareekh Consulting and EIIR Trend.
Additionally, Jain said that companies are testing AI in incremental phases, further reducing the size of deals. “People are not committing to large AI projects yet, instead they are opting for smaller phases to see tangible results before proceeding”.
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Further, TCS’s CEO, K Krithivasan, emphasised the importance of cost optimisation and vendor consolidation among clients.“Globally, clients continue to prioritise efficiency through cost transformation programmes, and demand for discretionary deals with low immediate ROI remains relatively subdued,” he said.
Similarly, Infosys’ CEO, Salil Parekh, said: “The type of large deals is still much more on cost and efficiency, and not so much on digital transformation”. This reinforces the notion that while smaller deals are on the rise, large transformation projects are still lagging behind, mainly due to uncertain AI ROI and cautious spending.
This trend was also seen in mid-sized IT services companies such as Mphasis and Coforge. Mphasis CEO, Nitin Rakesh, said that they observed large deals are being put on hold as companies remain in a “wait and watch” mode regarding AI ROI, while the company is seeing a high inflow of deals valued between $1 million to $10 million.
“We have seen $1 million to $10 million deal activity burst. And even this (September) quarter, the pickup in small deal volume, which typically is 0 to 1 year in consumption, is really what’s driving the overall TCV (total contract value) number,” he said.
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