By Narsimha Rao Mannepalli
As we get into December, and with the cloud of US presidential elections clearing up and with the promise of AI, here is what I believe we should expect to see in 2025 for the Indian IT services Industry.
Demand & Growth:
- On demand front, we should expect to see some good news, with discretionary spends coming up in some measure. Cuts in the discretionary spends have impacted growth in 2023 and 2024. In 2025, large businesses perforce have to invest into Projects and Programs they have withheld. This coupled with the disruptive nature of AI will mean higher discretionary spends in 2025.
- The Fed rate cuts and the pent up demand in the Financial Services sector(with 2 years of negative trajectory) is a definite positive going into 2025 and we should expect demand uptick here. FS, healthcare and Insurance sectors will see demand return in good measure.
- One emerging Head-wind to growth however is the stress on bottom-line for the Automotive sector Globally and particularly in Germany – this will possibly impact IT Providers who have a higher exposure on Automotive and to Europe. Manufacturing and Hitech sectors are likely to see lesser traction in the immediate term.
- I believe we have seen bottoming out of budget cuts / ramp-downs of large programs. This is positive such sudden ramp downs have impacted growth negatively for 2 years.
- The recent commentary from the companies has spoken of some early green-shoots on growth is a good sign going into 2025.
- IT service Vendors will see a better demand environment as the budgets and projects open up in Jan/Feb ’25 timeframe.
- With this demand environment Tier-1 Vendors should see a mid to high single digit growth rates in 2025 up from the low single digit growth we have seen in 2024. Lack of any mega deals in 2024 will make it difficult for these companies to go into double-digit.
- Tier-2 Vendors who have seen double-digit growth in 2023 & 2024 should expect to see growth accelerating in 2025. However, the ability of these companies to scale will be severely tested and we should expect to see some very good performances but equally some of them will struggle to keep pace.
- In Tier-2 we will see emergence some very strong players – particularly the specialized ones focusing in ER&D and/or Data &
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