scorecardresearchIndian IT players may take a major share of tech deals in Q1 of 2023, but JM Financial sees a long winter ahead

Indian IT players may take a major share of tech deals in Q1 of 2023, but JM Financial sees a long winter ahead

Updated: 15 Dec 2022, 08:00 AM IST
TL;DR.
The Indian IT sector has been under pressure in 2022 on concerns over shrinking demand due to the possibility of a recession in the US.
Brokerage firm JM Financial sees a long winter ahead for the IT sector.

Brokerage firm JM Financial sees a long winter ahead for the IT sector.

Indian software exporters may probably win a major share of the estimated $160 billion worth of IT deals that will come up for renewal in the first quarter of 2023, said a report by the Economic Times (ET).

"Indian software exporters could win a dominant share of the estimated $160-billion worth of IT deals that will come up for renewal in the first quarter of 2023, analysts tracking the sector said. This comes as global corporations look to consolidate technology spending with fewer vendors and reap the benefit of better pricing amid worsening macroeconomic conditions," said the ET report.

The report added that the bulk of the deals will come from American corporations, with a few from Europe and Asia-Pacific.

The Indian IT sector has been under pressure in 2022 on concerns over shrinking demand due to the possibility of a recession in the US.

The sector has been facing other headwinds too, such as high attrition and higher wages.

Brokerage firm JM Financial sees a long winter ahead for the IT sector.

In its report on December 9, the brokerage firm highlighted that the demand for digital and cloud services, which seemed impregnable just a few quarters back, has started to cool off.

"Caution has crept into hyperscalers and SaaS players’ outlooks. Our checks suggest pessimism is highest in the UK, with almost all large deals off the table. In a likely scenario of an EU-centred recession, we draw lessons from the 2012 Eurozone crisis when IT Services demand turned sluggish for a protracted period – reflected in industry/Infosys consistently under-shooting their initial guidance in that phase," said JM Financial.

Though an EU crisis can trigger another wave of offshoring, as it did in 2012, JM Financial sees limited incremental share gains for Indian IT vendors.

JM Financial added that the revenue estimates of SaaS players have only now started to get cut as Covid-led tailwinds held up demand thus far. Estimates for Indian IT Services, though moderated, leave scope for disappointment.

Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.

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First Published: 15 Dec 2022, 08:00 AM IST