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HCLT Leads Revenue Growth Among India-centric IT Services Vendors Amid Market Uncertainties

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HCLTech and TCS Drive Revenue Growth with Digital and AI, While Cognizant and Wipro Face Financial Sector Challenges

As macroeconomic uncertainty permeates clients’ technology buying decisions, IT services companies have positioned around technology-driven services, opening the door to sustained relevance and revenues. While Cognizant, HCLTech, Infosys, Tata Consultancy Services (TCS) and Wipro are all usually lumped together as India-centric vendors, each IT services company leads with its own strengths and market focus to best drive clients’ transformation projects.

 

HCLTech led revenue growth among the five major India-centric IT services companies in 1Q24, increasing 6% year-to-year, followed by TCS, which reported 2.3% growth over the same time period. Both TBR and the companies attributed growth to improvements in digital business, cloud migrations and AI productivity services, which helped clients enhance their IT environments and business processes. HCLTech’s and TCS’ deep expertise around digital services, such as for security, applications and workplace transformation, enabled both companies to build off existing client relationships and upgrade clients’ business environments.

 

In contrast, Cognizant and Wipro reported year-to-year revenue declines of 1.1% and 5.2%, respectively, in 1Q24, with both companies indicating that new opportunities have been limited due to pressures within financial services. Market pressures continue to hinder Cognizant’s opportunities, pushing the company to focus primarily on its existing client base.

 

Wipro reported the addition of 60 new clients during 1Q24 and an increase in active clients for the first time since 4Q22 as the company expanded activities with healthcare and insurance clients, including customer experience transformations, automation adoption and AI deployments for more efficient workflows. However, limited success could not overcome ongoing declines within total reported bookings.

 

Wipro reported that total bookings fell 13.5% year-to-year to $3.6 million during 1Q24. Declines in APMEA due to a reduction in low-margin accounts in favor of pursuing higher-value transformation projects hinder benefits from new logo additions. Further, economic pressures limit Wipro’s ability to generate higher-value projects in EMEA.

 

Because of ongoing market pressures, the five major India-centric IT services companies look within and prioritize their existing client bases to drive revenue generation. Further, the emphasis on large deals to make up for the deficit left by limited client spending brings out vendors’ experience and capabilities that reach across needs and functions throughout clients’ organization.

 

Take Infosys as an example: Making broad-based investments in innovative portfolio offerings, largely enabled by Infosys Cobalt, along with upskilling existing employees and recruiting higher-caliber talent in onshore and nearshore locations, paid off as Infosys proved to clients that the company could execute on IT services at scale, even in a challenging environment. Infosys Cobalt serves as a foundation for the company’s cloud management, comprising a set of services, solutions and platforms including 35,000 cloud assets and over 300 industry cloud solution blueprints.
 

TBR Senior Vice President Dan Demers and Principal Analyst Patrick M. Heffernan dive into the trends expected to shape the market in 2024, including GenAI’s impact on ecosystem alliances and how clients use TBR’s research and analysis to add context to strategic questions and address challenges around alliance enablement

Investment Focus Areas

To fuel the larger deals, the five highlighted India-centric IT services companies executed across portfolio innovation efforts, developing solutions that apply technologies such as AI, digital and cloud to essential processes and embedding them within workflows. Further, equipping employees to work with the new solutions and technologies remains essential to fully capitalize on investments. During 1Q24, these companies rolled out the following solutions:

 

  • TCS launched an immersive lab to deepen employee knowledge about AI technology. TCS has already trained over 150,000 of its employees in the foundational skills of AI and generative AI (GenAI), and the AI Experience Zone will help foster engagement from employees to experiment with cutting-edge GenAI-powered applications and solutions.
  • Using Azure OpenAI, HCLTech launched HCLTech AI Force, a GenAI platform that guides software development and engineering services. Platform users will also benefit from increased insights on operations and higher productivity. HCLTech also included security services within the platform to ensure compliance and provide governance measures around AI use and application and software development.
  • In 1Q24 Infosys launched the Responsible AI suite, which includes accelerators across three main areas: Scan (identifying AI risk), Shield (building technical guardrails) and Steer (providing AI governance consulting). These capabilities will help Infosys strengthen ecosystem trust via the Responsible AI Coalition. Infosys also claimed it was the first IT services company globally to achieve the ISO 42001:2023 certification for ethical and responsible use of AI.

 

With the increased attention and demand around AI to improve productivity and efficiency and lower overall expenses, nearly all IT services companies are aiming to expand their AI platforms and associated capabilities. For example, TCS prioritizes building its relevance to customers through employee hiring and training in critical technologies like hyperscaler platforms and GenAI. Facilitating the use of AI could be the key to these India-centric IT services companies finally growing their consulting capabilities.

 

Wipro indicated that Capco, which brought in technology and digital consulting services following its acquisition in 2021, was a bright spot during 1Q24. While client budgets are more limited, restricting consulting opportunities, pairing consulting expertise with deep technology knowledge does provide benefits for clients, particularly with increased access to C-Suite buyers.

Alliance Strategies

Partnerships provide opportunities for the five major India-centric IT services companies to drive new projects among clients, execute on reskilling and training initiatives, and strengthen their technology positioning. Recent partnerships also enable these vendors to guide portfolio and capabilities expansion to provide a wider range of offerings at an industry level.

 

Hyperscalers provide the India-centric vendors with additional scale and improve their ability to work alongside clients’ cloud and IT transformations regardless of maturity. HCLTech evolves its partner ecosystem to support its portfolio innovation and bring to market solutions that align closely with its clients’ business model transformation. TCS prioritizes partner-dedicated business units to capture the recent surge in client cloud adoption. These units leverage certified talent, centers of excellence, migration factories and innovation garages. HCLTech looks to complement its partner-dedicated business units with additional training through Google Cloud as well as expanded industry-specialized services.
 
Cognizant also deepened its partnerships with Microsoft and Google Cloud; it will increase the adoption of Microsoft Copilot using Cognizant’s advisory services, in addition to training over 70,000 of Cognizant’s employees on Google Cloud’s AI platform, Gemini, to build software development skills. Gemini will aid in training around AI offerings, including Google Cloud technologies as well as coding services. Through the partnerships, Cognizant will look to integrate AI technologies across its business transformation projects.

 

Partner-driven training efforts were focused on hyperscaler technologies and new skills development. For example, Infosys and the Financial Times furthered their partnership, which is focused on training and educating youth in India, by leveraging the Financial Times’ curated content capabilities delivered through the Infosys Springboard platform. The training-led partnerships strengthen the talent pipeline by helping both students and the vendors’ employees develop technology skills. Vendors will continue to leverage partnerships to develop additional skills among their talent bases and support their AI, digital and security positioning.

Conclusion

The five major India-centric IT services companies continue to experience pressured revenue performance due to market conditions, compelling them to strengthen their portfolios and talent. Evolving partnerships and expanding partner ecosystems to deepen capabilities and skills that address industry-specialized needs enable the vendors to maintain client relationships.

 

As clients look to execute on projects and apply technology to strengthen operations, these IT services companies must work closely with technology partners to quicken project timelines. Every client TBR talks to brings up speed-to-value as a critical KPI.

 

While revenues are not expected to greatly accelerate during 2024, the partnerships and portfolio development will help the India-centric companies be more resilient to market changes and increase value-driven engagements.