Contract renewals slow down for Guj IT SMEs
Demand for discounts is also something new this year during contract renewals
With their overseas clients thinking twice before spending on IT products and services, Gujarat-based small and medium enterprises (SMEs) are witnessing a deferment in contract renewals by 2-3 months. Faltering economic condition has not only seen clients going slow with contract renewals but also seeking renegotiations, say industry players.
For instance, Ahmedabad-based custom software and mobile application developer VBSOFT India which witnesses average contract size of $40,000-50,000 has seen renewals defer by almost a quarter. "Clients are either giving a second thought to products and services renewals or taking time to come back. On the contrary, last year the renewals were happening back to back," said Vivek Ogra, director at the Rs 35 crore VBSOFT India.
Similarly, according to Neeraj Ghemawat, CMD, Gateway Technolabs, the negotiation conditions have also changed this year. "Clients are asking for more accountability for the products during renewal this year. If not cost then at least innovation is being sought for in the products," said Ghemawat.
Demand for discounts is also something new this year during contract renewals.
"Unlike last year, clients are also seeking 5-10 per cent discounts over contract renewals, something which was earlier sought only during fresh contracts. Moreover, clients are also seeking products that help them cut costs," added Ogra.
Seconding his views is Rajendra Shah, director and group chief executive officer, Virtual Netcomm Pvt. Ltd. "During slowdown, contract renewals are usually a safe getaway for IT SMEs in Gujarat since fresh contracts take a hit. However, this year, even the renewals either coming in late or clients are thinking otherwise. However, we believe the trend should reverse in next six months," said Shah.