IT companies to diversify, draw 30% revenue from non-western mkt by 2030

The disproportionate reliance on the Western market in the Indian IT space is likely to reduce as the rest of the world's share climbs to 30 per cent by the end of this decade, The Economic Times (ET) has reported. As things stand, the share of the non-western world in Indian IT outsourcing stands at 20-25 per cent, the report said.

Japan, Australia, and countries from West Asia will play a major role in this shift as they expand their share in the Indian IT outsourcing space. However, the relative contract values from these geographies will still lag compared to those finalised by English-speaking customers in Europe and the USA. The ET report cited data from technology research firm Unearth Insight and said that the US and Europe currently contribute 75-80 per cent of the global IT services market while the rest 20-25 per cent is spread across 70-80 countries. Founder and Chief Executive at Unearth Insight, Gaurav Vasu, told ET that this share is expected to grow to reach 30 per cent by 2030.

TCS and Infosys are expanding their market

The country's largest IT services firms, Tata Consultancy Services (TCS) and Infosys have reported a rise in their revenues from markets outside of the USA and Europe. TCS generated revenues of $1.22 billion at the end of the second quarter this year, which was up from the $1.14 billion it made during the same period last year. Infosys also reported a similar trend as its revenue during the second quarter of financial year 2023-24 from markets outside of the USA and Europe rose from $564 million to $585 million during the same period last year.

The ET report cited Omdia's IT Services Contracts Database and said that a large share of upcoming contract renewals in the next year are likely to be from the US, Europe (The UK, France, Spain, and Germany), India, and Japan. Senior Principal analyst at Omdia, Hansa Iyengar, told ET, "In recent years, Indian Systems Integrators (SIs) have been gaining ground against incumbents (in these markets), a trend that is expected to continue."

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Hansa added that these large contracts will likely be broken into smaller components as companies in the space continue to take a cautionary approach. This is expected to significantly affect the total contract value (TCV).

IT firms plan expansion in emerging markets

The ET report highlighted that the emerging markets have strong incumbent firms, which have made it tough for any single company to acquire more than 5 per cent market share. This is true for both global players like Accenture, Cognizant, and Capgemini, alongside Indian IT giants. Indian IT companies have small local sales teams in these emerging markets. However, these companies are working to expand as business in the US and Europe suffers.