IT Services Sector Witness Lack of Urgency to Spend by Clients: InCred Equities
Clients continue to seek 'doing more for less' to optimize legacy projects to fund small-ticket AI-led ones
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Indian IT services companies are witnessing a lack of urgency to spend by clients as they remain cautious in an uncertain business environment, and are still hesitant to take long-term decisions, according to a report from InCred Equities.
"But the reconciliatory stance, especially on reciprocal tariffs, has helped de-escalate the situation. Deal conversations are underway but advisory-led proposals (RFPs) with long-term road-maps have complex constructs and are elongating the decision timeframe. Pipeline opportunity could be at its peak but the pertinent question for investors is the quantum of conversion book and rate," the report said.
However, enterprises are using the current uncertainty to right-size their organization/spending, given the inflationary pressure. The global conflicts have impacted client visits to Centres of Excellence (CoEs) and has elongated deal closure.
The India-Pakistan conflict impacted travel plans of clients. "We heard instances of less client meetings in the month of May 2025 as travel advisory led to cancellation or postponement of visits to CoEs in India. This, in turn, added a new vector to decision-making delay, especially for global capability centre or GCC-led deals," the report said.
AI-led productivity is the big elephant in the room. According to InCred Equities, the deflationary impact of artificial intelligence (AI) on revenue, led by productivity pass-back, is unlikely a near-term phenomenon. "We have been highlighting that clients continue to seek 'doing more for less' to optimize legacy projects to fund small-ticket AI-led ones. This, in turn, is driving vendor consolidation, driving the competitive intensity higher, creating staffing challenges, and pressurizing the margin profile of deals. Hence, building margin expansion for FY26F could be aggressive."
As economic downturns change technology adoption and consumption patterns, this cycle is likely to favour mid-sized IT companies. The report cites similar views from CEO of Zensar Technologies who believes tier-II have the opportunity to capture incremental mind and market share as the current technology (AI) change has made the field level-playing.
Infosys Chairman Nandan Nilekani alluded to the uncertain business environment in its latest annual report. "As we contemplate the developments of the last few months, we know we are in an era of uncertainty that we have never seen before. Multiple trends are colliding and leading us to reexamine the fundamentals of our businesses," he said.
N. Chandrasekaran, Chairman, Tata Consultancy Services (TCS) also agreed that financial year 2025 was a year of profound global disruption. "Widespread geopolitical conflicts, military escalations, and uncertain trade dynamics severely impacted global supply chains. Over 60 nations went to the polls, stalling policy continuity and reform agendas across several key markets. As a result, businesses worldwide faced significant shocks— ranging from falling production volumes and rising costs to suboptimal asset utilization, impacting profitability and cash flows," he said in the company's latest annual report.
The InCred Equities report indicated of a potential budget flush in 2H FY26F, given the current procrastination in spending, delay in decision-making and/or ramp-ups, and tepid spending pattern in 1H CY25. "That said, it may not be a true reflection of structural recovery as AI-led deflationary pressure could outweigh the near-term tailwinds, if any," the report said.
The demand trend across banking, healthcare, energy, mining, and insurance verticals appear to be better than manufacturing, hi-tech, and retail. "That said, there appears to be no real urgency to spend, even within the segments having a better demand trend."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Associated Press
4 hours ago
- Associated Press
Solytics Partners Appoints Financial Crime Compliance Expert Sunil Kavishwar to Advisory Board to Strengthen AML Efforts in the GCC
DUBAI, AE / ACCESS Newswire / June 21, 2025 / Solytics Partners, a global leader in regulatory technology and AML/Financial Crime Compliance (FCC) solutions, is pleased to announce the appointment of Sunil Kavishwar to its Advisory Board. Sunil will support the firm's mission to drive compliance transformation and regulatory innovation across the Gulf Cooperation Council (GCC) region. Bringing over 20 years of experience in AML, sanctions compliance, and regulatory supervision, Sunil has held senior roles at the Central Bank of the UAE (CBUAE), First Abu Dhabi Bank, EY, and Accenture. He has played a leading role in shaping regional financial crime frameworks and public-private initiatives. Sunil's unparalleled experience in shaping the financial crime compliance landscape in the UAE makes him an invaluable addition to our team,' said Vikas Tyagi, CEO at Solytics Partners. 'His regulatory insights, public-private leadership, and strategic execution capabilities will be pivotal as we expand our footprint across the Middle East. ' Sunil was instrumental in establishing the UAE's first financial crime supervision framework at the CBUAE, covering institutional risk analysis, CRS/FATCA tax transparency, and virtual asset regulation. He also led the development of FATF-aligned frameworks and helped shape national policies on cross-border data sharing and sectoral risk assessments-strengthening the UAE's financial system integrity. Driving RegTech Growth in the GCC Sunil's appointment is a key milestone in Solytics Partners' strategy to accelerate the adoption of intelligent AML and sanctions solutions in the region. He will help build stronger ties with regulatory authorities and financial institutions, promoting alignment with global standards and enabling technology-driven compliance transformation. 'Solytics Partners has built a comprehensive and forward-looking FCC ecosystem,' said Sunil Kavishwar. 'I'm excited to support its mission and help institutions in the region to enhance compliance effectiveness while meeting regulatory expectations through intelligent solutions.' About Solytics Partners Solytics Partners is a global provider of RegTech solutions that streamline compliance, risk management, and regulatory reporting for financial institutions. Leveraging AI, machine learning, and advanced analytics, Solytics enables its clients to combat financial crime, improve risk oversight, and operate more efficiently. With a strong focus on the Middle East and emerging markets, Solytics Partners delivers customized, scalable solutions for AML compliance, transaction monitoring, sanctions screening, and risk assessments-helping clients stay ahead of evolving regulatory landscapes. Contact InformationDeepak Mehta Investor Relations +1-6468223440 SOURCE: Solytics Partners press release
Business Insider
6 hours ago
- Business Insider
Aliko Dangote eyes Namibia for the next big investment move amid pan-African expansion
Aliko Dangote, billionaire and one of the most prominent African investors, is considering Namibia as a potential destination for his group's extensive investment portfolio. Billionaire Aliko Dangote considers Namibia for expanding his investment portfolio. His investment approach emphasizes Africa-wide economic self-reliance and development. Namibia is implementing strategies in green hydrogen and private sector collaborations. Fresh off the completion of what is now the world's largest oil refinery, Dangote hinted at his plans to expand into Namibia during a high-level meeting with President Netumbo Nandi-Ndaitwah in Windhoek this week. The visit marks another step in the Dangote Group 's ongoing expansion into energy and industrial markets across over a dozen African countries, including South Africa, Ethiopia, Zambia, and Tanzania. ' Africa is Africa. It's not about Nigeria alone. If we sit back, there is no entrepreneur; whether from Japan, the U.S., or elsewhere, who can come and build our continent for us. ' The billionaire said. Why Namibia? Dangote's interest in the southern African nation aligns with its emerging green hydrogen strategy and energy ambitions, as well as its renewed focus on pan-African private sector partnerships. Most notably, he announced the completion of a 650,000-barrel-per-day oil refinery, now the largest in the world, alongside significant production capacities for polypropylene, fertilizer, LPG, and other industrial products. He stated, " We now have oil and gas. We've just finished building the largest refinery ever built, not just in Africa, but globally." 'We produce one million tonnes of polypropylene, carbon black feedstock, LPG, sulphate chips, and a fertilizer capacity of over three million tonnes; the second largest in the world." He added. The billionaire investor highlighted his $620 million investment in South Africa as part of a broader strategy to promote economic self-reliance and intra-African trade, stating,"It's not about Nigeria; it's about Africa. We must show that it can be done, and done by us." In response to his comments, President Nandi-Ndaitwah emphasized the need for African-owned investments to drive value addition and job creation. She said: " We are too few to be poor, considering the resources we have; both human and natural." "We don't want to be seen as a rich continent with poor people. African entrepreneurs like you give hope to the young ones that it is possible." She added. In a potential investor-wooing effort, she invited Dangote to consider Namibia as "a home away from home" and affirmed the country's readiness to support African-led investment projects with long-term local impact. 'When we meet successful African entrepreneurs like you, it is not just business; it is inspiration,' she said. 'Namibia is ready for this kind of partnership.' Nandi-Ndaitwah said.
Yahoo
7 hours ago
- Yahoo
Fuel firms can challenge California's emission limits, supreme court rules
Fossil fuel companies are able to challenge California's ability to set stricter standards reducing the amount of polluting coming from cars, the US supreme court has ruled in a case that is set to unravel one of the key tools used to curb planet-heating emissions in recent years. The conservative-dominated supreme court voted by seven to two to back a challenge by oil and gas companies, along with 17 Republican-led states, to a waiver that California has received periodically from the federal government since 1967 that allows it to set tougher standards than national rules limiting pollution from cars. The state has separately stipulated that only zero-emission cars will be able to sold there by 2035. Although states are typically not allowed to set their own standards aside from the federal Clean Air Act, California has been given unique authority to do so via a waiver that has seen it become a pioneer in pushing for cleaner cars. Other states are allowed to copy California's stricter standard, too. But oil and gas companies, as well as Republican politicians, have complained about the waiver, arguing that it caused financial harm. The waiver was removed during Donald Trump's first term but then reinstated by Joe Biden's administration. Last week, Trump again moved to end the waiver, signing a congressional disapproval of California's move to cut pollution and shift new cars and trucks to become electric over the next decade. Gavin Newsom, California's governor and a Democrat, who is in a huge head-to-head battle with the White House over the Los Angeles protests and state power, amid Trump's immigration crackdown, has called this move illegal and has said the state will sue. The justices' ruling overturned a lower court's decision to dismiss the lawsuit by a Valero Energy subsidiary and fuel industry groups. The lower court had concluded that the plaintiffs lacked the required legal standing to challenge a 2022 EPA decision to let California set its own regulations. 'The government generally may not target a business or industry through stringent and allegedly unlawful regulation, and then evade the resulting lawsuits by claiming that the targets of its regulation should be locked out of court as unaffected bystanders,' conservative Justice Brett Kavanaugh wrote for the majority. Liberal Justices Sonia Sotomayor and Ketanji Brown Jackson dissented from the decision. The lower court had previously ruled that the oil and gas industry didn't have legal standing to attempt to topple the California waiver but a challenge to this reached the supreme court, which appeared sympathetic to the claim when the case was heard in April. 'It's not that high a burden,' Amy Coney Barrett, one of the justices, said about proof of the alleged harm. California and the federal government have been allowed to 'stretch and abuse' the Clean Air Act, the American Fuel & Petrochemical Manufacturers, one of the groups challenging the waiver, has complained. But environmentalists and California's Democratic leadership have defended the waiver, arguing that it has helped push forward vehicle innovation and help cut greenhouse gases. Transportation is responsible for more planet-heating pollution in the US than any other sector. 'California and other clean car states cannot achieve federal clean air standards and protect communities without reducing harmful transportation pollution,' said Andrea Issod, senior attorney at the Sierra Club. 'We stand with these states to defend their well-established authority to set standards for clean cars.' The supreme court's ruling on Friday does not in itself end California's standards to cut pollution from vehicles, said Vickie Patton, general counsel of the Environmental Defense Fund. 'The standards have saved hundreds of lives, have provided enormous health benefits, and have saved families money,' Patton said. 'While the supreme court has now clarified who has grounds to bring a challenge to court, the decision does not affect California's bedrock legal authority to adopt pollution safeguards, nor does it alter the life-saving, affordable, clean cars program itself.'
