India's IT to Gain 10% Revenue Boost from Digital Deals by FY25 By CIOTechOutlook Team

India's IT to Gain 10% Revenue Boost from Digital Deals by FY25

CIOTechOutlook Team | Wednesday, 18 December 2024, 09:55 IST

Indian technology services firms are anticipated to experience a minimum of a 10 percentage point annual rise in revenue from digital transformation contracts by the conclusion of the financial year 2025, indicating a better demand climate for the IT industry as clients begin to reassess technology expenditures following almost two years of caution.

The overall deal composition of leading IT services firms is transitioning from a focus on cost optimization agreements in FY24 to a gradual increase in transformation deals in FY25. For example, the leading four Indian IT firms, such as Tata Consultancy Services (TCS), Infosys, HCLTech, and Wipro, have entered into 18 digital transformation agreements over the last 7-8 months of FY25, based on information obtained from the market intelligence company UnearthInsight.

In FY24, cost optimisation and vendor consolidation agreements made up nearly 50 percent of tech services firms' revenue, whereas larger digital transformation projects, which focus on updating legacy technology and enterprise backends, accounted for approximately 25 percent of revenue, with the final 25 percent resulting from other agreements, based on UnearthInsight data.

Consequently, FY25 is projected to witness revenue contribution from digital transformation contracts rise to 35 percent from 25 percent the year before, while revenue from cost optimisation contracts will decrease to 40 percent, suggesting early signs of growth in discretionary spending and demand recovery for clients in the IT sector. This change will be noticeable after almost two years of declining demand.