The Great Indian IT Squeeze

An anonymous reader shares a report: The Indian IT sector has operated for decades under the dominance of major firms TCS, Infosys, Wipro, and HCLT. The historical growth of these companies was tightly coupled with the U.S. economy through a strong 'multiplier effect,' where Indian IT export growth significantly outpaced US GDP growth. This reliable growth model is now under pressure.

The multiplier has weakened considerably, falling from a peak of 4.1x to a projected 1.6x. This is contributing to a prolonged slowdown period for India IT exports. A primary factor in this slowdown is a clear shift in client spending priorities. While overall enterprise technology spending remains strong, clients are now allocating a larger portion of their budgets to core digital infrastructure, such as cloud platforms and SaaS platforms, over traditional IT services.

The firms are facing challenges on multiple fronts. Global corporations are increasingly establishing their own global capability centers in India, with projections indicating an accelerated pace of 120 new centers being added annually in fiscal years 2024 and 2025, up from some 40 six years ago. This insourcing trend diverts revenue from traditional IT vendors and creates direct competition for skilled technology talent.

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