TCS and Infosys report Slowdown in one particular area of Business! Details

A study on outsourcing contracts done by Information Services Group (ISG) reflects that there has been a notable slowdown in deals undertaken. The total commercial outsourcing contracts with annual contract value of $5 million has declined by 5% over the last quarter as enterprises have reduced spending on managed services. 

This analysis shows that there has been a huge decline in financial services deal activity, where many IT companies are involved. 

“Contrary to consensus expectations, deal activity in Financial Services was a major disappointment. This was ascribed to low interest rates and delays witnessed in the shift to the remote work model, led by compliance/security requirements, etc.," analysts at Motilal Oswal Financial Services Ltd said in a note.

Both Tata Consultancy Services Ltd (TCS) and Infosys Ltd get more than 30% of their revenues from banking, financial services and insurance (BFSI) vertical.

Although these firms have spent less on managed services, they have increased spending on digital efforts.However, investors are interested in knowing the demand trends in financial services through the TCS results that is going to be released by the company. 

ISG has warned that deal activity can remain weak in the coming term as well. It indicates that there will be a double-digit decline in overall contract values in financial services this term. 

“We are surprised with sharp contraction in financial services deal activity as per ISG database. The decline is contrary to positive commentary in demand from IT service providers. ISG is also predicting a slower recovery, albeit marginal, in deal activity compared to earlier expectation. The broad outlook highlighted by ISG is broadly consistent with its earlier stance," analysts at Kotak Institutional Equities Research said in a note.