Even as business slowed for IT firms in FY24, these firms reported improvement in their order book going from FY23 to FY24. According to data shared by CareEdge – total deal wins for FY24 for the four IT firms, TCS, Infosys, HCL Tech and Wipro were 31.9 per cent higher in FY24 versus the 2023 fiscal. Their cumulative order book in the 2024 fiscal amounted to 74.8 billion dollars, in FY23 their total order book was 56.7 billion. 

Pareekh Jain, an IT analyst, explained, “These deals are mostly cost optimization deals. These are larger duration deals hence they have such a large total contract value (TCV), but they run for longer. The question is whether the IT firms will be able to convert this into rising revenues going forward.”

The prevailing issue in FY24 dampening margins and revenues for IT firms was the fact that they were struggling to turn deals into ongoing projects as their clients were hesitant to start these projects in order to cut back their discretionary spending.

Lesser uncertainity

For the most part, experts remain unclear about whether these circumstances will improve significantly in FY25, however one expert explained, “There is lesser uncertainty in FY25, it is clear that the threat of a recession in the US market which was looming last year has abated for this year. At the same time the election cycle in the United States could be another dampening factors which might cause clients to hold off on project implementation.”

Also read: Infosys Q4 results: Are analysts not learning lessons or is the company faltering? 

Samir Sheksaria, CFO of TCS said after Q4FY24, “firms are less cautious than they were a year before but we still need an economic trigger to change the sentiment.”

Overall the rate of client acquisition has improved only marginally. Number of new clients being onboarded each quarter has risen significantly only in the “small client” bracket – that is the firms that bring less than a $1 million business to the firm.

As IT firms invest into their gen AI capabilities, that is not necessarily reflecting in their order books as well. Jain added, “GenAI will only make 2 per cent of the total order book for these IT firms at this point. But the fact that Indian service providers have invested significantly in generative AI is allowing them to bag larger deals.”