$13 Billion IT Contracts Set for Renewal: A Competitive Landscape for Indian Tech Giants
As the global technology landscape evolves, approximately $13 billion worth of IT contracts are poised for renewal in the upcoming six months, culminating at the end of December. This presents a significant opportunity for major Indian IT firms, including Tata Consultancy Services Ltd (TCS), Infosys, HCLTech, and Wipro, to secure lucrative deals in a competitive market.
Surge in Deal Activity Amid Economic Pressures
Recent data compiled by Economic Times from various research and analyst firms indicates that this anticipated surge in deal activity is largely driven by the need for IT firms to navigate rising operational costs and the increasing demand for AI-led optimization from clients. The current year is projected to see a deal market that exceeds the $14 billion worth of contracts renewed in 2024, reflecting a robust appetite for IT services.
The Indian software services export industry, valued at approximately $283 billion, typically categorizes large deals as those priced at $100 million or more, with mega deals often exceeding $500 million. According to the Everest Group, over 600 engagements are set for renewal in the latter half of 2025, with average deal sizes ranging from $20 million to over $1 billion, and some contracts even surpassing the $2 billion mark.
Key Contracts Up for Renewal
Among the notable contracts up for renewal are TCS’s partnerships with Star Alliance and Nielsen, Infosys’ significant deal with Daimler AG, and HCLTech’s agreements with Swedish telecom giant Ericsson and UK-based insurer Chesnara. Wipro is also in the mix, with contracts involving German utility E.ON, Finland’s Fortum, and Brazil’s Petrobras.
In a recent development, TCS secured a $640 million contract with Danish insurer Tryg, marking its first major deal since January 2024. Meanwhile, Wipro extended its partnership with European food wholesaler Metro for an additional two years, following a successful four-year contract that began in 2021.
The Landscape of Renewals
Data from the Information Services Group (ISG) reveals that the upcoming renewals encompass over 800 deals, particularly from the financial services and manufacturing sectors, including mega deals valued at around $1.7 billion. In the first half of the year, approximately $1.3 billion worth of mega deals were in the renewal pipeline, covering about 70% of the global IT deal momentum.
Namratha Dharshan, chief business leader at ISG, noted that the number of mega awards-contracts with an annual value of $100 million or more-has been on the rise over the past two years. She emphasized that the combination of a strong mega deal renewal profile and the current macroeconomic environment suggests that large deal activity will remain robust in 2025. Enterprises are increasingly focused on cost reduction, while service providers are keen on shaping large deals to meet these demands.
Challenges in the BPO Sector
Despite the positive outlook for large deals, the business process outsourcing (BPO) sector is experiencing a contraction in overall deal sizes. Dharshan pointed out that smaller deals are indicative of discretionary spending, which has been sluggish over the past two to three years due to a challenging macroeconomic and geopolitical climate.
Yugal Joshi, a partner at the Everest Group, highlighted that average deal sizes are slightly below $100 million in total contract value (TCV). He noted that last year, during the same period, there were over 700 deals, typically of larger sizes. However, the market is beginning to show signs of irrational deal constructs, particularly concerning task automation driven by AI agents, raising concerns about whether all providers will meet their delivery objectives.
The Impact of Global Economic Conditions
The significance of these renewals is amplified by the current global economic climate, which has been affected by a US-led tariff war. This situation has led to a slowdown in technology demand, impacting both global IT firms and India’s software services export industry.
Dharshan summarized the prevailing market conditions as a mix of “confident” and “guarded” optimism. While managed services have shown improvement and continue to gain momentum, uncertainty remains high. This suggests that companies will likely maintain a strong focus on cost optimization and keep discretionary spending in check.
During the renewal process, clients are increasingly seeking substantial discounts while also demanding AI-led benefits. Joshi pointed out that, unlike in the past where around 90% of renewals would go to the incumbent provider, AI is now playing a more decisive role in the deal-making process.
Conclusion
The upcoming $13 billion worth of IT contract renewals presents a pivotal moment for Indian IT firms as they navigate a complex landscape marked by economic pressures and technological advancements. With a focus on cost optimization and the integration of AI solutions, these companies are poised to compete fiercely for a share of this lucrative market. As the industry adapts to changing demands, the outcomes of these renewals will likely shape the future trajectory of the Indian software services sector.
