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Time of India
6 hours ago
- Business
- Time of India
Tech outlook: Indian IT firms face margin heat as AI impact meets macro slowdown; companies delay hikes, cut costs and chase deal conversions in negotiator's market
AI image India's top IT firms are grappling with a squeeze on margins amid persistent macroeconomic headwinds and rising pressure from AI-driven productivity improvements, with the first quarter of FY26 reflecting a shift to aggressive internal cost control measures, analysts said. From deferring pay hikes to trimming sales and admin costs, companies are pulling all levers to sustain profitability as deal momentum remains weak. Experts believe the pressure on margins is unlikely to ease in the near term, even if revenue improves modestly due to pent-up demand, according to an ET report. 'The sector is entering a negotiator's market,' said Nitin Bhatt, technology sector leader at EY India. 'Margin pressures will worsen with investments in new sales and go-to-market motions, solution-building, reskilling, and in some cases, discounts to protect the current estate.' AI-linked pricing changes are further complicating margin dynamics. 'IT firms are shifting from time & material to outcome-based pricing for AI projects, linking fees to business impact like cost savings or efficiency gains. This may pressure short-term margins but promotes high-value, long-term engagements,' Bhatt said. Brokerage firm Emkay Research cited HCLTech's management commentary noting generative AI's impact: 25–30% efficiency gains in software development, up to 50% in business processes, and up to 75% headcount reduction in contact centres due to conversational AI. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like A genetic disorder that is damaging his organs. Help my son Donate For Health Donate Now Undo For the first time in several quarters, HCLTech revised its margin guidance downward—from 18%-19% to 17%-18%—which analysts flagged as a negative surprise. 'Margin guidance came in as a negative surprise to the Street since HCLT has been keeping margin guidance intact despite changes in revenue target for the past few quarters,' said Elara Capital. At Tata Consultancy Services (TCS), rising employee costs—due to fresh hiring and mid-quarter benefits—impacted margins by 80 basis points in Q1FY26. Employee cost now forms nearly 59.45% of TCS's revenue, even as attrition remains elevated at 13.8%. 'FY26 is margin protection and margin expansion year,' said Gaurav Vasu, CEO of UnearthInsight. 'Growth, especially in the US and core verticals, is weak across the board. Large deal wins are not yet translating to revenue acceleration, so lead indicators (pipeline, bookings) matter—but execution and conversion will be critical in H2 FY26.' Vasu said top-tier IT companies are resorting to tight operational controls, including deferring salary hikes, cutting variable pay, and closely managing bench strength. He forecast modest revenue growth of 3–5% for FY26, with geopolitical risks, US tariffs, and a slowing global economy delaying recovery in client spends. Stock research firm InCred Equities noted that client delays in finalising long-term digital deals were increasing. 'Deal conversations are underway but advisory-led proposals with long-term roadmaps have complex constructs and are elongating the decision timeframe,' it said. While the deal pipeline is robust, it remains a 'negotiator's market,' InCred added, where agility and pricing flexibility are critical. Clients continue to demand 'more for less'—optimising legacy spends to fund smaller AI-led projects. This shift is driving vendor consolidation and heightening competitive pressure. 'Building margin expansion for FY26F could be aggressive,' InCred warned, citing tighter client budgets, slower staffing cycles and intense competition. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
19 hours ago
- Business
- Time of India
IT companies tighten belt as AI, macro headwinds squeeze biz margins
Academy Empower your mind, elevate your skills ETtech India's leading IT companies are facing the double whammy of persistent macro headwinds and AI-led productivity impact, squeezing fiscal first quarter showed companies are stretching all internal levers aggressively to protect profits amid slowing large-deal momentum. This includes lowering sales and admin costs, delaying pay hikes, and rejigging bench expect the trend to continue through the fiscal second half as the IT sector is turning into a 'negotiator's market'. While revenues may see an uptick due to pent-up demand created in the last few quarters, margins will remain stretched and firms will focus on operational excellence, analysts to Nitin Bhatt, technology sector leader at EY India, margin pressures will worsen with investments in 'new sales and go-to-market motions, solution-build and reskilling, large deal conversions, and in some cases, providing discounts to protect the current estate.''IT firms are shifting from time & material to outcome-based pricing for AI projects, linking fees to business impact like cost savings or efficiency gains. This may pressure short-term margins but promotes high-value, long-term engagements,' he instance, HCLTech 's management highlighted that generative AI delivers substantial efficiency gains in software development (25–30%) and business processes (up to 50%), with contact centres seeing up to 75% headcount reduction by implementing conversational AI, brokerage firm Emkay Research noted in a for the first time in several quarters, lowered its margin guidance to 17%-18% from 18%-19%. 'Margin guidance came in as a negative surprise to the Street since HCLT has been keeping margin guidance intact despite changes in revenue target for the past few quarters,' Elara Capital said in a the case of Tata Consultancy Services (TCS), increase in employee costs because of hiring, excess capacity, and mid-quarter benefits led to an 80 basis points impact during Q1FY26. The company's employee cost reached an all-time high, now constituting 59.45% of revenue, even as attrition remains high at 13.8%, data showed.'FY26 is margin protection and margin expansion year,' said Gaurav Vasu, founder and CEO of data and research platform UnearthInsight. 'Growth, especially in the US and core verticals, is weak across the board. Large deal wins are not yet translating to revenue acceleration, so lead indicators (pipeline, bookings) matter—but execution and conversion will be critical in H2 FY26.'Vasu added that top-tier IT firms are adopting tight controls—reducing variable compensation, deferring salary hikes, and tightly managing bench policies.'H2 FY26 for top Indian IT firms will likely see gradual but not dramatic growth improvement, driven by geopolitical risks, US tariff stance and slowing global economy which delays deal conversions and recovery in client spend,' said UnearthInsight's Vasu, stating a 3-5% revenue growth guidance for research firm Incred Equities said clients' procrastination over long-term decisions has increased.'…deal conversations are underway but advisory-led proposals (RFPs) with long-term road-maps have complex constructs and are elongating the decision timeframe,' InCred said in a report. It added that although the pipeline opportunity could be at its peak currently given the delays, it is a highly negotiator's market where companies need to be agile, flexible and accommodative.'Clients continue to seek 'doing more for less' i.e. to optimise legacy projects to fund small-ticket AI-led ones. This, in turn, is driving vendor consolidation, driving the competitive intensity higher, creating staffing challenges, and pressurising the margin profile of deals. Hence, building margin expansion for FY26F could be aggressive,' said InCred Equities.
Time of India
05-06-2025
- Business
- Time of India
IT's growth search takes them to doors of mid-market firms
Live Events India's $280 billion-plus technology outsourcing industry is expanding its focus to the underpenetrated smaller and mid-market enterprise segment, chasing growth beyond its traditional base of Global 2,000 and 5,000 companies in a sluggish watchers see strong opportunities as corporates with annual revenues typically between $1 billion and $5 billion accelerate digitisation amid the rapid rise of artificial intelligence (AI).Fundamentally, as growth in the larger clients has been sluggish, IT services companies are looking at portfolio diversification, and the mid-market offers strong opportunities in this space, said Jimit Arora, chief executive officer of US-based research and analyst firm Everest Group. 'For mid-market companies, tech-enabled transformation deals are largely greenfield opportunities, and they are looking to leapfrog prior S-curves and move to value creation through AI,' he the large and mid-tier IT service providers did not respond to queries, industry experts said the emergence of AI and ongoing digitisation have compelled smaller and mid-sized corporates to beef up investments in cloud, cybersecurity, and broader tech transformation. Mid-market enterprises are typically late adopters of technology. Until now, their tech adoption was largely limited to back-office functions and basic IT infrastructure—areas served by small and mid-sized outsourcing firms Now, as many of these enterprises across the world scale up and move from the unorganised to the organised sector, their need for advanced technology transformation is rising factors are driving large IT companies to target these clients, experts said.'They are often more agile in decision-making, present a lower barrier to entry, and offer greater opportunities for services such as tech modernisation, cloud adoption, cybersecurity and managed services,' said Nitin Bhatt, technology sector leader at EY industry executive pointed out that large, conventional clients of IT firms, are increasingly setting up global capability centres (GCCs) in low-cost regions like India, which help them insource their technology capabilities. This has further pushed India's strong outsourcing companies to scout for growth IT outsourcing business grew slower by low single digit at around 3% in constant currency terms in FY25 to more than $280 billion. Traditionally, a double-digit growth sector, the IT industry grew slowest in decades in FY24 at 1.2% and is expected to grow by 3- 5% in FY26 due to weak technology demand post high-growth Covid phase and disruption from enterprises still account for over 60-70% revenues of the top five Indian IT services firms—Tata Consultancy Services (TCS), Infosys , HCLTech, Wipro and Tech Mahindra , according to data intelligence platform beyond the Global 2,000 list lies a less-explored segment of over 40,000 companies worldwide, each generating between $500 million and $5 billion in revenue, Bhatt this opportunity, IT companies have now developed tailored and often sector-specific go-to-market strategies and playbooks for mid-market to data shared by Bhatt, the segment has a total addressable market for tech services estimated at $300-400 per Everest data, mid-market in North America alone is a $110-130-billion IT services market and is expected to grow at about 8-10% compound annual growth rate (CAGR) over the next three the overall technology spend across corporates is around $1.3 of Everest sees the diversification thesis play out in the IT services sector, which shows companies looking at new frontiers for growth – be it newer geographies of Asia Pacific, Latin America and Middle East, or new client segments like mid-market both large and mid-tier IT services companies make a play for this market, Arora foresees greater success with the mid-sized outsourcing companies that are in the sweet spot of size and agility.
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Business Standard
30-05-2025
- Business
- Business Standard
Artificial intelligence watch: Tech middle managers stare at job blues
Being just a software engineer is not good enough, Nina Schick, an expert on artificial intelligence (AI) and founder and chief executive of Tamang Ventures, said last week at a packed conference in Bengaluru. 'Level up,' she said while explaining the importance of thinking about the next-generation skills. In the midst of all the upskilling talk in the AI era, middle managers in the tech sector seem to be delicately placed, analysts believe. Quite like the entry-level software roles. 'It's a matter of time before middle-management jobs will come under scrutiny, especially as AI agents get better at supervision and decision-making. A significant number of middle managers in the tech sector would need to be reskilled, repurposed or made redundant,' says Nitin Bhatt, partner and technology sector leader at EY. The fact that not only entry-level roles but also experienced positions can be impacted by automation and AI has sparked off uncertainty, nudging more people to reskill themselves. According to industry executives, jobs of mid-level managers with about 20 years of experience —essentially people managers — are at risk. This cohort, they say, must not remain just a manager but be a techie in the new AI-led universe. The way software is being written, tested, developed, and deployed is changing fast. 'AI is not taking your job but people who use AI will,' points out Praveen Neppalli Naga, chief technology officer, mobility and delivery, Uber. 'There is a difference between an engineer using Cursor and one not using it. The scale of this change is big.' Such managers are big in number across India. TeamLease, a leading staffing firm, estimates this segment at 10-15 per cent of the total technology managerial roles that are primarily support functions. According to Xpheno, a specialist staffing firm, there are about 610,000 senior talent in India, with experience between 13 and 17 years. 'There was a time not too long ago, maybe five to 10 years ago, when the concept of a manager was supposed to be a people manager. There is no people manager anymore. None of our engineering leaders are people managers because they are hardcore techies. Unless you understand technology, you cannot lead people,' says Rohit Kaila, head of technology and site leader at the India technology centre of Wayfair, a US-based ecommerce company. In line with that thinking, Zoho founder Sridhar Vembu recently cautioned software engineers that better salaries than a mechanical or civil engineer 'is not some birthright'. He posted on X: 'The productivity revolution I see coming to software development (LLMs + tooling) could destroy a lot of software jobs.' Data from Nasscom, a tech industry association, shows while more than 400,000 engineers in India are trained on AI, just 73,000 have advanced AI skilling knowledge, highlighting the skill gap. The Nasscom data also shows that India will create 2.7 million newer AI jobs by 2028. 'The ones facing challenges are those without specialised skills. For example, someone with only basic Java programming skills will struggle. GPT (generative pre-trained transformer) tools and internal LLMs (large language models) are now writing such codes and demand for routine jobs is going down,' says Aditya Narayan Mishra, managing director and CEO of Ciel HR. IT under pressure India's information technology (IT) sector has long been one of the top employment generators, absorbing thousands of students from engineering colleges every year for maintenance and support of IT systems of multinationals. And yet, that sector is poised for a tectonic shift in the face of AI, analysts say. 'Codes are increasingly being churned by machines and software testing, one of the most traditionally structured functions within the software development life cycle (SDLC), is also getting automated.' There will be entry-level roles, but what is L2 and L3 will become L1 because automation is making a lot of entry-level jobs redundant, points out Neeti Sharma, chief executive, TeamLease Digital. That has led to a drop in hiring rates of IT companies. The top-five IT companies hired just 12,718 people in the last financial year, compared to 66,500 for the financial year ended March 31, 2020. 'The real change is in IT services,' adds Mishra of Ciel HR. 'We now get a lot more requirements in AI, GenAI, Cloud, DevOps, full-stack development, product management, and cybersecurity.'
Hindustan Times
14-05-2025
- Science
- Hindustan Times
Ludhiana: Nilaruna, Nitin top PSEB Class 12 exams in district
The Punjab School Education Board (PSEB) declared the Class 12 results on Wednesday, bringing pride to schools and families across the district. Two students, Nilaruna Dogra of BCM School, Focal Point, and Nitin Bhatt of RS Model Senior Secondary School, Shastri Nagar, emerged as district toppers, both securing a remarkable 99.4% with 497 out of 500 marks. Nilaruna, a humanities student and a national-level softball player, dreams of becoming an IAS officer. She scored a perfect 100 in English and history and says her daily routine and focused preparation helped her achieve this success. 'I used to study from 6pm to 11pm regularly, and during exams, my study time stretched to 10 hours a day with short breaks,' she shared. Currently preparing for the law entrance exam at Panjab University, Dogra credits her success to her family and previous school toppers who inspired her. 'My family never pressurised me for marks. They always encouraged me to gain knowledge instead of chasing numbers,' she added. Last year, she won a silver medal in the national games held in Andhra Pradesh and was the only student from her school to represent at the national level in softball. Nitin Bhatt, a non-medical student, matched Dogra's score with 497 marks. Studying at RS Model Senior Secondary School, Shastri Nagar, Bhatt's consistent efforts and dedication earned him the top position in the district alongside Dogra. Several other students also made the district proud by securing the second position with 98.4% marks. Among them was Prabhjot Singh from Atam Manohar Jain Modern Senior Secondary School, Khanna. Scoring a perfect 100 in mathematics, chemistry, and English, Prabhjot aspires to become a computer science engineer. 'I didn't take any coaching for mathematics. I focused on self-study and stayed away from social media. Watching cricket helped me relax during the exams,' he said. Son of a driver, Prabhjot had previously made it to the merit list in Class 10 with a score of 97.8%. Rajveer Kaur and Amandeep Kaur, both commerce stream students from the Senior Secondary Residential School for Meritorious Students, also shared the second spot in the district. Rajveer, daughter of a farmer and a homemaker, aims to pursue her undergraduate studies at Punjabi University. 'I wasn't someone who studied five to six hours every day. I focused in class and studied with dedication during exams,' she explained. Amandeep credited her success to the support from her teachers and parents. 'I stayed consistent with my studies and didn't stress over marks,' she added. Niharika Gujral, a medical student from Shaheed-e-Azam Sukhdev Thapar Girls School of Eminence, Bharat Nagar Chowk, also stood second in the district. With a perfect 100 in physics, she now plans to drop a year to prepare for the NEET exam, aspiring to become a gynaecologist. 'I prefer studying at night and even stayed awake before my physics, chemistry, and Punjabi exams,' she said. Other high scorers who earned the second position in the district include Divjot Singh from RS Model School and Anmolpreet Kaur from SGD Grammar Senior Secondary School. Scored big against all odds Beating all odds and rising above financial hardships, Shikhar Shrivastav, a non-medical stream student of School of Eminence, Sekhewal, has made his mark by securing an impressive 90.4% in the Class 12 examinations, the results of which were announced by the PSEB. Shikhar's journey is nothing short of inspirational. Having lost his father at a young age, he now lives in Ludhiana with his uncle and aunt, while his mother and brother stay in Rae Bareli, Uttar Pradesh. His uncle works as a watchman in the same school where Shikhar studies. Despite such personal and financial challenges, he remained focussed on his studies and emerged successful, scoring 452 out of 500 marks. 'My mother doesn't earn, and my brother, who is pursuing his undergraduate degree, works part-time to support the family. He also sends me money to manage my expenses here,' Shikhar shared. Relying entirely on self-study, Shikhar made consistent efforts by practising previous years' question papers and sample tests. He had earlier scored 90.6% in his Class 10 exams, proving that his academic excellence is the result of dedication and hard work. Speaking about his routine, he said, 'On normal days, I used to study from 7pm to 10pm, and after a short break, continued until 2am. During exams, I stretched my study time even further.' Shikhar, who credits his success to his school faculty and principal Naresh Kumar, aspires to become a computer science engineer and later plans to appear for civil services exam.
