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Time of India
a day 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.
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Business Standard
6 days ago
- Business
- Business Standard
67% of Fortune Global 30 now run strategic GCCs in India, says ANSR report
About 67 per cent of the Fortune Global 30 and over one-third of the entire Fortune Global 500 now run Global Capability Centres (GCCs) in India, said a newly released report. The report, developed by ANSR in collaboration with UnearthInsight, examines the operating models, talent trends, and innovation maturity across 174 Fortune 500 companies that have established over 390 centres across India. These centres now employ over 950,000 professionals, with a growing share of global functional leadership based in India. 'These centres have evolved into intelligent, AI-native hubs that are not only scaling innovation but redefining how global businesses operate. As digital twins of the headquarters, they are leading platform modernisation, creating IP, and driving real-time, enterprise-wide decisions,' said Vikram Ahuja, Co-Founder, ANSR, and Chief Executive Officer, 1Wrk. Ahuja further added that with the rise of agentic AI and hyperconnected ecosystems, GCCs in India are no longer back offices. They have become the command centres of tomorrow's global enterprise. The report also highlighted that Indian GCCs now house senior functional leaders with global P&L responsibilities. In many cases, they serve as global Centres of Excellence for AI, GenAI, cybersecurity, and product engineering. In terms of preferred cities, Bengaluru and Hyderabad dominate, with over 200 GCCs employing more than 560,000 professionals for Fortune 500 enterprises. The report further noted that the next phase of GCC evolution is marked by intelligent, autonomous operations and deep integration into enterprise strategy, leveraging India's ecosystem to accelerate time-to-value. In terms of sectors, BFSI (21 per cent), Retail/CPG (14 per cent), Healthcare (12 per cent), and Automotive (11 per cent) lead in GCC adoption, reflecting India's ability to support both tech- and domain-intensive operations. Women now account for 30–32 per cent of the workforce in Fortune 500 GCCs in India, with active efforts to build inclusive leadership pipelines. As global enterprises prepare for a future defined by AI, digital resilience, and distributed leadership, India's role as the headquarters for global work continues to deepen, said the report. The Fortune Global 500 GCCs in India Landscape Report 2025 underscores not just the scale, but the strategic significance of India's GCC ecosystem, positioning it as a cornerstone for innovation, growth, and enterprise transformation in the years to come.
