Although Trump’s plans could increase marginal prices, they won’t stop Indian IT outsourcing: Samuel Bendor
Given the growing momentum in the GCC (global capability space), the Indian IT industry is probably going to gain. Foreign companies are increasingly establishing technology captives in the nation to outsource important technological labor. It is anticipated that this tendency would continue in 2025. In addition, Indian IT companies would not see a significant increase in discretionary spending this year, even if the demand situation is predicted to improve overall .
According to Peter Bendor-Samuel, founder and CEO of the international IT consulting business Everest Group, in an interview with Bizz Buzz, the Indian IT sector would not be significantly impacted if H1B visa regulations are tightened under the incoming Trump administration. Despite political hyperbole, he believes that immigration will not alter much since the US lacks the technological skills to carry out IT initiatives. He said that big deals, which have slowed down recently, may return from specific regions. According to Bendor-Samuel, despite all the management commentary, artificial intelligence (AI) will not generate income for IT companies in 2025.
There are high hopes that 2025 will surpass 2024 as the year with the greatest growth in the global IT services sector. How do you feel about this aspect? What are the likely drivers of any such increase?
In our opinion, the market has reached its lowest point and will rebound somewhat but unevenly in 2025. From the standpoint of the sector, BFSI (banking, financial services, and insurance) and technology are at the forefront. We’ve seen Tech Services decelerate for eight consecutive quarters, which is almost a record (for the industry). In our opinion, businesses will need to make changes to their operations, which will result in increased expenditure on IT services. We anticipate that Europe’s modernization expenditure will moderately rebound, and that labor arbitrage cost-cutting will rise. Nevertheless, this year’s comeback is not very robust.
The second quarter of the current fiscal year (Q2 of FY25) has seen some recovery in the performance of Indian IT services companies following a one-and-a-half-year downturn. Is an upswing about to start?Are you able to offer some insight into this issue?
We anticipate that the gradual and small recovery will continue and somewhat quicken, as previously mentioned. Nonetheless, a highly competitive climate with ongoing pricing pressure is what we observe.
What are the main technological trends that will influence the IT sector in the upcoming year? Throughout 2024, a lot of discussion will be focused on applications and solutions connected to artificial intelligence (AI). Do you believe that the industry will begin to see revenue translation from business spending connected to AI? Are you able to offer some insight into this situation?
We anticipate that a minor addition of artificial intelligence (AI) will help the digital modernization movement recover. But we haven’t yet seen the widespread, compelling applications of the much awaited AI boom. We do not anticipate that, by 2025, AI-led transformation initiatives will play a major role in the expansion of IT organizations.
What opinions do you have on generative AI? The majority of IT companies provide a variety of engagements, but only a small percentage have disclosed the precise income produced by GenAI initiatives. Will large IT corporations and IT services start to see revenue translation from emerging sectors like GenAI?
As the market grows sick of Gen AI pilots, it is unwilling to sustain the frantic pace of proof of concepts (POCs). A growing amount of discipline is being used to make sure that investments have a certain return on investment (ROI). Because of this and the lack of reliable large-scale AI use cases, the much-awaited AI wave will still be years away.
The sector has witnessed fewer mega and huge agreements in the second half of 2024. What is the proper way to interpret this? Does this indicate an improvement in discretionary spending, particularly in the digital realm? Are you able to offer some insight into this issue?
The number of megadeals in the US is obviously on the decline. However, Europe could experience a comeback. We observe signs that companies are beginning to free up some of their discretionary funds. Nonetheless, we anticipate that this will be subdued for at least the first two quarters of 2025 and probably moderate for the entire year.
The number of foreign businesses establishing technology captives (GCCs) in India has been rising. In your opinion, will the GCC’s momentum continue in 2025?
The Global Capability Center (GCC) insourcing business is booming, and the sector is seeing positive growth. In the GCC, the Build, Operate, and Transfer (BOT) business is anticipated to continue growing quickly. In our opinion, a new and maybe bigger GCC technology transformation market is beginning to take shape.
The H1B visa program is the subject of intense discussion in the US. Given that the Donald Trump administration is expected to enter office this month, do you believe that immigration laws will soon be tightened for the global IT services sector? Would stricter laws pertaining to outsourcing have a negative effect on the Indian IT sector, in your opinion?
The degree of regulation or tariffs would have a negative impact on the IT sector. It is unlikely to undo the outsourcing that has already taken place, though, because the US does not have the ability to take on the work again. Future growth might be impacted by headwinds. The unexpected consequences of policies like tariffing outsourcing, however, would probably result in wider industrial and societal pressures that would much exceed the drawbacks and would even favor the Indian IT sector overall.
The fact that Trump is receiving backing from big corporations and some technology this time might be a mitigating element. More moderating effects are probably going to be present this time, which will help to lessen his activities, especially when they are not intended to benefit blue-colored workers. Last but not least, the current state of affairs cannot be much altered by the incoming government since there is not enough IT skill in the US to take up a sizable amount of the current Indian supply. The most likely scenario is that there will be some hyperbole and a few little problems, like visa restrictions, which might marginally increase costs without causing the sector to collapse.
