
BENGALURU: From revenue to hiring, mid-sized IT firms are performing better than their larger peers as they continue to focus on specialisation. Be it making use of generative AI or winning deals, these firms are eyeing digital transformation projects from clients.
The mid-sized firms ($150 million - $1 billion) are growing between 6% and 15%, whereas the larger firms’ constant currency organic growth is between 3% and negative 4%.
Companies such as Coforge and Persistent Systems, among others, are winning key deals. Coforge in Q4 had an order intake of $774 million, including a $400 million 10-year deal in the BFS vertical and a $55 million three-year transformation deal in the insurance vertical.
The company signed 11 large deals, two of which exceeded $300 million in contract value. It is confident in delivering robust organic growth in FY25. Persistent Systems’ order booking for the quarter ended on March 31, 2024, was at $447.7 million in TCV and at $316.8 million in annual contract value (ACV) terms. L&T Technology Services (LTTS) in Q4 had a strong sequential growth of 5.1%.
“There are several factors driving this (mid-tier firms managing to perform well). As the market has reduced discretionary spend for large initiatives, what remains is the small adjustments to the tech stack that are necessary to continue business operations and these smaller adjustments or initiatives pick up in volume,” Peter Bendor- Samuel, CEO of Everest Group, a research firm, said. The mid-sized firms are well positioned to do this work as they actively target it, whereas, the larger firms go hunting for larger opportunities.
Another factor is that many enterprises are increasingly dissatisfied with larger firms and feel that they are not getting the value from them that they should. The market is looking for specialist firms that bring expertise in a specific technology and or business domain or function, he added.
These mid-tier firms have understood this and are actively marketing themselves as specialists and taking share from the larger firms. Samuel added that these firms’ senior executives show up on the deals and guarantee attention that the larger firms can’t replicate. “These firms are already outperforming the larger firms and if they continue to focus on specialisation, they will likely continue to outperform them,” he added. At a time when top IT firms are seeing a reduction in workforce, mid-tier firms are adding more employees.
TCS, Infosys and Wipro together saw a decline of 63,759 employees in FY24. Mid-tier firms such as LTTS, Birlasoft and Persistent have cumulatively added 1,267 employees in Q4 alone.
Sanju Ballurkar, President Experis IT, the IT staffing arm of ManpowerGroup, said there is a guarded optimism amongst the mid-tier IT services firms even though the current hiring trends are still muted and sluggish.
"When we compare our demand from mid-tier firms, we see a Y-o-Y rise of anywhere between 10 and 30%. The hiring volumes and the random spurt in demand, is still dominated by the large IT firms. However, we also see demand from mid-tier firms that are known to carry specialisations in ERP implementations (particularly in the SAP) and other digital in-demand skills," he added.