IT majors under pressure from global eco troubles

BENGALURU:Recent management commentaries by IT companies show the impact of global macroeconomic pressures. HCL, in a recent investors’ meeting, said that it will achieve the lower end of its revenue guidance for the year. HCL had set a revenue guidance growth of 16-17% for the services vertical in FY23.

Company CEO C Vijayakumar also mentioned that the drop in discretionary spend in the hi-tech and telecom verticals have been more than what the company had expected, and to add to this headwind, incremental price increases were not going to be easy with macroeconomic challenges.

Accenture, which recently reported its earnings for its first quarter ended November, stated that there is a delay in decision-making, and clients were pausing smaller deals. “All of this (macro challenges) impacts the smaller deals more than the bigger deals because we’re continuing to see that big transformation focus,” the company said.
The opportunities to crack big deals was a common factor in the commentary of both Accenture and HCL.


Phil Fersht, CEO and chief analyst at HFS Research, told TOIthat pipelines for next year are, by and large, weaker than at the same stage last year and there is definitely a drop off in smaller deals. “There are some large ‘consolidation deals’ out in the market as firms look to bring more services under one provider to drive down costs and beat inflationary pressure. I expect to see some large deal announcements in Q1 2023,” he said.

Analysts noted a sense of caution in Accenture’s guidance. ICICI Securities, in its report after Accenture’s quarterly numbers, stated, “Accenture has maintained its FY23 YoY CC (constant currency) revenue guidance despite strong growth in Q1 implying caution over demand ahead.”

The company’s consulting bookings declined 13. 7% YoY in dollar terms and this decline and slowing consulting revenue growth imply contraction in discretionary spending, ICICI Securities said. Consulting revenue growth moderated to 10% YoY in constant currency terms as against 22-32% in the past four quarters, it pointed out.