Because of shifting technologies, IT firms may lose outsourced contracts

Because of shifting technologies, IT firms may lose outsourced contracts

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Because of shifting technologies, IT firms may lose outsourced contracts

Transamerica terminated its 10-year, $2 billion deal with Tata Consultancy Services last week, two years earlier than scheduled.

 

Indian IT firms face many challenges, including macroeconomic headwinds and emerging technologies such as Low Code and Generative AI.

 

Transamerica terminated its 10-year, $2 billion deal with Tata Consultancy Services last week, two years before schedule. It is now planning to reduce its reliance on third-party IT vendors.

 

It’s too early to predict what trends will emerge in the IT industry, but one thing can be said: some deals could face greater scrutiny due to changing technology, and there may be a rise in outsourcing.

 

V Balakrishnan said it is still too early to tell if this is a sign of a new trend. In the recent past, we had not seen a cancellation of a large deal that was meaningful.

 

He explained that insourcing usually occurs when the customer can handle the work more efficiently than outsourced vendors. AI technology is automating many IT tasks, which will impact productivity.

Customers will consider insourcing as AI platforms and engines become more mainstream. This will allow them to take advantage of all productivity gains, reducing costs and increasing competitiveness. “Even though this is still early, the industry needs to be on its guard,” he said.

 

Pareekh Jain of Pareekh Consulting said that clients who signed deals five or more years ago would believe they were locked into older technology with the advent of much more advanced technologies like Meta and Generative AI. While large deals can provide IT vendors with visibility into revenue streams, they also present challenges.

Source:-https://www.financialexpress.com/industry/it-companies-may-lose-outsourcing-deals-amid-changing-technologies/3131361/

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