Several of these deals are in the vicinity of a billion dollars, while a few are significantly above that threshold. Almost a third of the roughly $16 billion worth of large deal renewals in the market in the next two quarters are federal contracts, data from Omdia Research showed.
Most of these contracts are multi-year cloud modernisation, application development, and maintenance deals, which American IT majors like Accenture, Perspecta, CACI International, SAIC, Noblis, and Maximus currently service. Barring Accenture, the remaining companies earn a majorty of their revenues through federal contracts.
Experts say that while it’s still hard territory for Indian companies to crack into, there is a more positive attitude from US federal clients toward Indian-heritage suppliers with India being widely accepted as the major talent location for technology these days. There has been a significant change over the last few years with strengthening India-US ties, they added.
HfS Research chief executive Phil Fersht said things are changing for sure. However, they face stiffer competition from US tech services firms, such as Deloitte and KPMG, which offer managed services in direct competition with the leading Indian suppliers.
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“There is generally a more positive attitude from US federal clients towards Indian-heritage suppliers with India being widely accepted as the major talent location for technology these days,” Fersht said.
During the Q3 results, Indian IT majors have also called out the fact that they are increasingly winning a larger share of renewals as clients continue to look for cost-optimised solutions in a challenged macroeconomic environment.
Recent changes in visa policies could also aid some shift in the market dynamics. In September, the US government announced the launch of a pilot program for domestic US visa renewals benefiting the H1B category, a large part of the Indian technology associates in the region.
In an environment marred by slowdown and uncertainty, global large deal renewals will see large Indian, as well as multinationals, slug it out among themselves to bag these contracts, experts told ET.
Over the past four quarters, large Indian IT majors like Tata Consultancy Services (TCS), Infosys, Cognizant, and HCLTech have reported several large and mega deals which include the $700 million deal with Phoenix Group, $1 billion Nest deal (UK government), $454 million Danske Bank deal, $1.6 billion Liberty Global deal, $1 billion CoreLogic deal, and $2.1 billion Verizon deal among others. However, none of these are major US federal contracts.
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However, federal contracts may not be a cake walk for Indian providers like Tata Consultancy Services, Infosys, Wipro, and HCLTech.
Hansa Iyengar, senior principal analyst, Omdia said that Indian IT majors do not have an established presence in this market.
“Indian vendors have nothing major in the US federal contracts segment. Most of the federal contracts go to some well-established players who are mostly US-based as these require staff to have varying levels of security clearance which Indian vendors with their offshore staff cannot obtain,” said Iyengar.
Similarly, Everest Group chief executive Peter Bendor-Samuel believes that the Indian firms have been making sustained investments in the Federal market, “The going is slow and they face entrenched competition, a long selling cycle, and are less advantaged from a cost perspective than they are in other areas,” he said.
