Results of Infosys and HCL Technologies indicate that strategic outsourcing is dying a natural death: Greyhound Research

From the results of two big IT service providers, namely HCL Technologies and Infosys, it is clear that Strategic Outsourcing (SO) is dying a natural death, believes Greyhound Research.

"Strategic outsourcing deals are increasingly being replaced by cloud and/or managed services delivery methods to leverage the cost and delivery benefits arising out of these delivery models. We believe that contracts of the length of 5 or 10 years are currently not that common. In the fast evolving IT market, companies do not want long term attachments; they prefer to obtain smaller contracts that enable them to renegotiate more frequently in order to reduce costs. This is impacting both deal size and term," says Sanchit Vir Gogia, CEO and Founder, Greyhound Research.

Sanchit highlights the recent HCL Q3 results which reflects that maximum client additions from the previous quarter were added in the 1 million to 5 million dollar bracket and no large ticket deals came in during the last quarter.

Infosys CEO, Vishal Sikka, too has pointed out that the traditional model of IT services is dying and organizations must innovate and automate more to succeed. In Infosys' Q4 results, there was an absence of new large deals, which is true for most Indian IT service providers.