ISG Expert Webinar Takeaways - Demand Picking Up In June; Deal Pipeline Is Still Growing: ICICI Securities

ICICI Securities Report

We hosted IT sector experts where we discussed key demand and tech trends playing out amid an uncertain macro environment. Key takeaways from the call include:

• IT services industry is facing a slowdown in demand due to cancellations or delay in ramp-up of discretionary projects. These projects are short-term and largely relate to non-revenue generating middle office work (example: implementing new customer relationship management cloud), whereas projects related to revenue generation and cost optimisation are moving forward. Almost every deal now has cost-saving component, as per ISG.

• Demand didn’t improve in April 2023 and May 2023 post slowdown in March 2023 (which was impacted by banking crisis), but ISG is seeing improved decision making in last two weeks of June-23. Additionally, pipeline remains strong, especially at the top of the funnel. Therefore, ISG expects demand to revive from September 2023 quarter and may retain its growth guidance of 5% YoY for managed services annual contract value.

• There are mega deals (more than $100 million ACV) in the pipeline that were expected to close in June-23 quarter, but their closure has been delayed. However, deal flow is coming through in June-23 and pipeline to total contract value conversion is expected to improve from Sep-23 quarter.

• Industries such as manufacturing, life sciences and public sector are growing well.

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