Large contracts have been a common phenomenon with large IT companies. Margins from such contracts would go way beyond traditional profits IT service providers would make over years with such engagements. Such contracts however were complex and needed the service providers to be large enough and having enough experience to take on such deals.
“Show us the value or else we will find ways to reduce cost …”
The key differentiators with large IT companies have always been that and the premium demanded by them was therefore justified.
However, this differentiator also stands to get diluted very soon. A new trend has started in US and Europe where the customers are not renewing these deals but breaking down the whole work into several smaller components and opening up for mid scale IT companies to take up at far lower cost.
This tread has infact impacted large companies including Infosys, IBM , Accenture and many other big names.
The message from market is coming out loud and clear “Show us the value or else we will find ways to reduce cost”. One is thing is almost certain that high margin game in commodity technology services which covers more than 80 percent of the global IT services needs will be over very soon.
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Picture Credits : Techshout, For representational purposes only
By Alok Kumar