As global economic uncertainties continue to impact the IT services sector, leading firms Cognizant and Infosys are adopting a new trend in IT deals to sustain growth and combat industry challenges.
Both companies have identified vendor consolidation deals as a key strategy to optimize costs, enhance efficiency, and secure long-term contracts with major clients.
With enterprises reducing the number of IT outsourcing vendors, Cognizant and Infosys see an opportunity to expand their market share by securing larger, multi-year contracts.
This shift comes amid sluggish demand for new IT projects, forcing companies to rethink their business models and focus on strategic partnerships.
Cognizant and Infosys: Rise of Vendor Consolidation Deals
Vendor consolidation deals involve reducing the number of IT service providers that enterprises work with, streamlining operations, and cutting costs.
This trend has gained momentum as companies seek to simplify their IT ecosystems, ensuring greater efficiency and accountability.
Infosys CFO Jayesh Sanghrajka and Financial Controller Sandeep Mahindroo highlighted that vendor consolidation deals have become a major focus area for the company.
Analysts at Kotak Institutional Equities noted that Infosys has several such deals in the pipeline, positioning it for sustained revenue growth despite the lack of net new deals in the industry.
Similarly, Cognizant’s President of Americas, Surya Gummadi, echoed this sentiment during a discussion with Bank of America analyst Jason Kupferberg.
He emphasized that vendor consolidation agreements are enabling Cognizant to strengthen its client relationships and establish long-term contracts.
This strategy helps the company navigate economic uncertainty and adapt to fluctuating trade policies.
Why IT Firms Are Adopting This Strategy
The IT industry has faced significant headwinds in recent years, including:
- Uncertain global trade policies, particularly in the United States.
- Reduced discretionary spending by enterprises on IT services.
- Slower deal flow, with fewer new contracts being signed.
By focusing on vendor consolidation, Cognizant and Infosys aim to:
- Increase revenue stability through multi-year agreements.
- Strengthen client relationships by offering end-to-end solutions.
- Improve operational efficiency by handling larger portions of IT workloads for enterprises.
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