Amid the recession, IT companies on the path to business transformation...

- Artificial Intelligence is not yet contributing much to revenue and profits, but it is a growing field.

The third quarter results of the four major information technology companies and their management comments show that the worst is over in terms of demand slowdown. However, managements of the companies are still cautious about the demand improvement projections in the short term. TCS, HCL Tech, Infosys and Wipro have all done well on the revenue front. Their performance in terms of profit and margin also remained more or less the same. Investors were expecting good earnings due to the surprisingly strong performance of the US economy as the US is a key market for Indian information technology companies.

However, while on the one hand management is positive in the sense that the companies believe that the worst is over in terms of demand and margin decline, on the other hand none of them believe that there will be an immediate pick-up in demand. At least two company sources said there is still a trend where consumers are avoiding discretionary spending.

On the positive side, all these companies are looking at the market in new areas, for example, in the area of ​​artificial intelligence and cloud-based products. Companies are also starting to feel confident about winning new deals. TCS has the largest number of customers in Europe and the company says costs may normalize after two bad years. The number of employees fell at the three largest companies, but the rate of decline in the labor force has slowed. HCL was the only company that saw an increase in the number of employees. However, management says there has been no clear improvement in demand. Churn rates (the rate at which a customer stops doing business with a company within a given period of time) have also decreased across the industry and are now in the 12-15 percent range. But it is also a symptom of slack demand conditions as this rate increases when demand in the industry is high. TCS management's comments and the clear revenue lines of the other three companies generally indicate that revenue estimates for all four companies will remain intact. But neither company has claimed to see better earnings in the near future. Customers of all companies are taking interest in artificial intelligence but they are not converting to large orders. Some customers are considering another round of moves to the cloud. In the long run, sustained growth and low inflation in the US could boost demand. Customers who hold off on discretionary spending can start negotiating deals again. However, the changes that have taken place in the last two or three years may have a long-term structural impact on the IT services market. More and more large companies have invested in developing internal capabilities. This has led to the expansion of global centers of competence. If viewed at the level of definition, this will reduce the demand for outsourcing. Many organizations have completed the migration to the cloud, affecting demand in this sector and may reduce outsourcing in the future.