Mid-tier IT firms are emerging as preferred partners for businesses as companies shift toward smaller, experimental contracts instead of long-term, large-scale deals. This trend is driven by economic uncertainty, cost-optimisation strategies, and the increasing adoption of Generative AI (GenAI).
For instance, Coforge recently signed a partnership contract worth approximately $1.56 billion with US-based Sabre Corporation, a travel technology company.
Similarly, L&T Technology Services secured an $80 million multi-year deal with a US-based industrial products manufacturer to accelerate digital transformation through advanced technologies such as connected products and the digital thread.
Mphasis also reported a high inflow of deals ranging from $1 million to $10 million.
IT outsourcing expert and CEO of EIIRTrend, Pareekh Jain, highlighted two diverging trends in the industry: “Large firms secure cost-optimisation deals, whereas mid-tier firms are winning smaller contracts. With the rise of GenAI, substantial preparatory work in cloud and data services is necessary. Mid-tier firms are often preferred for this phase due to their agility. Large firms still dominate renewals and major programmes, but mid-tiers are gaining traction with smaller, experimental deals”.
One of the key reasons for this shift is the ability of mid-tier IT firms to efficiently execute smaller contracts, a domestic brokerage analyst noted. Many businesses are focusing on cost control as they prepare for the next economic cycle, leading to increased investment in cloud and data projects, typically smaller in scope.
“Firstly, smaller contracts hold greater significance for mid-tier firms than for large firms, which do not prioritise them. Secondly, mid-tier firms have fewer decision-making layers and smaller teams, which enable faster execution. Lastly, they rely more on subcontractors, allowing them to quickly onboard specialists without depending heavily on fresher training programmes, making them more efficient in staffing short-term projects,” the analyst added.
“Many mid-tier CEOs come from large IT companies and understand the dynamics of big deals. Clients are now more comfortable working with mid-tier firms, marking a shift from the earlier trend where only smaller deals went to them while larger contracts were awarded to tier-one firms,” Jain explained.
IT services firms, including large companies, are experiencing shorter deal cycles, a trend expected to persist. HCLTech, Wipro, and LTIMindtree all noted this pattern following their Q3 earnings reports.
Clients are prioritising flexibility and agility, avoiding long-term commitments as they navigate rapidly evolving technological landscapes, analysts said.