BNP Paribas figures reveal that India's $250 billion outsourcing industry saw a boost in deal momentum in the quarter ending in September, with around 60 deals. According to industry experts, the increase in deals from 47 in the previous quarter represented a gradual rebound, albeit one influenced by seasonal demand.

In September alone, significant IT services providers signed 26 transactions, including six apiece for domestic business Infosys and global competitor Accenture, while Cognizant secured three.

In September, Infosys signed agreements with Proximus Group, LIC, and Metro Bank, while Cognizant announced collaborations with Kombit, England and Wales Cricket Board, and Mecwacare. Wipro secured one contract with JFK International Air Terminal.

The recovery of the important banking and financial sectors, particularly in North America, boosted hope. Analysts believe that the upcoming cycle will be more predictable as a result of lower US inflation, interest rate decreases, and a projected stronger dollar following the US presidential election.

"We are entering the next year's budgeting cycle with far more certainty, as inflation is under control and Fed rate cuts are no longer a pipe dream, but are already underway," said Kumar Rakesh, associate director at BNP Paribas.

Though there were no major outsourcing contract announcements in the September quarter, top-tier IT businesses reported sequential gains in deal wins, and Infosys and HCLTech, the country's second and third largest IT firms, revealed an upward revision to business growth.

According to a Nuvama Institutional Equities study, overall agreements in managed IT services climbed 15.1% year on year to a record $26.7 billion, led by greater mega-deal activity and longer contract length.

"As we get into the December and March quarters, it may soften a bit because of the holiday season," Rakesh said.

The second half of a fiscal year is typically slow for IT services providers due to the post-holiday and furlough season, which results in fewer working days for staff as clients postpone their spending and project work.

However, most companies' management commentary in the September quarter was positive, with transaction activity returning in the future, despite a decline in employee additions following a seven-quarter drop.

In October, Cognizant announced three transactions with du, FCCI Insurance Group, and Alnylam Pharmaceuticals, while Tata Consultancy Services (TCS), Infosys, and Tech Mahindra each secured two.

TCS secured projects from the Department of Social Protection and Insper, Infosys signed contracts with Old National Bank and Zooplus, and TechM secured deals with Payoneer and Ooredoo Qatar.

The majority of the multi-year contracts signed were a mix of renewals and new arrangements, including numerous digital transformation deals. The deals typically include GenAI features to make them technology agnostic, even if precise outcomes or cost savings are difficult to verify.

According to Ramkumar Ramamoorthy, a partner at digital growth consultancy firm Catalincs, transaction momentum is a feel-good statistic that validates the business's long-term relevance, strength, and durability, as well as the stickiness of client relationships.

However, he added, "Unless we know the finer details of the deals—such as whether the deal is a renewal of existing business or incremental business, whether the deal focuses is on 'run the business' or 'change the business', whether the contract duration remains the same or has been extended—we cannot gauge the real impact on key aspects of revenue, margin, or digital transformation of clients' businesses."

Clients have broken down the arrangements renewed thus far into smaller sizes and shorter tenures, pushed down by tighter discretionary spending while they await macroeconomic clarity.

According to BNP Paribas' September report, "September was an exceptionally busy month in terms of deal-winning announcements by IT services firms. As a result, the 3 million rolling sum of deal signings, which is a strong one-quarter lead indication of transaction TCVs, remained high in September. We are more convinced that the sector's consensus earnings estimate could be upgraded."