India’s leading IT services giant, Tata Consultancy Services (TCS), anticipates a surge in technology spending from North America’s retail and manufacturing sectors, following a recent revival in banking and financial services. This optimistic outlook comes as consumer confidence strengthens, and labor challenges in manufacturing ease.
Retail and Manufacturing Set for Growth
TCS Chief Financial Officer Samir Seksaria shared that the strong holiday season sales in the U.S. should positively impact consumer sentiment. He noted that while banking has led the recovery, a synchronized rebound across retail, manufacturing, and financial services could drive significant growth for the IT sector.
Despite this cautious optimism, global economic uncertainties and persistent inflation have kept companies hesitant about increasing tech investments. However, TCS remains hopeful that stabilizing market conditions will encourage clients to resume spending.
North America Still a Challenge
North America remains TCS’s largest market, but its revenue from the region has now declined for five consecutive quarters. Still, there are signs of improvement—TCS’s banking and financial services segment posted its strongest performance since mid-2023.
Retail and manufacturing, which account for a significant share of TCS’s $29 billion revenue, could soon follow suit. Encouragingly, major players like Walmart, Amazon, Shein, and Temu reported record-breaking Black Friday and Cyber Monday sales last month. Meanwhile, overall U.S. online holiday spending surged nearly 9% to $241.4 billion.
Will Falling Interest Rates Boost Growth?
Another struggling segment for TCS has been communications and media, which is highly capital-intensive. Seksaria believes that if interest rates decline, this vertical could also see a revival.
His outlook aligns with TCS CEO K. Krithivasan, who expects policy clarity from the incoming U.S. administration to boost corporate confidence and drive discretionary spending in IT services.
Stock Market Optimism & The GCC Challenge
TCS investors welcomed the positive outlook, sending the company’s Mumbai-listed shares up by 5.6% on Friday—its biggest single-day gain since July 2024.
However, TCS and its rivals face growing competition from Global Capability Centers (GCCs)—in-house technology hubs that multinational corporations are expanding in India. These GCCs handle engineering, cybersecurity, and financial operations, reducing the need for outsourced IT services.
India’s GCC market is expected to reach $105 billion by 2030, but Seksaria downplayed concerns, stating that the cost advantage of GCCs is short-lived. Over time, many companies find managing costs and productivity over a 3-7 year period challenging, leading to cycles of GCC openings and shutdowns.
Mergers & Acquisitions in IT Services
In recent years, TCS and competitors like Infosys have responded to changing market dynamics with strategic acquisitions. In 2023, Infosys acquired Danske Bank’s captive arm, while TCS acquired Post Bank AG’s IT unit back in 2020. These moves help IT firms strengthen their foothold despite shifting client strategies.
Final Thoughts
With banking bouncing back and retail and manufacturing on the verge of recovery, TCS is poised to benefit from an uptick in IT spending. However, global economic pressures, inflation concerns, and the growing role of GCCs mean that TCS must remain agile in the evolving tech landscape.
