Indian IT industry may face temporary pause due to Russia-Ukraine conflict

As the conflict between Russia and Ukraine is escalating, India’s Information Technology (IT) service providers are on a wait-and-watch mode to consider taking strategic decisions including shifting service or delivery locations from Eastern Europe to India and the business continuity plans, especially for the clients from Europe.

Data collated from the quarterly earnings reports of top Indian IT service companies suggests that Europe is the second most important client geography for software service providers from India contributing 20-25 per cent of the overall business.

However, analysts with whom Business Today spoke to said that 90 per cent of this business comes from the Western Europe whereas the Eastern part of the region had lately turned out to be a key strategic delivery centre location where the IT firms had started establishing their presence.

Besides, the Indian engineering services firms had also acquired several firms in the Eastern Europe region to strengthen their delivery capabilities. In terms of industry verticals, sectors like banking, automotive, oil and energy, utilities in Europe, especially those which have a fair exposure to Russia, may face supply constraints that could further derail the new deals for Indian IT companies.

”Notably, the clients concentrated in Europe had started preferring the delivery locations closer their offices which resulted in Indian IT service providers having a presence across these countries,” Pareekh Jain of CEO, EIIRTrend, IT consulting and research firm told the BT.

Jain added that although the existent deals are unlikely to see any major impact on account of the ongoing crisis in the Europe, the new deal pipeline may face pressures as the enterprises across the region will recalibrate their spends and may go slow on the digitization initiatives in short term.

India’s largest IT service company, Tata Consultancy Services (TCS) told BT, “In response to the unfortunate events unfolding in Ukraine, TCS wishes to inform that we do not have employees or offices in the region(Ukraine). We are monitoring the current situation with great concern. We do understand that some of our associates have family and friends in Ukraine and we are extending all support to them during this crisis.”

HCLTech also responded by saying that although the company doesn’t have a presence in Europe, it is watching the developments closely and extending the support to the employees and their families from the region.

Infosys, Wipro, Accenture meanwhile did not comment when BT reached out to them with separate queries.

Will localization efforts be impacted?
Ukraine, Poland and other Eastern Europe countries are increasingly gaining significance for the tech talent pool that these countries provide and are becoming an attractive alternative of outsourcing to India for global companies as well as IT companies. The impact on the businesses due to ongoing war is expected to put a pause in the further hiring plans of IT service providers especially from Europe which could intensify the war for talent in India.

“There is going to be huge amount of work, projects which will be shifted to India, that may temporarily increase the need for local talent in the country and hence we could see huge demand for tech talent in coming few months,” a top HR professional in an IT service major, whishing not to be named said.

“Ukraine IT services generated $6 Billion in revenue in 2021 and wanted to increase to $16 Billion in 2025, which could have been 10% of Ukraine’s GDP. Now that will be uncertain, and some of that work might be located in other regions, including India,” a report by EIIRTrend noted. BusinessToday