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Time of India
3 days ago
- Business
- Time of India
IT sector may be hit amid AI shift, slower spending
Bengaluru: As AI-driven efficiency gains increasingly impact deal wins, triggering steeper rate cuts, the 25% additional tariffs imposed by US President Donald Trump pose a double whammy to India's IT sector. Even as the sector anticipated greater trade clarity by Aug-a development expected to boost US consumer spending-the announcement of an additional 25% tariff now threatens to dampen sentiment and stall the fragile recovery in discretionary spending. Phil Fersht, CEO of US-based HfS Research, said Trump's 25% tariff is the new IT services wrecking ball. "While services aren't directly taxed, the new tariffs stoke inflation in the US, forcing American firms to tighten discretionary spending. As manufacturing, logistics, and retail customers reel from higher input costs, they'll look to slash consulting and IT outsourcing contracts first, slowing deal cycles and delaying rollouts. Deal slippage will be most visible in manufacturing, logistics, and retail verticals by the Sept quarter." Fersht believes the new levy is forcing American enterprises to slam the brakes on discretionary spending. "A tariff-fuelled downturn in the world's largest economy typically translates into weaker tech budgets, directly crimping Indian software export growth, which depends on US buyers for over half its $190 billion in annual revenues." by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 20 Unforgettable Cars from the Past Undo In a recent report, Kotak Institutional Equities said the demand environment took a slight hit due to uncertainty over the Trump administration's tariff regime, with considerable impact on retail, logistics, and manufacturing verticals. "The hi-tech vertical is focused on investing for the future (AI-related capex and opex) while optimising the present (cuts to discretionary spending and prioritising spends away from other bets to AI). The healthcare vertical is operating under considerable uncertainty with payers under cost pressure and Trump ratcheting pressure on big pharma with threats of tariffs and changes to the drug pricing regime," the note said. Stay informed with the latest business news, updates on bank holidays and public holidays .
Time of India
3 days ago
- Business
- Time of India
Trump's tariff may hit Indian IT amid AI shift, slower spending
Bengaluru: As AI-driven efficiency gains increasingly impact deal wins, triggering steeper rate cuts, the 25% additional tariffs imposed by US President Donald Trump pose a double whammy to the Indian IT sector. Even as the Indian IT sector anticipated greater trade clarity by August—a development expected to boost US consumer spending—the announcement of an additional 25% tariff now threatens to dampen sentiment and stall the fragile recovery in discretionary spending. Phil Fersht, CEO of US-based HfS Research, said Trump's 25% tariff is the new IT services wrecking ball. "While services aren't directly taxed, the new tariffs stoke inflation in the US, forcing American firms to tighten discretionary spending. As manufacturing, logistics, and retail customers reel from higher input costs, they'll look to slash consulting and IT-outsourcing contracts first, slowing deal cycles and delaying rollouts. Deal slippage will be most visible in manufacturing, logistics, and retail verticals by the Sept quarter." Fersht believes the new levy is forcing American enterprises to slam the brakes on discretionary spending. "A tariff-fuelled downturn in the world's largest economy typically translates into weaker tech budgets, directly crimping Indian software export growth, which depends on US buyers for over half its $190 billion in annual revenues." by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Free P2,000 GCash eGift UnionBank Credit Card Apply Now Undo In a recent report, Kotak Institutional Equities said the demand environment took a slight hit due to uncertainty over the Trump administration's tariff regime, with considerable impact on retail, logistics, and manufacturing verticals. "The hi-tech vertical is focused on investing for the future (AI-related capex and opex) while optimising the present (cuts to discretionary spending and prioritising spends away from other bets to AI). The healthcare vertical is operating under considerable uncertainty with payers under cost pressure and Trump ratcheting pressure on big pharma with threats of tariffs and changes to the drug pricing regime," the note said. Fersht said that net-net, even a "goods" tariff of 25% acts like a tax on American buyers, cutting into the heart of India's IT services model. "Firms with higher discretionary digital exposure and deeper US footprints will bear the brunt, while the IT sector's giants may weather the storm more evenly as they are deeply rooted in stable, predictable maintenance engagements," he said. "Unlike China's rare-earths chokehold, India has little to threaten in return. Although US firms depend heavily on Indian IT talent, those services are broadly replaceable with other offshore providers or onshore automation—a blunt weapon that hurts more than it coerces." You Can Also Check: Bengaluru AQI | Weather in Bengaluru | Bank Holidays in Bengaluru | Public Holidays in Bengaluru Ray Wang, CEO of US-based Constellation Research, said tariffs only apply to goods, not services. However, the increased cost of component products that face tariffs will decrease service provider margins and potentially raise prices for customers. Stay updated with the latest local news from your city on Times of India (TOI). Check upcoming bank holidays , public holidays , and current gold rates and s ilver prices in your area.
Time of India
01-08-2025
- Business
- Time of India
Ground impact: GCCs go enterprise, India becomes the epicentre of change
Bengaluru: As global capability centres (GCCs) position themselves to operate as the enterprise, India is emerging as the hub driving that transformation. The 25% tariffs could prompt US companies to invest more in GCCs to navigate challenges such as geopolitical risks, visa restrictions, and to leverage India's tech talent powerhouse. Arindam Sen, partner and GCC sector leader - technology, media & entertainment and telecommunications in EY India, said most global firms are adopting a wait-and-watch approach, keeping a close eye on how these trade dynamics evolve and whether they affect broader cost structures or investment flows. "For now, the India GCC play remains strong. The value proposition continues to be driven by talent depth, innovation capability, and operational maturity. That said, this environment does reinforce the need for GCCs to stay agile: to build optionality into their delivery models, deepen tech-led efficiencies, and remain tightly aligned to business priorities globally," Sen added. The rise of India as a dominant force in the GCC landscape is evident, with projections exceeding $100 billion by 2030, according to the EY India GCC Pulse Survey 2024. Additionally, these centres are poised to create over 2.5 million jobs across the country. Phil Fersht, CEO of HfS Research, said, "I do not believe these tariffs will impact purchases of professional services, and it may actually encourage more investment in GCCs from US corporations to avoid any cross-boundary issues. " You Can Also Check: Bengaluru AQI | Weather in Bengaluru | Bank Holidays in Bengaluru | Public Holidays in Bengaluru An HfS Research and KPMG report said that enterprises are no longer evaluating service providers based on traditional metrics. "Size, reputation, and cost competitiveness—the holy trinity of vendor selection—are giving way to a new priority: manoeuvrability. In a world where trade winds shift overnight, the real test for vendors isn't meeting today's specs—it's whether they've got the agility to pivot when tomorrow flips the script. " Everest Group founder and chairman Peter Bendor-Samuel said, "We have studied this extensively and we see no significant impact from these tariffs on the tech services industry. These tariffs are not on services which are very hard to tariff. There may be a smaller impact if India chooses to retaliate by increasing taxes on services delivered from India. The more you tax something, the less you get off it." The HfS and KPMG report said enterprises are prioritising automation and AI-enabled delivery for speed, resilience, and control. Half of the respondents said they're turning to automation to accelerate service delivery without increasing headcount. The report said this is not about chasing cheaper labour markets anymore. Enterprises are doubling down on delivery models where geography and headcount no longer dictate outcomes. "As a CTO of a Fortune 500 firm put it: 'We are not chasing the next low-cost country. We are chasing a model that doesn't care where the cost sits,'" the CTO was quoted in the report.
