Indian IT Companies Revenue To Be Driven By SaaS In 2024, Say Analysts
Indian IT companies’ have partnerships with a number of global SaaS organisations that reported positive financial performance.
![<div class="paragraphs"><p>Photo from Freepik</p></div>](https://media.assettype.com/bloombergquint%2F2024-01%2Ff01ca40e-c51c-430f-97e9-d1924da3c7ff%2Fpeople_using_digital_device_while_meeting.jpg?auto=format%2Ccompress&w=200)
Indian information technology companies will report steady revenue growth in 2024, driven by optimism over software-as-a-service companies and as engineering and research and development work continue to be a bright spot, according to analysts.
Indian IT companies’ have partnerships with a number of global SaaS organisations such as Salesforce, Adobe, ServiceNow and Snowflake, ICICI Securities said in a note. An improvement in demand for these global companies may have a positive knock-on effect on their partner companies.
Recent financial performance of global SaaS organisations and their management signify that they “exhibit a texture of stable demand and even improvement,” the note said, which formed the basis of the positive outlook.
Most SaaS companies reported September/October 2023 quarter revenue growth higher than their guidance. Some upgraded full-year CY23 guidance too, indicating a stabilising demand environment. Adobe’s guidance for FY24 November-end and Bloomberg consensus estimates suggest CY24’s revenue growth for SaaS companies to be similar to CY23.
There is keen interest in generative artificial intelligence-based products that SaaS players have to offer. “We see SaaS players being early beneficiaries of GenAI, with follow-on effects on the IT services industry with a time lag,” said the ICICI Securities note.
Almost all SaaS companies are seeing strong demand for their AI and GenAI-based products. For example, Salesforce’s Einstein GPT Copilot (AI tool) is used by 17% of Fortune 100 customers. ServiceNow saw its highest-ever customer requests for a pre-release GenAI product and has closed four GenAI-related enterprise deals in the recent quarter.
“ER&D remains a bright spot. Enterprises in manufacturing-led verticals, such as automotive and aerospace, have historically lagged in tech adoption but are now catching up,” said Kotak Institutional Equities in a note.
“Automotive clients are undergoing a technology transition and investing in electrification, connected and autonomous vehicles. Sustainability is another theme where clients are increasingly allocating spends to make their businesses more environmentally friendly. Indian engineering service providers are benefiting from elevated spends by clients across multiple themes,” the note said.