As IT major Accenture cautioned last week that tightened US federal spending under DOGE was impacting its revenue, industry analysts note that Indian IT firms, who have a large Western market, may not be as badly impacted.
Top-tier Indian IT players like TCS, Infosys and others do work with select US state governments, and also Federal agencies in some cases, but have less than 2 per cent of their revenues coming from government contracts in the US, analysts told businessline. In contrast, Federal revenues made up approximately 16 per cent of Accenture’s Americas revenues in FY2024.
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“The spending cuts under DOGE have induced significant uncertainty in services industry. The direct impact on Indian service providers is lower than US public sector heavy global peers. A rough estimate of revenue mix from US public sector business for select group of Indian service providers would be between 0.5 per cent and 2 per cent of topline,” Prashant Shukla, Vice President, Everest Group, said. “Having said that, any reduction in overall spend generally has a cascading effect on competitive intensity of a market,” he added.
“US Federal/ Public sector consulting and technology budget cuts wouldn’t impact Indian IT services industry as they have lower revenue from the same. Also Indian IT services have limited technology consulting and almost non-existent management consulting revenues from US Federal govt,” Gaurav Vasu, founder of research firm UnearthInsight said. Like Accenture, it is consulting firms like McKinsey, BCG, Bain and Big4 firms that have a larger exposure to the US public sector, he added.
Analysts also note that Indian IT deals with US government agencies that are both small and also tightly priced, so they may not come under the purview of DOGE cuts. For instance, the Delaware Department of Labor selected Infosys Public Services, an Infosys subsidary, to modernise its labour systems in July 2024. Similarly, TCS also won a deal to digitally transform the Georgia Department of Labor’s IT systems in 2023. These deals may be much lower than $50 million in deal size, industry insiders note.
However, US-based Cognizant (which has a large employee presence in India) is likely to have relatively higher exposure to the US government business, thanks to a recent acquisition. In 2024, Cognizant acquired Belcan, a digital engineering and IT services provider primarily to the aerospace, defence, marine and government services markets in the US and UK. At the time of acquisition, analysts said that Belcan was generating about $800 mm in revenue run rate, of which 40 per cent came from the Federal government. As per the Belcan website, it is a partner to over 40 US Federal agencies.
Cognizant did not respond to businessline’s queries.
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Analysis of the US Budget documents for fiscal year 2025 shows that the government has proposed $75 billion of Federal IT spending by civilian agencies in fiscal year 2025. This is almost flat from 2024, and majority is set aside for the ‘IT Infrastructure, IT Security and IT Management.’ For the US, October to September is the fiscal year.
Ramkumar Ramamoorthy, Partner at Catalincs, a tech growth advisory firm says that short-term uncertainty is expected due to initiatives of DOGE but it is also likely to open up reallocation of IT spending for modernising systems, leveraging AI for transforming operations and building cyber resilience.“ These measures should drive newer opportunities, especially for agile, small and medium technology companies that are not wedded to legacy playbooks,” he said.
