MUMBAI, INDIA – IT outsourcing providers are seeing delays in contract renewals as clients hesitate amid rising policy uncertainty and the disruptive pull of AI. What was once completed in 6–8 months is now stretching to 9–15 months.
According to Siddhartha Tipnis, partner and technology sector leader at Deloitte India, “the full potential of AI is still unfolding, with new use cases emerging and the promise of reshaping how businesses operate. Organizations continue to learn and adapt as the technology evolves each day.”
From the vendor’s side, the uncertainty is compounded by volatile macroeconomic policies. Sumit Pokharna, VP for IT at Kotak Securities, stated that these have an impact on both IT providers and their clients. Tariffs and uncertainties over recession or inflation risks have made these clients cautious in renewing commitments to outsourcing deals.
Industry Impact: Sectors Most Affected
Pokharna added that “clients are confused whether or not to invest in IT services” due to the policy changes.
Clients in sectors tied closely to global trends, such as manufacturing, oil and gas, and retail, are the most cautious. In these industries, contract renewals are delayed the longest. Conversely, banking and enterprise tech firms, where budgets still allow for discretionary spending, are faring better.
Additionally, analysts note that boardroom conversations now often focus on embedding AI or Agentic AI into outsourced solutions, which further lengthens the decision-making cycle. Meanwhile, software licensing costs are increasing by 5–10% annually, pushing clients to be selective about outsourcing projects and what new AI-driven efficiencies they can realistically demand.
As India’s IT outsourcing providers wait longer for renewals, they must also adjust their propositions to meet clients’ evolving expectations. For example, they can shift toward outcome-based pricing and embedded AI on a multi-vertical, multi-region basis.
