Why Smaller Contracts Are the New Normal in Indian IT

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The global economic uncertainties notwithstanding, three of India’s major IT companies reported a 15 per cent sequential rise in the total value of contracts won in Q4 of FY25, though largely led by deals in the $1-5 million category. This is the second quarter when the companies have increased deal wins based on smaller deals, the data shows.

According to Greyhound Research, the rising prevalence of $1–5 million deals reflects deep-seated uncertainty in client boardrooms, particularly as U.S. tariff rhetoric and regulatory scrutiny continue to muddy the waters for global services delivery. 

“FY26 will be marked by “selective wins,” not sweeping growth—clients are segmenting large transformation programmes into bite-sized, milestone-driven contracts that can be paused or refactored quickly if the external climate worsens. The new gold standard is not contract value, but resilience and optionality,” said Sanchit Vir Gogia, Chief Analyst & CEO at Greyhound Research.

As quoted in The Hindu Business Line, in an article authored by Vallari Sanzgiri published on April 20, 2025.

Additional comments by Greyhound Research analyst:

Smaller Deal Sizes Reflect Enterprise Hesitation Amid Tariff Turbulence

Greyhound Flashpoint – Indian IT’s average deal size rose sequentially, yet still trails last year’s benchmark—evidence of sustained client caution. Greyhound CIO Pulse 2025 finds 64% of North American CIOs are prioritising cost control over transformation, and 61% have either delayed or restructured procurement. At Greyhound Research, we believe the proliferation of smaller deals signals not just budget pressure, but an industry-wide pivot to agile, risk-mitigated execution models in the face of political and economic volatility.

Greyhound Standpoint – According to Greyhound Research, the rising prevalence of $1–5M deals is neither an aberration nor a tactical blip. It reflects deep-seated uncertainty in client boardrooms, particularly as U.S. tariff rhetoric and regulatory scrutiny continue to muddy the waters for global service delivery. FY26 will be marked by “selective wins,” not sweeping growth—clients are segmenting large transformation programmes into bite-sized, milestone-driven contracts that can be paused or refactored quickly if the external climate worsens. The new gold standard is not contract value, but resilience and optionality.

Greyhound Pulse Insights – Greyhound CIO Pulse 2025 data indicates 61% of Fortune 1000 CIOs in the U.S. have paused or revised their technology deals due to policy volatility. Within this group, nearly half report that board oversight has increased for any contract over $10M, driving the shift to sub-$5M deal structures. Sectoral analysis shows this is most pronounced in BFSI, healthcare, and logistics, where deal fragmentation has become the norm rather than the exception.

Greyhound Fieldnotes – Per a recent Greyhound Fieldnote from a top-10 U.S. retailer, an original $22M digital overhaul was broken into five smaller sprints, each with a discrete business outcome and the right to re-bid at each stage. The CIO shared that “uncertainty around tariffs and labour policy made it impossible to commit to a multi-year contract.” This friction led to process delays and additional legal overhead—showing that what looks like vendor ‘wins’ on paper often masks a much more tentative client commitment in reality.

Tariffs and Policy Headwinds Will Prolong the Trend Toward Smaller Deals

Greyhound Flashpoint – The tariff and trade policy saga is creating an era of “confidence disruptors” for Indian IT. According to Greyhound CIO Pulse 2025, 61% of North American CIOs say ongoing tariff discussions are directly delaying multi-year IT investments. At Greyhound Research, we believe this trend—smaller, staggered deals and elongated decision cycles—will persist until clients see genuine clarity on U.S. trade and labour policy. The shift is structural, not cyclical.

Greyhound Standpoint – According to Greyhound Research, tariff volatility is forcing technology buyers to rewire their risk models. Clients are proactively limiting exposure to policy swings by favouring modular, quick-turn engagements over traditional TCV mega-deals. FY26 will be defined by this cautious approach, with deal momentum closely tied to “confidence cycles” rather than the fiscal calendar. Until there is credible, bipartisan stability on U.S. tariffs, localisation, and tech visas, Indian IT vendors should expect to build pipelines around smaller, renewal-driven contracts—especially in the Americas.

Greyhound Pulse Insights – Greyhound CIO Pulse 2025 finds that 36% of major U.S. buyers have recently revised their vendor portfolios to reduce geographic concentration, while 28% of decision-makers in regulated industries now require explicit compliance sign-off before committing to any large-scale IT contract. Clients are not just nervous—they are systemically redesigning their procurement and delivery processes for agility in a volatile global market.

Greyhound Fieldnotes – Per a recent Greyhound Fieldnote from a North American BFSI client, a $15M cloud migration project was converted into three $5M proof-of-value phases, with no guarantee of follow-on spend. The CTO cited “tariff whiplash and political risk” as factors that made the board unwilling to greenlight the original proposal. This piecemeal approach has since been adopted in other transformation programmes, confirming that the preference for small, reversible contracts is now a feature—not a bug—of the industry landscape.

With U.S. Weakness, Indian IT Eyes Europe for Stable Growth

Greyhound Flashpoint – Indian IT’s American geographies have underperformed, leaving India and EMEA to carry overall growth. Greyhound CIO Pulse 2025 data shows 41% of Western European CIOs plan to increase tech budgets in FY26, versus just 21% in North America. At Greyhound Research, we believe Europe is poised to attract renewed focus from Indian vendors seeking predictable policy, resilient funding, and vertical-specific digital demand.

Greyhound Standpoint – According to Greyhound Research, the rebalancing toward Europe is no longer optional. With the U.S. market mired in tariff tension and regulatory overhang (e.g., ongoing discrimination probes), Indian IT firms must diversify risk by scaling their European and emerging market operations. Europe, particularly the DACH, Nordics, and U.K., is seeing steady demand for sectoral cloud, GenAI, and digital infrastructure, offering a stabilising effect for vendors facing headwinds in the Americas.

Greyhound Pulse Insights – Greyhound CIO Pulse 2025 shows that 48% of European CIOs expect to expand technology budgets, compared to only 21% in the U.S. European buyers also rate Indian IT highly for cost efficiency and execution stability, particularly in industries such as energy, automotive, and public sector. This creates a robust runway for growth—so long as vendors can demonstrate deep vertical expertise and a presence in local delivery hubs.

Greyhound Fieldnotes – Per a recent Greyhound Fieldnote from a leading U.K. energy utility, a Tier-1 Indian IT provider won a €35M automation deal after demonstrating both GenAI maturity and a proven record of delivery through recent economic shocks. Meanwhile, a U.S. pharma client froze a similar engagement, citing ongoing “tariff cloud” and heightened compliance anxiety. These contrasting experiences are becoming the rule, not the exception—signalling that Europe may become the strategic centre of gravity for Indian IT in FY26.

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