Mid-tiers dominate the five fastest-growing service providers in Q2 ‘23 for revenue growth

Revenue growth of all the IT service providers continues to slow, thanks to the painful one-two punch of inflation and recession leading to cautionary spending by enterprises. Typically, we expect the smaller players to report higher growth rates than their peers, although it’s worth noting they are often more exposed to macroeconomic headwinds. To that end, in Q2 2023, we saw the mid-tier providers⁽¹⁾⁽²⁾ dominate the fastest-five provider list. Here, we delve into the financial reports of the five providers reporting the highest year-over-year growth rate in Q2 2023⁽³⁾. Enterprises might want to keep an eye on this list if they’re searching for a new partner:

• Persistent: Despite challenging macroeconomic conditions, Persistent reached the $1 billion revenue milestone in Q1 2023. Persistent reported the highest YoY revenue growth, 17.1% YoY in Q2 2023. Its focus on software, high-tech, emerging industries, BFSI, and healthcare and life sciences in North America is paying off. However, 80% of Persistent’s revenue is from North America. Penetration in other markets will help it diversify and maintain long-term growth momentum.
• EXL: EXL reported the second-highest revenue growth of 16.8% YoY this quarter, led by steady growth across all industries, bar healthcare. EXL continues to claim its data-led transformation approach is resonating with clients and serving as a key revenue growth driver.
• Globant: Globant reported 16% YoY revenue growth, led by new deals in the media and entertainment, consumer, retail and manufacturing, and healthcare industries. This was complemented by inorganic growth through targeted acquisitions aimed at diversifying its business verticals and geographies. Globant’s executives advise its key strength is its ability to combine deep technical expertise with an understanding of business context. HFS believes there is power in the intersection of tech expertise and domain knowledge.
• Coforge: Q2 2023 marks Coforge’s second consecutive quarter in the fastest-five; it reported 13.9% YoY growth, the fourth highest among all service providers. Coforge’s growth is driven by banking and financial services, insurance, and other industries, including healthcare, retail, high-tech, manufacturing, and the public sector. We highlighted Coforge’s growth strategy in a recent publication.
• Sonata Software: Sonata Software reported 13.3% YoY revenue growth in Q2 2023. This growth was generated inorganically and driven by its acquisition of Quant, leading to investments in the new verticals of healthcare and life sciences and winning more large deals.

The Bottom Line: Mid-tier service providers’ double-digit growth amid continued slowdown—enabled by flexibility and client-centricity at the intersection of technology and industry expertise—makes them attractive for enterprises, particularly in their respective specializations in industry verticals and geographies.

Enterprises looking for mid-tier agility and a hands-on leadership approach will find both in mid-tier companies. As mid-tier companies log fast-paced growth, they must strive to keep the promise of agility while attracting and retaining sought-after talent in the emerging era of AI.

Notes:
(1) HFS considered Accenture, Capgemini, Coforge, Cognizant, Conduent, DXC, EPAM, EXL, Genpact, Globant, HCLTech, IBM, Infosys, Kyndryl, LTIMindtree, Mphasis, Persistent, Sonata Software, TCS, Tech Mahindra, Wipro, and Zensar for this analysis.
(2) HFS defines mid-tier companies as those with revenue between US $500 million and US $2 billion.
(3) Growth data represents HFS estimates based on analysis of publicly available information. The year-on-year (YoY) growth compares a quarter with the same quarter the previous year.
Source: HFS Research and earnings reports of leading service providers, 2023

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