The fastest five maintained double-digit revenue growth in 2023 despite slowdown

2023 was the year of the digital dichotomy, as enterprises balanced market headwinds with the big hurry to innovate. It’s not surprising that revenue growth of leading IT and business services providers slowed across the board. However, despite the market slowdown in 2023, service providers are increasingly optimistic about 2024, as recent large deal wins and strong pipelines indicate enterprises are looking to loosen their purse strings and increase spending throughout 2024. The smaller mid-tier providers are more prone to market swings, but we typically expect them to report higher growth rates than their larger peers. As we studied their FY2023 results, we found this was again the case.

Here, we have examined the financial reports of the “fastest-five”—the five providers reporting the highest annual year-over-year revenue growth rates in 2023. For enterprises seeking a new partner, these fastest-five providers present a unique opportunity to find a firm balancing impressive growth with mid-tier flexibility: Sonata Software, Globant, Persistent, EXL, and Coforge.

Exhibit 1: Mid-tier companies grew fastest in FY2023, despite a slowdown in deals

Source: HFS Research and earnings reports of leading service providers, 2023
Notes:
(1) Growth data represents HFS estimates based on analysis of publicly available information.
(2) 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.
(3) HFS definition of mid-tier companies: Revenue of USD $500 million to USD $2 billion.
(4) FY2022 and FY2023 implies January to December.

The strategies and drivers of impressive revenue growth of the five service providers

Sonata Software

Sonata Software was the fastest-growing service provider in 2023, reporting 19.1% YoY revenue growth. Its growth was fueled by strong performances across its Modernization Engineering and Platformation offerings; the Quant Systems acquisition in Q1 boosted inorganic growth. The Quant acquisition bolstered Sonata’s digital capabilities, skilled workforce, marquee logos, strategic partnerships, and IP portfolio.

Sonata Software has increased its focus on cloud, data, AI, managed services, and automation, which leadership advises has been a key factor in deal wins. In addition, the provider has diversified its client base among key industries, including BFSI (banking, financial services, and insurance), healthcare and life sciences, retail, manufacturing, and TMT (technology, media, and telecommunications).

Globant

Globant, the largest firm of this quarter’s fastest five, was the second-fastest-growing service provider in 2023, reporting revenue growth of 17.7% YoY. In 2023, the provider beefed up its offerings and geographical diversification through acquisitions, including Adbid (LATAM), Vertic (Denmark), KTBO (Mexico), GUT (US), Fivvy (banking, US), ExperienceIT (healthcare, North America), Iteris (tech consulting, Brazil), and Pentalog (digital transformation, France).

Globant’s key growth drivers are consumer, retail, manufacturing, and the media and entertainment industries. Its operations in the Americas and Europe reported impressive geographic growth. We expect Globant’s reported $1 billion investment in LATAM and its growing focus on emerging technologies like AI to fuel new deals in the region and North America, thanks to an expanded nearshore presence.

Persistent

Persistent reported 17.5% YoY revenue growth. In Q1 2023, the provider reached $1 billion in annual revenue, driven by growth across these sectors: BFSI, healthcare and life sciences, software, high-tech, and emerging industries, supported by strong growth in North America and Europe. Leadership advises that, despite no M&A activity in 2023, its 2021–2022 acquisition flurry of Data Glove, MediaAgility, Sureline, SCI, and Shree Partners is still positively impacting growth. These acquisitions helped Persistent expand its geography and offerings in key verticals like BFSI and data, cloud, and artificial intelligence (AI) capabilities.

In 2023, Persistent laid the foundation for continued growth by reinforcing its executive leadership team to enrich its marketing, client engagement, strategy and execution, talent management, and sustainability areas. Persistent aims to reach $2 billion in revenue by 2026. To achieve this, it has a multi-faceted growth strategy focusing on leadership (including leadership focus on AI and generative AI), much-required geographical diversification beyond North America, operational efficiency, talent management, and sustainability.

EXL

EXL reported revenue growth of 15% YoY, led by steady growth across all major verticals. Its key revenue contributors are its insurance and analytics businesses, which both reported solid performances in 2023. EXL boosted its 2023 growth with the acquisition of Clairvoyant, which provided a revenue boost, enhanced its geographic presence, and solidified its AI, cloud, and data capabilities. Today, more than 80% of EXL’s revenue is generated in North America, so the provider should look to penetrate markets in Europe, APAC, and ANZ to drive business resilience and further growth.

Coforge

Coforge reported 13.1% YoY revenue growth in 2023 and was the second of the fastest-five providers to join the triple-comma club, reaching $1 billion annual revenue in Q1. In recent research, HFS highlighted how Coforge’s leadership, industry focus, and SLK Global acquisition boosted the provider’s growth trajectory. Moving forward, we expect Coforge to double down on its portfolio diversification (primarily in healthcare; retail; and communications, media, and technology) in 2024, as the BFS industry is predicted to slow digital transformation investment and still contributes around one-third of Coforge’s revenue.

The Bottom Line: The growth of these mid-tier companies continues to make the fastest-five an attractive prospect for enterprises—if they can maintain the balance between strategic investments and their mid-tier flexibility.

The fastest-five service providers maintained impressive double-digit growth in 2023 despite the industry-wide slowdown brought on by the recent economic environment. Their collective growth was driven by a robust mix of organic and inorganic growth, resulting in all the fastest-five providers bolstering their offerings to better serve enterprise clients. For enterprises looking to nurture a deep relationship with a growing provider, the fastest five should be the perfect place to start.