‘Fastest Six’ service providers continue to demonstrate agility and flexibility

In Q2 2024, HFS identified the ‘Fastest Six’ service providers, reporting the highest revenue growth(1) rates. The ‘Fastest Six’ were Sonata Software, Globant, Persistent Systems, Firstsource, EXL, and Coforge. Exhibit 1 shows they almost reached double-digit revenue growth across the board, far exceeding the 3.5% YoY market average(2) growth rate.

For enterprises looking beyond the TWILTCH providers covered here (TCS, Wipro, Infosys, LTIMindtree, Tech Mahindra, Cognizant, and HCLTech), the ‘Fastest Six’ presents an interesting opportunity to partner with a growing provider due to their unique blend of scale, agility, and flexibility. It’s important to note inorganic growth can catapult a provider onto this list.

Exhibit 1: Year-over-year ‘Fastest Six’ revenue growth in Q2 2024

Source: HFS Research and earnings reports of leading service providers, 2024

Note: Revenue and growth data represents HFS estimates based on analysis of publicly available information. Year-on-year (YoY) growth compares a quarter with the corresponding quarter of the previous year.

Despite the industry slowdown, the ‘Fastest Six’ continue to double down on strategic investments, particularly GenAI

Driving the ‘Fastest Six’ growth is continuous business investments that involve tweaking strategies to adapt to shifting market conditions. Essentially, they can be more agile and responsive than their larger counterparts. That’s why we see plenty of announcements about tools such as GenAI as these companies look to pivot to the new technology arbitrage-driven S-Curve. In particular, we have seen a trend of fast-growing firms investing in GenAI to drive improved employee and customer experiences.

In addition, HFS has identified a heavy focus on talent acquisition and development, which includes upskilling existing employees for the latest AI tools and doubling down on large deals as a key growth driver. They’re doing this while balancing a strong focus on priority industries and geographies with strategic growth to curate a resilient portfolio.

It’s important to remember the group’s growth is occurring against the backdrop of an industry-wide slowdown. The ‘Fastest Six’ reports delays in executive decision-making due to the uncertain macroeconomic environment, alongside traditional challenges such as foreign exchange volatility, restructuring costs, and industry-specific instability.

Delving into the earnings of each ‘Fastest Six’ company

• Sonata Software reported 25.4% YoY revenue growth, the highest of all the service providers HFS tracks. Growth was driven by significant deal wins with a US-based healthcare provider and a US financial services firm. Leadership advises that Sonata is expanding its focus on cloud modernization services, manufacturing, financial services, and the Australian market.
• Globant reported 18.1% YoY revenue growth, driven by solid performances in Media & Entertainment, Travel & Hospitality, Consumer, Retail, and Manufacturing. Globant advises that it had significant growth in The Walt Disney Company account and won high-profile sports deals in the Middle East. Globant also reported 42% YoY growth in Europe, helped by winning a large airline deal—which it attributes to efforts to scale up its European delivery network.
• Persistent reported 16% YoY revenue growth, highlighted by several large deals, including a $50 million sale to a US tech firm. Its Healthcare & Life Sciences business reported an impressive 67% YoY growth, while North America and India reported 18% and 15% YoY growth, respectively. Leadership did advise of strong headwinds in its Salesforce and High-Tech segments, particularly in Europe, due to long-tail customers and slowing enterprise software investment.
• Firstsource reported 15.6% YoY revenue growth, driven by its Healthcare business vertical, which grew by 27% YoY in Q2 2024. The growth in this vertical can be attributed to the integration of its recent acquisition of QBSS (Quintessence Business Solutions & Services), which leadership believes will help Firstsource add new logos in the US market. They also advised that in the Communications, Media, and Technology (CMT) vertical, growth was affected by the ongoing shift of work from onsite to offshore locations for their top client.
• EXL reported 10.7% YoY revenue growth, mainly attributable to 16% and 15% YoY revenue growth in its Insurance and Emerging Business verticals, respectively. The provider signed 23 new clients this quarter, citing notable wins in the insurance and healthcare industries. This quarter saw EXL acquire ITI Data to strengthen its data management capabilities. Leadership advised that restructuring costs and macroeconomic uncertainties hindered the company’s short-term growth.
• Coforge reported 7.2% YoY revenue growth, its slowest in the last two years. Revenue growth dropped across three focus verticals: Banking & Financial Services to 9.6% YoY, Insurance to 1.5% YoY, and Transport to 4.9% YoY. Geographically, EMEA and the Rest of the World slowed to 7.5% YoY and 4.5% YoY, respectively. It’s important to note that despite the slowdown, these are still solid results in a challenging market, which saw Coforge sign two significant deals this quarter. Moving forward, we expect Coforge’s acquisition of Cigniti to positively impact its revenue growth, both inorganically and through cross-sell opportunities.

The Bottom Line: Mid-tier flexibility, strong GenAI investments, and hand-picked focus areas of the ‘Fastest Six’ present an interesting prospect for enterprises.

The ‘Fastest Six’ aren’t topping the charts by accident; strategic investments put them there. Enterprises looking to jump to a technology-arbitrage-driven S-Curve of value but want an agile provider to help them get there should seriously consider looking beyond the traditional market leaders to the “Fastest Six.” However, given their tight focus on a handful of regions and industries, enterprises must ensure their provider’s priorities align with their own if they hope to achieve maximum value returns.

Notes: (1) Growth data represents HFS estimates based on analysis of publicly available information. The year-on-year (YoY) growth compares a quarter with the corresponding quarter of the previous year.

(2) HFS considered Accenture, Birlasoft, Capgemini, Coforge, Cognizant, Conduent, DXC, EPAM, EXL, Firstsource, Genpact, Globant, HCLTech, IBM, Infosys, Kyndryl, LTIMindtree, Mphasis, Persistent, Sonata Software, TCS, Tech Mahindra, Wipro, WNS, and Zensar for this analysis.

(3) HFS definition of mid-tier companies: Revenue between USD 500 million to USD 2 billion.