India’s prominent $280 billion-plus technology outsourcing industry is strategically pivoting its growth focus towards the underpenetrated smaller and mid-market enterprise segment. After a period of challenging growth primarily reliant on Fortune Global 2,000 and Fortune 5,000 companies, IT firms are now actively targeting businesses with annual revenues typically ranging from $1 billion to $5 billion. This shift comes as revenue from larger clients has slowed, compelling the industry to explore new avenues for expansion in a generally sluggish market environment.

Industry experts observe significant opportunities within this mid-market segment, particularly as these enterprises accelerate their digitization efforts, spurred by the rapid advancements in artificial intelligence (AI). Jimit Arora, CEO of Everest Group, notes that with growth from larger clients being sluggish, IT services companies are naturally looking at portfolio diversification, and the mid-market presents robust opportunities. He adds, "For mid-market companies, tech-enabled transformation deals are largely greenfield opportunities, and they are looking to leapfrog prior S-curves and move to value creation through AI." The emergence of AI and ongoing digitization trends have also compelled these smaller and mid-sized corporations to increase their investments in crucial areas like cloud computing, cybersecurity, and broader technological transformations.

Historically, mid-market enterprises have been later adopters of technology, with their tech adoption largely confined to back-office functions and basic IT infrastructure, often served by smaller outsourcing firms. However, as many of these businesses scale globally and transition from unorganised to organised sectors, their demand for advanced technology transformation is sharply increasing. Several factors are motivating large IT companies to pursue these clients. Nitin Bhatt, technology sector leader at EY India, highlights that these firms "are often more agile in decision-making, present a lower barrier to entry, and offer greater opportunities for services such as tech modernisation, cloud adoption, cybersecurity and managed services."

Another contributing factor is the increasing trend of large, traditional clients of IT firms establishing global capability centres (GCCs) in cost-effective regions like India. This move allows them to insource their technology capabilities, further pushing India's outsourcing companies to seek growth beyond their established client base. India's IT outsourcing sector experienced slower growth, around 3% in constant currency terms in FY25, reaching over $280 billion. This contrasts sharply with its traditional double-digit growth, having seen its slowest growth in decades in FY24 at 1.2%. Projections for FY26 estimate a growth rate of 3-5%, partly due to weak technology demand post the high-growth Covid phase and disruptions from AI.

Despite this shift, large enterprises still contribute significantly, accounting for over 60-70% of revenues for India's top five IT services firms—Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, and Tech Mahindra, according to UnearthInsights. However, the untapped potential is vast. Bhatt points out that beyond the Global 2,000 list, there are over 40,000 companies worldwide generating between $500 million and $5 billion in revenue. This segment represents a total addressable market for tech services estimated at $300-400 billion. Specifically, Everest data indicates that the mid-market in North America alone is a $110-130 billion IT services market, expected to grow at an 8-10% compound annual growth rate (CAGR) over the next three years, within an overall corporate technology spend of approximately $1.3 trillion.

In response to this opportunity, IT companies are developing tailored and often sector-specific go-to-market strategies and playbooks designed for mid-market firms. Arora of Everest Group sees this as part of a broader diversification thesis, with companies exploring new growth frontiers, including newer geographies like Asia Pacific, Latin America, and the Middle East, alongside new client segments like mid-market firms. While both large and mid-tier IT services companies are vying for this market, Arora anticipates greater success for mid-sized outsourcing companies, which are often in a "sweet spot of size and agility" to effectively serve these clients.