Can Mid-Market Deals Save HCLTech From the Great AI Tech Squeeze?

For three decades, India's large IT services firms grew by deepening their hold on a few hundred of the world's biggest companies, deploying thousands of billable engineers to manage legacy systems. That model may be running out of room.

With generative AI, automated SDLC platforms like Persistent Systems’ SASVA and Infosys’ Topaz, and agentic workflows now available, enterprise clients are demanding fixed-cost modernisations. The mega-cap enterprise market is now saturated, and the industry is responding accordingly.

Last month, HCLTech launched a new unit called Pulse, targeting enterprises with annual revenues of $500 million to $5 billion. It pegs that segment at about $400 billion in technology-services spending, growing 7–9% a year, and is aiming for double-digit growth. 

But why did a company that already serves many of these clients decide it needed a separate P&L, leadership team, and delivery model?

The Squeeze at the Top

Gaurav Vasu, Founder and CEO of research firm Unearthinsight, says big enterprises are not spending as much on traditional IT services, and revenues from Fortune 500-scale clients have stagnated. The top 10–15 global and Indian firms already control almost 80% of the services budget in verticals such as BFSI and retail.

"This is not primarily about gaining wallet share within the largest accounts," Vasu tells AIM. The growth is in new spend, which is shifting towards enterprise AI, cloud, and compute rather than traditional services. Tech-first companies are becoming share gainers in their verticals, and services firms increasingly need to serve them.

In June this year, tech behemoth Accenture launched Accenture Edge, a dedicated business unit targeting mid-market companies with annual revenues between $300 million and $3 billion.

Vasu calls the mid-market pivot a structural shift and expects other firms to follow suit.

Making the Pie Bigger

Ashish Kumar Gupta, Global Head of HCLTech’s New Business Incubation Group that built Pulse, in an interaction with AIM, says when the AI wave arrived, the internal conversation was two-pronged. 

"We need to do whatever we need to do inside the larger organisation, but we also need to start looking at how we can build AI-native businesses, in segments where HCLTech could actually go and gain market share." The logic, he says, "comes from gaining market share in segments where we haven't really played before."

The mid-market to lower-enterprise belt fits the brief. 

"This is the market where we have a lot of customers, so we understand what these customers need," he adds. That also exposed a gap. "We've been servicing them, and every large customer services them, with the same model with which we service large customers." Gupta saw "a massive opportunity to reimagine how we go to market with these customers."

A second reason, Gupta says, is how quickly these companies decide. 

"AI adoption in this segment is going to be quite rapid because the decisions on technology are going to be done with a lot more speed. They're typically made by the CEOs or the CXOs, and they move quite fast in this segment." 

These companies, according to Gupta, have "the ambition of large customers" but lack "the organisational depth" and the investment muscle to build broad technology teams.

AI Deflation

HCLTech has flagged a 2–3% annual deflationary headwind from AI, since automation lets providers deliver the same work with fewer people. 

A new revenue pool could offset that, but Vasu says the offset depends on what Pulse sells. If it is built around enterprise AI applications by process or vertical, it could negate part of the impact. If it is largely traditional services, mid-market clients can pivot to AI-native players and the same pressure can emerge.

According to Gupta, AI lets providers "go higher up in the value chain and actually offer a business outcome," rather than "just offering the infrastructure layer or the application layer or the BPO layer individually." 

"AI actually now makes a lot of outcome-based models possible, which were not possible in the past," he says. Pricing will follow, and HCLTech is comfortable with it. Its fixed-price and outcome-oriented contracts are already "a lot bigger" than time-and-materials deals, Gupta notes. 

However, on the economics of deflation, he notes, "Existing services get modified or get changed…That is just the nature of how AI is going to impact the world."

The Separate Unit Thesis

Large IT firms typically split sales into hunters and farmers, and the hunters chase large-enterprise RFPs and RFIs. Global analyst firms, which shape buyer perception, also rate providers on their large-enterprise work. A dedicated business lets HCLTech build a separate sales team and could give analysts a basis to place it in the mid-market category.

Gupta's argument was about organisational inertia, and it is arguably the core of the strategy. 

Embedding change in a large organisation is "very difficult," he adds, but in one "carved out new and being built for a particular market segment, you can actually build the organisation from the ground up to what the market needs and what the current technology stack is."

Analysts are less convinced the segment is an easy win. 

"Materially, nothing has changed in the mid-market itself," Vasu says. It is, if anything, a harder segment, with lower price points and intense competition, and mid-tier and emerging Indian firms already serve many of these clients. Growth is only selectively faster, among certain regional banks, healthcare players, FMCG companies, and manufacturers.

“On AI, the leapfrog argument is an assumption most services firms are working with, and it hasn't been proven," the UnearthInsight founder notes. Competition will not come only from other services firms. SaaS and enterprise AI product companies such as ServiceNow, HighRadius, and BlackLine are chasing the same spend.

The Execution Test

Praveen Bhadada, MD and CEO of consulting firm Neovay Global, says the rationale is understandable but "the real test will be in execution." HCLTech must get segmentation right, set clear ownership between old and new businesses, and avoid creating "a perception of two tiers of clients." 

Existing mid-market customers may wonder whether they still get the senior attention of flagship accounts, the very thing Pulse promises.

“HCLTech Pulse has the potential to materially expand HCLTech’s addressable market, particularly as mid-market enterprises move from AI experimentation to scaled transformation. But the bigger question is whether HCLTech can build a model that delivers that growth with consistency, economics, and client intimacy,” says Bhadada. 

A dedicated unit brings speed but can distance clients from the wider leadership, and folding scaled accounts back into the core business could prove equally hard.

Pulse, therefore, is less a bet on the mid-market to lower-enterprise segment alone than a test of whether a large IT services company can build a different growth engine without the existing organisational baggage.