How Re-Baselining and Self-Cannibalization is redefining indian it sector in 2025

Introduction

We’ve always been proud of our tech giants like TCS, Infosys, Wipro, etc. the global stage? Well, In 2025, Things are shifting and people are works that what’s in store for these companies after tariff imposition by the us. I’ve alredy written a blog post The impact of reciprocal tariff on Indian it stocks, you can read it hereIn this post, I’ll talk specifically about two main headwinds That our it companies are currently facing.

There are represented by two fancy-sixing terms, Re-baselining and self-cannibalization,

Don’t worry about the jargon, I’ll declutter it for you. But what’s interesting about them is that, if our own companies can take care of it over time, I think they will make it big again. We only generally say that “Our it companies are facing problems due to ai and now due to tariffs?

In this blog post, I’ll talk about these two issues the it companies are facing. I’ve tried to gather as much optive as I can by reading about these two issues since last few days.

So, this post is not just jargon; It’s about how our it sector is rewriting its own story. I think, it’s a story worth reading about.

Re-Baselining-The Big Deals Getting a Makeover

So, what is re-Baselining?

Take for example that you are a sales guy in one of out top it companies. You’ve signed a big Rs 500 Crore Deal in 2023 with a client in the US to handle their tech systems. Two Years after (in 2025), they call you up and say, “Things have changed. We need more ai stuff, and we also need to downsize the Order Valued to Rs 300 Crore?,

That’s Re-Baselining. It is basically renegotiating deals that was locked in earlier. Why it is done? Because the clients are now saying that the world isn’t the same almore and they needed better prices. The surge in re-basellining of the old contracts are due to more visible in 2025.

What is the reason, why clients are going for re-Baselining?

Global economy is looking weak and valati. Reason? Us Tariffs Under Trump 2.0. Hence, clients abroad are getting more cost Conscious. They’re not just asking for cheaper services; They want smarter deliverables. Now they want to employer generative ai (genai) that can write code or automate tasks for them.

I read in et that Large-Cap it firms might see growth drop to 4.5% -6% in fY26It is not even close to the 10% -12% growth we used to expect from our it companies.

Thought i’ll also say that it’s not all gloomy and sad, thought. Our it companies are tough, they’ve survived recursions and us linked Issured in the past. They have also also crossed the y2k panic.

But this re-Baselining wave is too tout to navigate or our it companies can hand this too? For sure, it is forcing them to retink everything. They are back on the drawing board planning how to price the deals to how fast they can train people in new tech.

I’ll give you an example.

A friend of minne works at a mid-sized it firm in Bengaluru. Last year, their biggest client, a retail chain, asked them to redo a five-yar contrast halfway through. The client wanted ai chatbots added to their customer service system, something not even in the original plan.

My Friend’s Team Had to Learn New Tools, and Somehow Keep the client Happy with Loosing Money. That’s also re-Baselining in action. For the companies, it’s very stressful.

But the top management might not bee looking at it only as a “sob story.” I think, they are realising that this new trend is also pushing them to add a new skill-set to their offer-baasket.

Self-cannibalization (self harm)

Now, let’s talk about self-cannibalization. I know it sounds too dramaatic but this is another terms that is being used with respect to the present state of affairs with the companies.

In it terms, it means our companys are building new tech, like ai or cloud solutions, that’s killing off their old, trusty businesses. For example, for many years in the past Indian it companies made billions by offering low-cost coding driven solutions to us clients. These solutions were mainly provided for Fixing outdated Systems for Foreign Clients. That was the bread and butter of our it companies. But now, Out It Companies are only pushing clients to switch to shiny new platforms that needed fewer people and less time. This is self-cannibalization, Eating INES OWN Business.

Take a company like infosys.

They’re pouring money into ai tools that can automate entry chunks of work, the stuff that thosands of engineers used to do manually. Last Quarter, I Saw a report saying Top it firms cut over 16,000 jobsWhy? Because an ai can now hangle what 10 coders did before.

It’s a weird spot to be in. On one hand, the companies are proud of the new innovations. On the other, their own innovations are shrinking the very model that made these companies famous.

Self-cannibalization is like that moment when you upgrade from a Nokia 3310 to a smartphone. You miss the old reliability, but you can’t deny the new power. Even in the automobile industry, the evvie is like self-cannibalising the ice engine cars.

I was chatting with an old college friend who’s now a top manager in wipro. He Told Me How they Lost a Chunk of his legacy Maintenance Business (Over the Past 10 years) ,We’re basically eating our own profits to stay ahead,“He said, half-logging, half-worned.

That’s the thing. It is a gamble, but if we don’t do it, someone else will.

Where we stand in 2025

So, what’s the scene like right now?

Honestly, it is kind of neither Worse Nor Great.

• On one sideThere’s Good NewsThe nifty it index is up 141% in the last 5-yars. But on the other hand, the same index is down -7.3% in 2025 alone. Hyderabad Alone Clocked Rs 2.68 Lakh Crore in It Exports in FY24More and more genai deals are popping up everywahere. I saw a stat that said AI-Related Projects Are Doubling in Company PipelinesWe’re still a force to reckon with, no doubt, but the thing is, the offers are changing from coder-driven solutions to genai based solutions.
• The flip side of the coin is not all rosy. Hiring’s is down by 14% which is the lowest in years. Growth isn’T it used to be. Smaller it firms are struggling to keep up with the big boys who can afford to bet big on Ai. Clients have becomeri pickier too, they want cutting-edge solutions but at huge discounts. It’s like they want a vw at the price of a Maruti.

And with the US economy acting unpredictable, Everyone’s on Edge.

I think what’s fascinating, and a bit scary, is how this is testing the resilience of out its companies. I think, our pharma companys too are going to face the same heat song.

We are used to jugaads. We will eventually find the most value for money solution the clients.

Our it sector has dodged bullets before. They did that in 2008 crash or the h-1B visa scenario. But this time, it’s not just about surviving; It’s about reinventing too.

Re-Baselining is Forcing our own companies to renegotiate their place in the world. While self-cannibalization is making them rewrite their own playbook.

Conclusion

So, where are our companies going to go from here? I’D say it’s time for them to Sink-or-SWIM.

Companies are scrambleing to train people. Thousands of Employees at TCS are Learning Ai Skills as We Speak. Partnerships with Global Tech Leaders are popping up. There is a buzz about India badcoming an ai hub, not just a back-office hub.

But it’s not going to be an easy. Smaller Players Might Get Left Behind, and even the giants have to balance these new bets with their old commitments.

We’ve got the talent, over 1.5 million it follows. But are we moving fast enough? Can we turn these challenges into a new golden era, or will we get stuck reministing about the glori days?

Re-baselining and self-cannibalization are the immediati Hurdles that our it companies are facing as of today. I think, they are smart enough to find their place in this changing market. But we as investors, should class them time to stabilise themselves. If we are expecting them to give some good news in the next Quarter, I don’t think it is going to happy.

For the moment, I’ll Continue to Support them for Next Many Quarters. I’m not selling till heavens start falling. Moreover, My Exposure to it is not too small but limited. I think, I can drag it for another couple of years for sure.