Google trims $50 million from its 10-year-old annual contract to HCLTech

Google has reportedly reduced the scope of a decade-old IT services contract with HCLTech. A report claims that the tech giant is trimming about $50 million in work from the approximately $200 million annual engagement. According to a report by The Economic Times, the reduction is expected to affect around 1,000 HCLTech employees, who are likely to be redeployed to other projects, highlighting how automation and AI are reshaping traditional IT services work.The contract cut comes as technology companies increasingly review vendor spending and automate software development tasks. An HCLTech spokesperson declined to comment on client-specific engagements, while Google did not respond to ET’s request for comment.Contract reduction linked to vendor consolidationAccording to the report, Google has been one of HCLTech's largest clients, with the company managing application development and engineering work for the technology giant over the past 10 years.People familiar with the matter told the publication that the reduction represents nearly one-fourth of the annual project value. The impact is estimated at about 0.3% of HCLTech's annual revenue of approximately $14.7 billion and around 6% of its incremental FY26 revenue.The development is part of a broader trend in which enterprises are consolidating vendors, reducing short-term engagements, and relying more on AI-driven automation to handle software work previously outsourced to IT service providers.AI and automation continue to reshape IT servicesThe reduction comes as software services companies face increasing pressure from clients looking to optimise costs through automation and artificial intelligence. Industry analysts told The Economic Times that enterprises are also tightening technology budgets amid macroeconomic uncertainty and geopolitical challenges.During HCLTech's first-quarter earnings call, CEO C Vijayakumar acknowledged the changing demand environment."On one side, we are seeing strong sustained growth both in AI-native and AI-amplified services. On the other side, AI-disrupted services, the more traditional commoditised work, continues to be optimised further as AI-enabled automation takes hold," Vijayakumar said.He also noted that some client-specific challenges identified in previous quarters would continue to affect near-term performance.HCLTech maintained its guidanceLast month, HCLTech retained its FY2026-27 revenue growth guidance of 1-4%, with services revenue expected to grow between 1.5% and 4.5%.The Noida-headquartered IT company reported first-quarter revenue of $3.65 billion in constant currency terms, down 0.5% sequentially but up 2.6% year-on-year. In rupee terms, revenue increased 12% year-on-year to Rs 34,579 crore, while sequential growth stood at 1.75%.The company said the sequential decline in constant currency was primarily due to planned productivity gains shared with clients.The cut in the Google contract also comes as competition heats up among India’s top IT firms. Large enterprises continued to consolidate their technology vendor relationships this year, with Infosys losing parts of its contracts with Daimler and Mercedes-Benz to Cognisant and HCLTech, respectively.Get the latest technology news and updates. Download the TOI App.