TCS, Infosys are best placed, to tap into the SAP migration cycle- Jefferies

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Tata Consultancy Services (TCS) , Infosys share prices have gained 18-20% from October lows. The overall investor sentiments have improved with expectations of the US interest rates likely to have peaked leading to easing concerns on global slowdown. As analysts remain optimistic on earnings catching pace in few quarter , there are several opportunities that can help improve growth prospects.

Analysts at Jefferies India Pvt Ltd in their recent report said that Indian IT companies are well placed to ride the SAP wave SAP, the leading vendor of ERP (Enterprise Resource planning) applications, plans to end the mainstream support of its ERP Central Component (ECC) version by 2027 with an option to extend till 2030 for an additional fee. In the future, SAP will only support its next- generation ERP system, SAP S/4HANA, and has committed to support this at least until 2040. Also Read- Axis Securities' top 7 mid, small-cap picks for March; check full list This as per Jefferies is an opportunity for IT services firms.

Given the deadline by SAP, enterprises need to choose among either maintaining their existing SAP platforms, modernizing the SAP version or shifting to another ERP platform. Jefferies analyts highlight that even after four years since SAP's initial announcement, only 1/3rd of the ECC organizations have decided to modernize to S/4 HANA, suggesting that the pace of adoption has been slow. However, it is likely that organizations will modernize or shift to another ERP platform by 2027-30 which, in turn, would probably present growth opportunities for IT services firms.