In a year when top outsourcing customers have resumed spending, India’s leading tech firms are preparing to announce their return to doubledigit growth rates and are tweaking their business models, as they set their sight on crossing the $10-billion revenue mark within 2-3 years. Senior executives at Tata Consultancy Services, Infosys, Wipro and HCL Technologies — the country’s top four outsourcing firms, are busy preparing plans to outgrow rivals and in some cases even regain lost ground. As these companies prepare to announce their March quarter earnings next month, a return to double-digit growth is among the least of expectations, what lies ahead in coming years is what’s causing a scramble among some of them. At least five brokerage analysts ET spoke with over past two weeks, said TCS, Infosys, Wipro and HCL will report sequential revenue growth anywhere between 4 – 7% for the March quarter. For the year ending March 2011, these analysts said India’s top tech firms will return to double digit growth rates of 18-22%.

Cognizant Creating a Flutter Among Peers
“Unlike the past few years when the focus used to be on the next year’s growth, this year there were more talks about becoming a $10-billion, and even $20-billion company,” said a senior executive at one of the top five Indian tech firms who is involved with the strategy team.

While TCS plans to widen its revenue gap with Infosys and others even more, Infosys has rebranded itself as a consulting led firm. Wipro, which recently shifted to a single CEO model, has already drafted plans to create a simpler structure with different business units headed by senior leaders managing profit and loss accounts. Cognizant, is already causing a rethink among the top-tier Indian tech firms.

“Earlier, it was about Wipro losing its position to Cognizant, now even Infosys and others are looking at the multinational rivals and wondering how long before they catch up,” said an expert tracking these companies.

Some experts and company officials say both TCS and Cognizant are separating themselves from others in the tier-1 league on faster revenues growth, higher incremental revenues, profit growth and even net employee addition. During two of the toughest years Indian IT has ever seen—2009 and 2010, the separation between TCS, Cognizant and others became even clearer.

For instance, during calendar years 2009 and 2010, Cognizant and TCS added $1.77 billion and $1.52 billion in incremental revenues growing at 27.7% and 11.8% respectively. In comparison, while Wipro grew at 7.5% and added $672 million in new business, Infosys just managed to achieve 10.7% growth and had incremental revenues of almost $1 billion. On the employee front, TCS added 56,571 new staff during 2009-2010, more than double of 24,701 employees hired by Infosys and Wipro’s 20,722.

“It’s a little too early to call who the winners are — the jury is still out,” said a CEO of one of the top ten Indian tech firms. Experts such as John McCarthy, principal analyst at Forrester, say that despite all the debates about who is bigger, customers are not really bothered about the pecking order. “This is a legacy fixation of vendors—the positioning needs to be around domain and transformational expertise,” said McCarthy. “The classic proposition for outsourcing is dying, and vendors need to realise that,” he added. While faster growth looks good for investors, customers are more concerned about what a vendor can offer beyond pure cost savings.

“It’s unlikely that faster growth in the past two years help these companies win a lot of new clients. A 5% or 10% difference in growth rates does not make such a big difference to the client. What a client looks at is the capability, domain expertise and pricing,” said Amneet Singh, vice-president, global sourcing, Everest Group.

For HCL Technologies, the strategy has been about gaining more business by going for total outsourcing contracts—an area where profitability can get affected, according to analysts.

Source: 28.March.2011, ET.