Column : Indian IT canít take its eyes off US revenues

Jan 24 2013, 00:54 IST
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SummaryCompanies need to develop themselves as global brands so they can attract experts from Google, Apple, IBM, etc.

Domestic IT spending will be a key factor for Indiaís software growth in 2013. With the Lok Sabha elections scheduled for 2014, many of the IT vendors are looking forward to more e-governance initiatives from the government, with a view to enhancing efficiency and transparency. Domestic IT spending has definitely been on the rise in the last few years. Gartner has stated that the governmentís infrastructure projects will strongly drive IT, together with financial services and manufacturing sub-sectors. There is a view within the software industry that this domestic spend could become a critical factor in Indian IT in years to come, with the sluggish global economy not helping anyoneís cause. But this is too optimistic a view.

Take Wipro, for instance. It is a company that has traditionally relied on its West Asia and Indian domestic business to carry it through. It is a strong force in the region, without doubt. But its North American revenue stream is causing some worries. In the October-December quarter, Wipro slipped by 0.7% in the region sequentially while its peers grew. Negative growth in the US is something that no Indian IT vendor can afford. Wipro knows this only too well and is trying to address this quickly. Though companies are trying to depend less on America for their revenues, it will continue to be a telling factor for all concerned with Indian IT. Infosys still derives 61% of its revenues from North America and TCS gets 53% revenues from the continent. For Wipro, this is under 50%. Cognizant, the US-based IT major with a substantial Indian presence, gets close to 80% from North America.

It is predicted that the IT services revenues in the country will touch $10.2 billion in 2013, a 12% increase from an estimated $9.1 billion in 2012. Whereís all that money going to come from? North America, mostly. Big data, analytics and cloud services are expected to see more penetration in 2013 and US-based clients will have a big say here. Pay-as-per-use has become a big draw in IT circles and will continue to hold sway this year too. Many transformational deals in verticals such as BFSI, retail and manufacturing are going to come Indian ITís way, and those vendors with the longest reach in America will win the prize.

This is where Indian IT players have to undergo a transformation. This safety-first approach has been dragging the sector for a long time, but the industry pioneers have refused to change. Why canít the likes of TCS, Infosys and Wipro appoint industry-leading experts in key positions? Why is it that they are refusing to appoint leaders from Google, Apple or IBM? Itís not that they canít pay these executives top dollar. If one really is hoping to achieve great results, the HR heads will have to hunt down the top technologists of the world. The problem is most of the Indian IT vendors are still not regarded as global brands. TCS is not a household name, though it is Indiaís largest IT exporter. Hence, getting top people to join them is not going to be easy. The question is, do Indian IT vendors have the will to push for it? Are they too afraid of introducing top talents of the world, who could have a disruptive effect in their companies? Indian IT has always had a conservative soulóone that refuses to engage with disruption. North Americs requires those who can push the envelope and Indian players have to realise this.

India has been trying to get rid of this outsourcing destination tag and instead acquire an innovation label.

Its global delivery model (GDM) has been a time-tested policy that has yielded substantial benefits but itís now time to say goodbye to the time & material system. America and Europe are trying to spend as little as possible on IT and they are not looking at fixed pricing. Outcome-based pricing has taken over and Indian IT services players have latched on to it. Surviving by the quarter has been the trend for the last 3-4 years. Itís all about taking a myopic view of the situation. But only those companies that are willing to make short-term sacrifices for long-term gains are likely to last. The end of the decade will show us who has withstood short-term temptations to win the war of codes.

dj.hector@expressindia.com

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