A first look at the quarterly numbers might show nothing more than the dominance of application development and maintenance, typically contributing about half the revenues. But beneath the numbers is the growth story of newer technologies that are driving the growth. Hottest among the hot buzzwords revving the tech growth engine today are
Testing and validation
Domain-led process transactions
Eavesdrop on any IT majors boardroom or investors conference and you are bound to hear about all the five mentioned above. Almost every tech major including TCS, Infosys, Wipro and HCL seem to agree on the occupants of the hot seat. Momentum is very strong and application outsourcing deals sizes are growing much bigger. In terms of revenues, services like consulting, BPO, infrastructure management, assurance services and engineering and industrial services are growing much faster than the TCS growth rate, says TCS global delivery head Chandra Sekharan. Looking at their fast growth, TCS is learnt to have plans to give out separate numbers and stop clubbing them under application development and maintenance.
The story really has been our contributions from new services package implementation, independent validation service or testing, business process management as well as in Finacle area, echoes Infosys chief operating officer Kris Gopalakrishnan in an investor conference. And their contribution to the volume growth is evident. Infosys, for one, gets about 38-40% of its revenues from services introduced over the last five years.
All the big five are driving growth in their own way. While package implementation and testing are learnt to command better margins, remote infrastructure management offers opportunity for end-to-end solutions. Consulting, of course, is the most fashionable and is seen to be rather high in the value chain. Perceived to be at the bottom of the value chain for long, domain-led focused BPO services are now moving up the ladder and helping accelerate the boom too.
Offshoring coding model is already fairly commoditised. We are creating value and hitting new market segments with total outsourcing contracts. Packaged applications like ERP solutions are now booming just like infrastructure management has already shown potential, says HCL Technologies president Vineet Nayar. HCL was one of the first few to log into remote infrastructure management seriously. Analysts today compare remote infrastructure management to be where application development and maintenance was a decade back, but expect a much faster growth. Estimates peg close to half of the infrastructure management service pie to be efficiently delivered through a global delivery model. Industry biggies see it as a good space to be in because it allows providing end-to-end solutions and end-to-end services. While TCS added 18 new clients to its base of 102 active clients, Infosys boasts of over 40 clients in this segment.
IT brigade is equally bullish about testing and validation. Expected to boost bottom lines thanks to its high offshorability, testing and validation services are emerging as one of the fastest growing service line. While Infosys earned over 6% of revenues from testing services, Wipro has seen about 20% growth in testing business. Gartner estimates software testing market to be about $13 billion which is 39% of the global outsourcing business. About 30% of an application life-cycle is testing and around 80% of it can be outsourced.
Indian tech stalwarts have been eyeing consulting for a while, but decibel level in the space has gone up recently. Consulting practice is in a big ramp-up mode and high-value consulting projects seem to have gone a long way in helping TCS, Infosys and Wipro in taking on the biggies in the global turf. Infosys expects its consulting subsidiary to break even by the end of the fiscal year and post revenues of $34-35 million. Infosys Consulting contributed about $9 million to the topline growth for the quarter compared to $5.5 million in the previous quarter. TCS is equally bullish and bagged 40 new consulting engagements and 10 new clients during the second quarter.
Every self respecting vendor is working overtime to have the hottest of the hot five technology practices in place. Whether these new tech segments cause a seismic shift in the way our industry works or not, they are obviously added to the optimism and excitement among the elite in the tech club.