The top five Indian IT players ?? Cognizant, HCL Technologies, Infosys, Tata Consultancy Services (TCS) and Wipro ?? have increased their profitability in the past 12 months despite offering 4-6% discounts to their clients in a tough environment, according to a report of Forrester Research released on Monday.
While several small and mid-size Indian companies lost revenue as they picked up businesses at reduced profit, or even at a loss in few instances, the top five Indian IT companies reported positive revenue growth even when the economy shrunk, says the report.
In addition, as attrition was at a record low, their recruitment costs and annual raises were flat or reduced by 5-7%. Such systematic budget cuts, coupled with tight approval mechanisms, helped these firms cut costs virtually by double-digit percentages, the report notes.
Sudin Apte, principal analyst at Forrester and the author of the report, says, ?To beat the recession, most Indian firms took serious cost-cutting steps such as cuts in salary and variable pay, curbing spend on marketing and long-term R&D and overheads; and even downsizing in few cases.?
In the financial year ended March 31, 2009, which included the early part of the recession, the five companies named earlier grew by more than 20% in size. Even during the fiscal year ending March 31, 2010, these companies continued to witness increased revenues. The growth in the March quarter was broad-based, across verticals and geographies. With large deals back on the table, firms reported strong client additions.
However, Apte feels that these players? strategies lack sufficient clarity required to deal with the changing offshore landscape.?We found their strategies still lack clear differentiation, evolving sophistication and are based on convenient assumptions about the market. They all look identical, and typically chase same opportunities. As everyone prepares to build next-gen services criteria, their plans are still at an early stage and are not yet fully articulated,? warns Apte.
At present, clients are seeing India as a market for different types of services. They want to leverage offshore providers for works related to newer technologies such as service-oriented architecture (SOA) and Web 2.0. They are also looking for industry vertical or business process expertise from their offshore suppliers.
Forrester points out that though all five providers score well on the technology front, not all of them have high-end business skills across all verticals. While Cognizant is strong in the financial services, insurance and healthcare domains, it is building capabilities in some other verticals like manufacturing and retail. HCL, on the other hand, has limited vertical capabilities as several of its stronghold service lines like infrastructure services or engineering are predominantly cross-industry or technical in nature.
Commenting on the pricing models of the companies, the report highlights that while exploring various avenues to offer new models, early indications show that HCL and Cognizant lead the pack with Wipro and TCS.
?Infosys, however, struggles here as it is averse to risks when compared to its peers.
Several clients have told Forrester they found Infosys moves slow when it comes to the actual bidding. Infosys reiterates that it is committed to new engagement and pricing models but wants to be selective on deals it picks,?the report has said.