Giving out a clear signal that recession in the information technology space has been well and truly laid to rest, mid-tier Indian IT services firms, many of them victims of vendor consolidation during the global meltdown, have furnished a robust outlook for the quarters ahead. With global enterprises now willing to free up discretionary budgets, most of these firms expect to clock double-digit growth during the current fiscal.
While it has been clear for a while that tier-I software firms have come out of the woods, the mid-tier companies have now joined the party as well. With vendor consolidation slowing considerably, price negotiations have halted its downward spiral and more projects have fallen into the lap of mid-tier firms in the last three months. Mid-rung firms believe they are also reaping the harvest from first-time outsourcers who are currently experimenting with smaller offshoring projects.
According to services firm MindTree, its IT and R&D services can deliver higher than the Nasscom-estimated industry growth rate of 13-15%. 3i Infotech estimates a 11-14% revenue growth and telecom products firm Subex expects to grow its product segment by 15% during the year.
?The number of new accounts as well as new projects from existing clients has shown a multi-fold increase. The last two-three months have been extremely good. I see a clear turnaround,? says S Janakiraman, president and group CEO of MindTree?s Product Engineering Services.
For the quarter ended March, MindTree revenues grew 3.8% sequentially to Rs 344.4 crore. Net profits inched up 1.3% to Rs 54.5 crore. The firm is also seeing an upward trend in pricing with new accounts getting booked at a higher price. ?In some of the existing accounts, we had to go back to the table because the rupee appreciated. Since our expenses are in rupees we had to get additional pricing improvements,? Janakiraman says.
President and managing director of Sonata Software B Ramaswamy says he is now keen on three to five year deals in the $25-50 million range.
?We are beginning to spot some of these deals which had disappeared a year ago,? he adds. Similarly, NIIT Technologies is seeing its deal pipeline improving and discretionary spending thawing. ?I think the worst is behind us. Most companies would grow by 13-15%,? CEO Arvind Thakur says. ?Enterprises want to get more competitive, and hence technology spending is back,? he adds. NIIT Technologies had reported Rs. 239.2 crore revenues for the quarter ended March, a sequential growth of 4%. Profits stood at Rs. 41.3 crore, a sequential jump of 17%.
Software product firm Subex too notes a freeing up of capex, particularly in the segment it targets?telecom. Group president Vinod Kumar says in the telecom space, there are positive signs. Most operators had decreased capex as recession hit. Now, there are no more capex cuts if not vast increases, he notes.