The new stars

Updated: Jan 22 2007, 07:07am hrs
Tech bigwigs were on a roll this earnings season. And in the New Year, they look programmed to move into an even faster lane. While analysts are still working out their final numbers for the new fiscal, early predictions peg an annual growth of about $4 billion for the top six club. Insiders also see early signs of divergence in the almost undifferentiated offerings of the top six IT companies, popularly known as SWITCH (Satyam, Wipro, Infosys, TCS, Cognizant and HCL).

Much ink has been spilled over the big-ticket deals worth $100 billion due for renewal. If we dissect the mega-multi-million, multi-service deals and even the not so mega deals announced in 2006, it is hard to miss Indian tech stalwarts changing business mix. Traditional application development and maintenance (ADM) is still a big chunk but infrastructure services, consulting, engineering and R&D services, testing, package implementation, financial product services are now taking a firm seat in their growth charts.

The reasons are not hard to find. As offshore majors continue to grow at a break-neck pace, they cant afford to continue with the commoditised, undifferentiated offerings. Already TCS clocked the $1billion milestone in the third quarter and is not very far from becoming a $4 billion company. Infosys quarterly sales jumped 44.4% and HCL was not far behind at 39%. Moreover, growth is not limited to volumes, but billing rates are looking up too. Vendors like HCL claim to be signing a quarter of its $1million clients on multi-service deals.

A rich business mix will give us a competitive advantage. We have invested a lot in building a strong service portfolio and today, 42% of our revenue comes from the new services. We have been adding services like consulting, package implementation and infrastructure management, confirms Infosys president, joint managing director and COO Kris Gopalakrishnan. Consulting, for one, is seen as a harbinger of change at Infosys. It might be early days yet to take on Accenture head-to-head, but it is creating downstream jobs offshore. At Infosys, the revenue per employee has also gone up with the growth of consulting and consulting-based services including package implementation.

Infrastructure, another traditional domain of IBM, EDS and CSC is beginning to move offshore. Today, our chances of winning multi-service deals go up because of our portfolio of services. Applications services is a very competitive landscape and we launched our Blue Ocean strategy to get on the growth path and created remote infrastructure management and enterprise application services and change our offerings in output based pricing for our R&D and engineering services, explains HCL Technologies president, Vineet Nayar. HCL seems to be strong in infrastructure space, though TCS also claims to be ready for $50-$100 million deals and Wipro has been strong too.

Not only are we cross selling services to our existing customers, but many new customers are coming in with multi-service deals, says Nayar. He almost echoes TCS global head (sales and operations) Chandrasekaran at an analysts meet: Our customers are buying new services from us. If you take the infrastructure services, we have at least three different deals where existing large ADM customers have signed up a significant size deal in the infrastructure segment. The same thing is happening in testing and assurance and some of the other practice areas. So, that is going to drive growth.

Multi-service deals and cross-selling is clearly the mantra. And, as they move away from commoditised ADM space, subtle differences between their offerings are already showing. The almost undifferentiated offshoring majors are showing first signs of subtle differences in strategy. While Infosys is more vocal about its consulting division, HCL offers transformation services but not on a standalone basis. Strong in remote infrastructure management space, HCL is focused on cross-selling services. Though, TCS offers consulting as well as infrastructure services, it is gung-ho on its global delivery network and asset-leveraged solutions.

These nuances could see their growth paths diverge at various points. TCS is now eyeing the global Top Ten spot by 2010. Infosys expects an annual growth of 35-40% for the next three years. HCL is aiming to be a value leader by changing the way it offers its services in a three-stage transformation journey till 2010. As companies pitch their vision statements for the end of the decade, we could see individual goalposts overshadow the much-talked about $60 billion target set by Nasscom-Mckinsey report.