There is less talk about the real fight in the tech town. The over hyped buzz in the $60-billion Indian IT industry is Cognizant versus Wipro or Tata Consultancy Services (TCS) being the new IT bellwether. All the chaos is around who is going to beat the other in terms of revenues in the near future. But, the actual debate lies somewhere else?the vertical expertise.

The buyers/customers of this industry are more interested in knowing that TCS masters in BFSI (banking, financial services and insurance), Wipro leads in energy and utilities and Cognizant has the highest position in its healthcare vertical?rather than knowing who is beating whom in annual sales. Though, we see the revenue gap of various companies giving rise to a predictive new pecking order?the vertical focus now has a different story to share in terms of superiority. Also, the overall growth rate of these companies necessarily does not match with the growth rate they are experiencing in different verticals.

Amneet Singh, vice-president, global sourcing at Everest Group, a management and consulting firm says, ?The customers decide whether their work will outsourced to a particular vendor on two factors. First, the service providers investment in the particular capability needs of the buyer and the second is the commitment of the service provider to various contracts.?

As per Everest, from a global sourcing adoption perspective?BFSI, healthcare and life sciences, and energy and utilities (E&U) form half of the outsourcing market. Last year, 508 global sourcing deals were signed and half of them were in these three verticals and surprisingly, when we analyse the strengths of the top 5?TCS, Infosys, Wipro, Cognizant and HCL Technologies?in terms of verticals, the size of the company has less to do with the capabilities and deals won in a specific domain.

The ranking of WITCH (Wipro, Infosys, TCS, Cognizant and HCL) based on enterprise or total revenues has limited correlation to industry vertical rankings. The leader in each of the three examined industries is different. In BFSI, the biggest vertical contributing almost 20% of the global sourcing deals?while TCS is the clear leader with 2010 revenues of $3,394 million, Cognizant ($1,944 million) is rapidly closing in on Infosys ($2,045 million) for the second spot. And interestingly, Wipro is behind all three in this.

Analysts feel that TCS has developed over 100 proprietary solutions specifically for the BFSI vertical in addition to the continuous investments in the BaNCS core banking platform. It also made acquisitions (notably the acquisition of Citgroup?s India captive) in BFSI to enhance domain capability. Common underlying themes derived from the success of these IT companies in various verticals include strategic focus, investments in broadening and deepening domain capability, and superior client acquisition capability.

Quite contrary to BFSI, in healthcare and life sciences, Cognizant emerges as the clear leader with 2010 revenues of $1,177 million. This is greater than those of Wipro, TCS, and HCL combined. Signifying that the vertical is not too big for the company, Infosys does not report segment revenues for healthcare. Industry spectators feel that the healthcare vertical picked up two year back, post the healthcare reforms in the US.

Even energy and utilities, which contributes 5% to the global outsourcing deals has a different ranking to expose. Wipro leads the pack with $467 million 2010 revenues and is expected to widen the gap. In this vertical, Wipro?s clients comprise of multiple oil & gas super majors. In addition, Wipro continues to make investments in strengthening its domain capabilities?the recent acquisition of SAIC is a pointer in this direction. TCS achieved the highest growth in 2010 to move to third position ahead of HCL (TCS was No. 4 in 2009) and narrow the gap with Infosys. Cognizant does not report E&U revenues.

Government is also a major vertical for these Indian service providers but the domestic government market is hugely tapped by IBM India, and Wipro is close by. Unfortunately, there are no concrete numbers to prove the competitiveness in this domain. Acknowledging to the importance of vertical focus, these companies have also undergone through a lot of restructuring in the recent past. This is because they realise the importance of the different verticals and need to put mini-CEOs or leaders to manage these verticals.

For instance, from the six industry vertical groups that it earlier had, Infosys has now reclassified the verticals it services into four groups by including telecom in the energy utilities category. As per the new categorisation, retail, CPG, logistics,life sciences and energy utilities plus telecom will constitute one group while manufacturing would remain a separate vertical while BFSI, and public services would be two different categories.

A few years back, TCS being the trend setter, created 23 business divisions, each with a CEO having a high degree of autonomy. The concept was to have small corporations within a large company. Two months back, Wipro redefined three of its strategic business units (SBUs) as healthcare, pharma and life sciences; manufacturing and hi-tech; and energy and utilities. Three of its other units?technology, media and telecom; financial services; and retail and transportation have been left unchanged. But, the number of business segments remain unchanged at six.

Analysing the whole scenario, Siddharth Pai, partner and MD, TPI-India says, ?We are spending too much time thinking who is earning higher revenues than the other in the IT industry. The scale and size of a company cannot break or make a deal. The customers decide their vendor on the combined basis of vertical focus, fit of the solution, pricing, cultural fit with the buyer and ability of the vendor to scale.?

Breaking new ground

*In BFSI, while TCS is the leader, Cognizant is rapidly closing in on Infosys for the second post

*In healthcare and life sciences, Cognizant emerges as the clear leader with 2010 revenues greater than those of Wipro, TCS and HCL combined

*In energy and utilities, Wipro leads the pack and is expected to widen the gap through its acquisition of SAIC oil and gas business