The top tier Indian IT services providers in a bid to win large and new deals may be losing out on existing client base. Companies such as Infosys and Wipro have already seen that happening which has impacted their revenue growth.
Companies such as Tata Consultancy Services (TCS), Infosys, Cognizant and Wipro manage well over 700 clients. While managing large client base puts pressure on the management bandwidth to engage with them, but during tougher times there seems to be an overwhelming focus on managing the large or anchor clients, said a JP Morgan note.
"In other words, business tends to leak from quarters that larger companies tend to least expect while they are so consumed in maintaining market-share with their key clients and/or winning new deals/RFPs," said research analyst Viju George and Amit Sharma of JP Morgan in their report.
The report also points out that loss of existing market share to competition from unforeseen quarters is damage that laggards like Infosys and Wipro have suffered. "The market has seen vendor consolidation and some of the players have suffered. The senior management of TCS in its recent analyst meet clearly said that they will gain due to vendor consolidation in CY13," said an analyst who attended the meet on condition of anonymity.
The other metric that proves this point say analyst is the fact that though players like Infosys and Wipro have been adding clients on a regular basis it has not seen an equivalent impact on their revenue growth numbers.
"If we look at the large deal flow at Tier-1 IT companies, the wins have been very healthy; however, this has not reflected in significant revenue growth. A case in point is Infosys where the TCV won over the last four quarters would exceed $4 billion, based on our calculations, yet revenue growth over the last four quarters has been of the order of 0.7 per cent CQGR. In our view, this indicates that the leakage in existing revenues is significant, which has not been backfilled. Similar trends have been visible at other companies as well, where deal flow announcements have been solid but underlying revenue growth has not been as strong," said research analysts Ashwin Mehta and Pinku Pappan of Nomura Equity Research in their report.
The market share shift has not only impacted Indian IT services providers but also MNCs like players. With the latter getting much more competitive.
MNCs players such as IBM and Accenture have become more mature in their global delivery operations. "Accenture, in particular, has beaten Indian IT competition on outsourcing (cost-efficiency) growth over the last four quarters. So essentially the question is not Indian IT vs. MNC IT, rather it has become more of which players within the top Indian IT and MNCs will lead the way. In this context, players such as Infosys, Wipro among Indian IT and HP, CSC, local European vendors among the MNC IT side have been the laggards, while Cognizant, HCL Technologies, TCS and Accenture have gained and IBM to some extent has held on, in our assessment," said the Nomura report.