Of the wider issues facing the two companies, the easier to analyse is the global slowdown. The boats of billion-dollar exporters have to rise and fall with global tides. After nominal growth (1.5 per cent) last year, global IT services spending is likely to actually contract this year by five per cent. So investors in IT firms better be prepared for non-stellar growth for some time to come. But a far bigger challenge facing these companies is the rise in automation and the move to digital and cloud-based services; this shift could take away the traditional Indian business of writing code and maintaining enterprise installations, a business model built on wage arbitrage. The coming winners, therefore, are supposed to be Accenture and Cognizant, which are both strong in the US-based, consulting-led way of doing business. But investor preferences, as reflected in price-earning ratios, paint a more mixed picture. Accenture is ahead of the rest, its price-earning ratio having gone up by over 20 per cent in the last five years. Infosys comes last, with its price-earning ratio having fallen by nearly 40 per cent over the same period. Cognizant has also fallen by nearly 30 per cent. TCS has gone up by a modest 15 per cent. There are no simple lessons from these numbers.
There is every indication that Infosys' leadership is fully aware of the challenges ahead; the company's shift towards innovation and design thinking has certainly been strongly signalled. TCS has been less demonstrative about what it is up to; still, that has always been its style. One hopeful indicator is that even TCS has begun to separately show its digital revenue - and has recorded respectable growth in it. The days of 30 per cent growth are certainly over for now, but that does not mean that India's IT flagships have only decline in front of them.