India's largest IT services company Tata Consultancy Services (TCS) and Cognizant have been fairly successful in mining their existing client base, said a study by offshore advisory firm Offshore Insights. Around 90% of the total revenues of the Indian IT services companies comes from the existing clients.
As part of the study, the company spoke to around 300 clients of various Indian IT companies and IT services vendors. The advisory firm in its report also said, the ability to sell incremental revenue to same clients and relationships with key decision makers is the key for the Indian IT services companies to grow in coming five years.
“Indian companies which were once looked at as small and tactical suppliers of IT services and who worked on small projects or even simply supplied skilled and low cost resources, have now emerged as sizeable and strategic partners for many global players," said Sudin Apte CEO and research director, Offshore Insights.
“The previous two years saw even change in pecking order with Cognizant, first overtaking Wipro and then Infosys," he said. The report also said that though the top-5 IT firms have been adding substantial number of new clients, they hardly add to their revenues immediately thus making it pertinent for them to bank upon their existing clients.
Offshore Insights also said that Tata Consultancy Services is sitting on huge opportunity, closely followed by Cognizant. TCS has a great opportunity and the company has even surpassed its peers in large deals which are above $100 million.
It finds that India's second largest IT company Infosys too has good prospects for growth but need to fix some ongoing issues. The Bangalore-based company has a good client base but needs higher leverage of existing relationship. During the last eight quarters Infosys added maximum number of clients – both in terms of absolute number (total clients grew by 119 as net client count moved from 592 to 711) as well as in percentage terms (20% increase in client number). However, their revenue growth was not impressive during this period.
"Infosys which was earlier spending 5.6% of revenues on sales and marketing, has reduced the number,” added Apte. Another major IT services provider has grown their $100 million clients to 8, but the company's client profile is not improving enough.
“In spite of growing $100 million accounts, their top line is not showing corresponding increase. We believe either there has been a large client churn or loss of business from some clients or possibly they are discounting to hold on to the clients,” he said. Further, it said HCL has shown an excellent performance in past two years. However, the company may face growth crunch because of limited service lines and vertical expertise, it added.
