The new generation of managers who are taking over the baton at India’s top three information technology services companies are confident of the industry expanding its scale and brand but many admitted to lagging global incumbents in terms of client engagements.
CLSA Asia Pacific Markets in its report “Project NextGen” on Indian IT sector said these senior managers perceive their organisations as international, but not “yet truly global in terms of manpower mix, mindsets, and market breadth.”
Most of the 14 senior managers from Tata Consultancy Services, Infosys Technologies, and Wipro interviewed by CLSA admitted that internal systems need greater focus and noted that brand differentiation remains a challenge.
Many acknowledged the growing distance between employees and senior management.
On an average, the managers interviewed by CLSA, have 23 years of experience, over two-thirds of which was with their current employer. The report said cultural challenges are intensifying as a new consultative approach replaces the earlier technological path towards growth.
“Investments in non-linear growth are imperative, but only a small minority of managers mentioned this,” CLSA said.
The report has come in the backdrop of a 46-71 per cent three-year underperformance of the top stocks, suggesting market scepticism for the future, as these vendors approach $15 billion (Rs 64500 crore) in total revenue and 300,000 in manpower.
Margin challenge
Though these leaders are aware of the road ahead citing changing profiles of sales teams, different calibre of business managers, global expansion, and investments in brand and systems, they did not have an answer for a way to overcome the margin conundrum.
The report quoted an executive as saying “the margins we make are almost sinful” but quarterly pressures may not encourage them to sacrifice margins for growth.
“If NextGen leaders had it their way, their organisations would be smarter business consultants, tightly run with integrated systems, with global brands and sustaining growth for many years, though with some margin compromise,” CLSA said.
The report noted that most leaders of the future had a sales or business development background having spent many years outside India clocking in the sales, making them acutely aware of the ground realities.
“This perspective can, at times, conflict with quarter-on-quarter focus on margins,” the brokerage and investment banking company said.
CLSA noted salary differentials between senior managers at India firms and their peers at overseas majors reflect the margin challenges ahead.
