The top five Indian IT players have not only emerged smarter out of the recent recession but also managed to raise their profitability and clocked positive revenue growth. The latest Forrester Research report says that these five firms — TCS, Infosys, Wipro, HCL and Cognizant — actually increased their profitability in the past 12 months despite offering 4-6% discounts to their clients in a tough economy.
Says Forrester’s principal analyst Sudin Apte: “To beat the recession, most Indian firms took serious cost-cutting steps such as cuts in salary and variable pay, curbing spend on marketing and long-term R&D and overheads, and even downsizing in a few cases. In addition, as attrition was at a record low, their recruitment costs and annual raises were flat or reduced by 5-7%. Such systematic budget cuts, coupled with tight approval mechanisms, helped these companies cut costs virtually by double-digit percentages.”
While most companies across North America and Europe cut their spending by more than 10% at the height of recession, the Forrester survey anticipates growth in IT spend in 2010 and 2011. In fact, while announcing quarterly earnings recently, two of the five technology majors raised their guidance and gave indications of 4-5% sequential (quarter-on-quarter) growth. The top five anticipate double-digit growth in 2011 and possibly higher than that, with several of them even crossing 20%. Each firm has strategies in place to prosper post recession.
For example, Cognizant plans to take client relationships to a new level in the next 12 to 24 months, based on its stronger domain expertise and consulting skills. In the long term, it wants to leverage its proprietary global delivery methodology — Cognizant 2.0 — to win in new areas such as cloud computing and IP-led solutions like platform BPO.
HCL has charted key initiatives like “employee first,” which empowers its employees and assures them of internal support while they focus on delivering client benefits. It seeks to make each business unit self-controlled and self-managed; and its new “value portal,” which will help the company shift from a volume or labour-centric business to value-driven client relationships.
To build a broader services footprint from consulting to maintenance, Infosys is focusing on extending its GDM, improving efficiency, and harnessing new engagement models. It wants to leverage its current relationships to sell additional lines of services such as testing, product design/R&D services, and analytics.
TCS wants to build on its current leadership position and leverage its large number of existing client relationships, wide range of service lines, globally distributed delivery centres, and strong presence in emerging markets. To that effect, it continues to invest in areas such as platform-based BPO, components and framework, and software products for the financial services industry.
Wipro is focusing on technology, delivery innovation, and productivity to help clients save more. Some of the top themes that Wipro is working on include integrating IT services and BPO, enhancing its consulting capabilities, and building a non-linear service delivery to break the link between headcount and revenue.