tech news-TCS Infosys Wipro HCL MNCs for bigger US share
Looking to reach the $20-billion mark within the next few years, India’s top technology firms are readying plans to gain a bigger share of their largest market, US, by aggressively chasing contracts being served by multinational rivals now.
At least a dozen analysts ET spoke with over the past week said the top four, TCS, Infosys, Wipro , HCL, will grow their revenues by over 20% during year ending March 2012, helped by renewed demand from the top outsourcing markets of US and Europe.
The strong showing of the IT majors in the last fiscal to March 2011, bullish hiring targets for the current fiscal and factors such as a 10%-plus wage increment reinforce the positive demand outlook for IT services in 2011-2012. FY11 was the first full year when clients resumed spending on IT after the recession and the fourth quarter sales indicate that demand will continue to be strong resulting in another year of double digit growth for Indian IT heavyweights.
Analysts expect the top IT firms to grow between 23-27% in the current fiscal on the back of more number of discretionary projects and improved pricing, and robust business volumes. However, there could be some party-poopers. The recent S&P downgrade of the US debt outlook could cause the dollar to weaken. “Given the inflation in India, economists were anticipating the rupee to depreciate. But with the downgrade, we could see the rupee appreciate against the dollar,” pointed out an analyst.
Infosys Technologies , the country’s second largest software exporter, expects to hire 45,000 people in the current year, while Tata Consultancy Services (TCS) said it has already made over 37,000 offers on campuses, indicating a strong order pipeline. “Rapid growth in business demand during FY11 resulted in the largest ever hiring effort in our history with a gross addition of 69,685 professionals during the year,” said Ajoy Mukherjee, head – global human resources, TCS.
Vineet Nayar of HCL Technologies , which posted better than expected profits for the March 2011 quarter, says Indian IT vendors will also benefit from business moving from local IT vendors and global IT vendors. “Indian IT vendors are only 2.5% of the global IT spend. That is very small market share for extremely talented companies,” Nayar told ET. Nearly 73% of HCL’s business in the last nine months was won against competition with global vendors.
New client additions for Indian outsourcers have also been strong in the fourth quarter. Infosys added 34 new clients, seven of which were Fortune 500 firms. TCS and HCL added 39 and 58 new clients respectively. Vendors have also announced offshore wage hikes of between 10-12% and 12-15% and 2-3% onshore wage hikes in another indication of their confidence in the strong demand pipeline.
“We believe Infosys is on track to achieve a 25% growth in FY12,” analysts Pankaj Kapoor and Apoorva Oza of Standard Chartered said. They listed rupee appreciation and slower than anticipated pricing recovery as some of the potential downsides.
Experts such as Nimish Joshi of brokerage firm CLSA say TCS, among all IT firms, is best positioned to make the best of this opportunity.