DQ Top 20, 2017: Meet India’s Top 20 IT Companies

Managing scale vs. growth became one of the biggest challenges for the Indian IT industry in FY 17 as they explored ways and means to navigate the disruptive tech forces

The Indian IT industry is  at the fag end of conventional outsourcing, as we know it, and at the beginning of a new phase where the rules of engagement are completely different. As we look at FY 17, it was a mixed bag. The emphasis seemed to be on sustaining the scale rather than growing. Many factors contributed to the stunted growth – tighter visa regime, contraction of the market, shrinking of the volume business, overall cautious tech spending, layoffs added with the change of political guard in the US and the strong anti-outsourcing rhetoric by the Trump administration – all these have acted as dampeners for the Indian IT and outsourcing industry over the last year.

THE DQ TOP 20 COMPANIES FY 2017

COMPANY REVENUE 
1.TCS 1,17,966
2.Cognizant 92,724
3.Infosys 68,484
4.Wipro 55,417
5.HCL Technologies 46,722
6.Tech Mahindra 29,141
7.Ingram Micro India 22,770
8.IBM India 22,575
9.Redington India 17,879
10.Capgemini 15,446
11.HP Inc India 15,340
12.Oracle india 15,318
13.SAP india 11,787
14.Cisco india 11,770
15.Microsoft India 9,550
16.Lenovo India 8,000
17.HPE India 7,500
18.Intel India 6,969
19.LTI 6,500
20.Mindtree 5,236

Source: DQ Estimates FY 17 ( Rs Crore)

As we look at the DQ Top 20 listings this time, the IT industry is clearly going through mid-career blues. There is clear trend towards retrenchment in an industry at one point in time retention was a big challenge. Attrition is no longer an issue. If one looks at the Top 5 companies, the struggle to grow becomes quiet evident as we compare FY 17 with FY 16.

TRANSITIONING TO NEW REALITIES

According to reports available, the global IT industry is pegged at $1.2 trillion and growing at a rate of 4%. In a presentation titled IT-BPM Industry in India: Sustaining Growth and investing for the future, industry body NASSCOM talked about growth drivers and headwinds during FY 17. The growth drivers as cited by NASSCOM are: the addition of over $11 bn in revenue (8.6% in constant currency; 7.6% in reported currency) and digital becoming mainstream are two big events during FY 17. Due to the digital transformation wave, the industry is rather nudged to focus on skills in demand and expanded its play in multiple geographies like Continental Europe, Japan, China, and Africa. Moreover, the industry also did new acquisitions and forged new partnerships to enhance digital capabilities, domain, and consulting skills.

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NASSCOM also cited few headwinds, the significant ones are: increased rhetoric on protectionism, elections, Brexit and visa issues, delayed decision making due to macro-economic uncertainties, slower growth in traditional services, focus on cost optimization, currency volatility led to difference of 1–3% between constant currency and reported currency growth and longer gestation period for enhanced R&D investments in products and platforms led to some impact on margins.

As we look at some of the challenges post the US elections last year, it is the ant-outsourcing rhetoric. But TCS CEO & MD Rajesh Gopinathan in an interview to Dataquest said, “ The current discourse on the issue in the US is driven by emotions rather than the economy and the best way to tackle it is through greater engagement. Sometimes, companies like us get characterized is very different from the reality of what we bring to the table. The industry is not an outcome of a visa regulation. We have gone through a huge revolution on the technology side. The sheer extent of technology work globally has expanded many fold and India has emerged as a phenomenal source of high-quality supply for it.”

Companies in the fray are making concerted efforts in taming the headwinds. For instance, Infosys CEO Vishal Sikka said while announcing Q1, FY 18 results, “ Our persistent focus on execution in Q1 is reflected in broad-based performance on multiple fronts– revenue growth, resilient margins despite multiple headwinds, healthy cash generation and overall business results. I am encouraged by the uptick in revenue per employee for six quarters in a row, and the strong momentum in our new high growth services and software, as we accelerate our focus on innovation-led growth.”

So clearly the rules of engagement are changing and with the digital wave sweeping enterprise IT organizations across the world has triggered a range of impact right from layoffs to the emergence of new delivery models.

Quips Debashis Chatterjee, President, Global Delivery, Cognizant, “ Being digital is the defining challenge for today’s C-suite and the enterprises they lead. To speed our progress, we have many initiatives underway. We are expanding our solutions portfolio. To do so, we are deploying repeatable, industry-tailored solutions faster across our three practice areas. And we’re further developing offerings through select partnerships and acquisitions. We are deepening and broadening our digital skills under the guidance of Chief Digital Officers in each of our industry and regional business units. We’re further enhancing our digital engagements with clients. For example, at our “Collaboratory” or co-innovation centers, our strategists, designers, data scientists, human sciences and cyber security experts work with clients and partners to design, prototype, build, and run new customer experiences and business processes”

What lies ahead?

While doomsday pundits wrote last year that the Indian IT industry has hit its nadir, but given the huge size of the global IT industry offers tremendous scope to Indian IT. Industries estimates say that for FY 18 software exports are expected to grow at sub 7% while domestic market growth is pegged to grow at about 11%.

But on a larger level, companies need to devise ways and means to offset the challenges in the traditional ADM and packaged software segments with non-linear offerings and a platform led approach will help.

Yet another biggest challenge lies is managing the scale the IT companies have built over the years. As they embark on downsizing initiatives, it will clearly upset the workforce demographics within the organization. High paid lateral employees were given voluntary separation offers and in the short run, this might jeopardize the senior leadership roles.

In all FY 18 looks like a make or break year for Indian IT. Whatever innovation the companies are talking about will manifest in FY 18. The ongoing year will see the full extent of the layoffs and the extent of downsizing and in a way set a new direction for Indian IT industry.

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