AFTER THE PARTY… The Rich and Famous Remain Bold and Beautiful

The party is still on, though the wine isn’t as dark and free flowing. And
while the music is loud as ever, the revelry has been cut short–it is tomorrow’s
hangover that everyone is worried about. But this year’s Top 20 companies have
justified their rankings–they recognized the warning signs, took quick
decisions and changed market dependencies to survive the crash, with most of
their paintwork still intact.

And the moves that saw this year’s DQ Top 20 companies post an increase of
over 56% in revenues (overall industry grew just over 50%) compared to the
previous year, displayed quick planning and quicker execution. There was
spirited offshore development, new business opportunities were tapped into,
Europe, APAC and other markets emerged as hot new destinations. Consolidation
and overhaul of business models became the rule–there was much to sing about.
The US remained King, but there were others knocking at the palace gates.

An indicator of the staying power of the country’s top IT companies was
that there were few newcomers on the list–only CMC and Tata Infotech slipped
out of the rankings, tantalizingly close to the list, however, at No 23 and No
24, respectively. Moving up fast to fill the slots were Celetron and Cisco
Systems.

The Rs 10,000-cr booster shot

And
proving their drawing power, the Top 20 companies notched up an increase of
nearly Rs 10,000 crore over the previous year’s figures, touching Rs 27,479
crore. And there were some newcomers in the coveted Top 5 club as well, as
Compaq and Infosys moved in to dislodge IBM and HP, which slipped to No 6 and No
7. Infosys went a step ahead, as it joined TCS and embarked on a recruitment
binge.

The Tandon-owned Celetron Electronics emerged as the most nimble-footed this
year, as it pegged a year-on-year growth of 140%. This unmatched performance
stemmed directly from the merger of the two group entities–Advanced Technology
Devices and flagship Tancom Electronics, giving birth to a new entity christened
Celetron.

Infosys chairman NR Narayana Murthy did sound the alarm bells while
announcing the company’s Q4 results, issuing a profit warning and forecasting
a meager growth of 30% for 2001-2002, but this will reflect in the balance sheet
only next year. In 2000-2001, Infosys had a spectacular party as it zoomed to
the No 3 slot with a growth of 115%. Even in these troubling times, Infy nearly
doubled its workforce from 5,389 to 9,831. It also topped various APAC surveys
on human resources and business practices (including Dataquest’s ‘Best
Software Employers’ survey, published in the May 31 issue).

The secret behind Infosys’ success was in ensuring that a smaller
proportion of revenues comes from its top ten customers. An unhappy experience
with GE–its largest customer at one point of time–ensured that the company
would never again depend so heavily on any single client.

Another success story was that of Compaq, the PC vendor that entered India
only in the mid-1990s. It acquired an established systems and solutions company
in 1998-99, while entering the DQ Top 20 at No 5 in 1998-99. It soon set the PC
marketing benchmarks for established players like HP and IBM. And it’s now
made it to the Top 5 infotech groups of India–growing the fastest among
systems vendors. Sure, Compaq took a global hit in its PC leadership and its
earnings, went through a $1-billion restructuring and 8,000 layoffs. But Compaq
India outperformed its global and Asia growth in almost every category,
displacing HCL Infosystems from the top PCs slot.

First,
it was the driven by the ISP boom, then emerging contact centers and the
enterprise segment. Cisco smartly realigned itself with changing market
conditions to remain the undisputed leader in the networking segment. The
slowdown did not ruffle the giant as it marched ahead with yet another year of
three-digit growth. The company doubled its reseller base this year from 600 to
1,200 in its bid to reach out across the country.

Slipping from the first to second slot, Wipro showed a growth 5% below the
industry average of 50.3%. While Wipro Technologies outpaced industry growth
rates with a 70% jump in revenues, it was Wipro Infotech that pulled the final
tally back, growing at a more sedate 37%. Wipro Technologies contributed 80% of
the group’s net profit. The internal restructuring included the ushering in of
Suresh Vaswani as president of Wipro Infotech. The year also saw Wipro’s
listing on the New York Stock Exchange.

For NIIT, this was a year of consolidation and restructuring, the third such
exercise for the training major. The restructuring is aimed at achieving NIIT’s
next big target–Rs 10,000 crore by 2006. The pinch of the slowdown and the
resultant lay-off in IT companies, with fresh registration and inquiries
falling, saw NIIT switching into a massive campaign mode that would definitely
impact its topline. While NIIT slipped by two rungs to No 8, arch rival Aptech
was down three notches to finish at Number 16.

Mumbai-based ‘technology distributor’ Tech Pacific India kept all its
customers happy. With Shailendra Gupta deftly handling the helm and working on a
distinct business model, not very product-specific, Tech Pacific grew by 47% in
2000-01, from Rs 1,171 crore to Rs 1,727 crore. Tech Pacific distributes a
spectrum of products from all top vendors–Microsoft, IBM, Acer, Sun and HP,
among others.

TCS: The tallest of them all

Despite
a growth rate that was just 5% above the industry average, sheer size ensured
that TCS nudged out Wipro to emerge as 2000-01’s No 1 IT company. Of the Tata
Group’s overall revenues of Rs 4032 crore, IT flagship TCS alone brought in Rs
3,142 crore.

The Tatas grew TCS into Asia’s largest software exporter after creating it
as a logical alternative to the lapsed management agency system in the sixties.
There were doubts whether sheer base size would make gaining newer customers
difficult in a fast-moving economy. But numbers posted in 2000-2001 and other
developments scoff at all negativism. The TCS success story includes a growth of
54.5% in 2000-01, up from 23% in 1999-00. Revenues shot up from Rs 2,034 crore
to Rs 3,142 crore.

IT’s latest romance: Finance

Given that banking and finance are sectors relatively unaffected by the
slowdown, the IT industry benefited from projects in these verticals. The year
saw a marked increase in IT spending in the banking and finance sector. Spending
on IT projects increased from 8.8% in 99-2000 to 14%, while the contribution of
the manufacturing sector slipped by nearly 2%. For the first time, 18.8% of
Infosys’ revenues came from Europe (compared to 15% last year), while the US’
share came down from 78% to 73.5%. With it’s sixth reorganization in five
years, Wipro too ventured into Germany and France, apart from opening it’s
first European Development Center at Reading, UK, with 50 application
specialists. Year 1999-2000 had witnessed a dramatic drop in the contribution of
the government sector. This year, IT spending by the government and the public
sector increased by nearly 2%.

Western region: The coolest one

There
were no surprises in the regional distribution of revenues, with a contribution
of nearly 19% from Western India and the South close at it’s heels. This trend
did have exceptions like the Mumbai based PC vendor-Minicomp, which reported
over 40% of revenues from the east.

The number of offshore outsourcing deals coming India’s way increased
sharply–that India is a relatively cheaper market with a sound knowledge base
was only ground home more vehemently. The result: IT exports jumped by a massive
64%. And while a major chunk of the exports still went to the US, over a tenth
went to other countries. But surprise, surprise, surprise–defying overall
industry trends, the new Top 20 reported greater domestic market sales (57%)
than exports (43%).