OVERVIEW: Riding the Growth Wave

India shining? While the slogan did not help the BJP shine in the last

general elections, DQ Top 20 survey statistics indicate that IT India is

shining. And IT companies are basking in the sun.

Otherwise how would you explain that after a period of two years, the Top 20

companies grew at a faster pace than the industry. While the Indian IT industry

clocked a growth rate of 24%, the Top 20 IT companies were marginally ahead with

a growth rate of 25%. The last time this happened was in FY 2001-02, when the

industry grew by 50%, while the Top 20 companies grew by 56%.

Exports inch up by 3%, as Cognizant, Oracle and i-flex moved in BFSI and IT/Telecom lead the charge in the domestic market, accounting for over 50% of DQ Top 20 domestic revenues Cognizant and Cisco top growth chart HP overall number one in systems, while Samsung tops peripherals  The DQ TOP 20 2003-2004  Spending by Market Verticals  Segment-wise Revenue Break-up  DQ Top 20 over the Years  Quarter-wise Revenue Trends  East the New Action Land

However, there was an anomaly in the growth structure. While the domestic IT

segment grew by 24%, the Top 20 posted a growth of only 17% as far as their
revenues from domestic business was concerned. A little thinking resolves this

puzzle. This apparent lag is due to the software dominance in the Top 20 club.

Plus, this year's list also saw the inclusion of three new companies: i-flex,

Oracle and Cognizant, all predominantly software export companies. They replaced

NIIT, CMC and Mahindra BT. Small wonder then that compared to previous years,

Top20 members' exports raced ahead by 32%, as against the software exports

growth rate of around 18% (excluding BPO). Again for the Top20, exports also saw

an increase in share to 55% up from the earlier 52%.

In terms of vendors, HP ruled the roost in the domestic market with revenues

exceeding Rs 3,000 crore, and was the top player in the system space with a

total revenue of Rs 2,040 crore. In terms of hardware, Samsung was a distant

second with revenues of Rs 1,400 crore, though, obviously, the top player in the

peripheral space. On the software side, no prizes for guessing the number one

player: TCS continued to dominate the software space with total revenue of Rs

4,500 crore.

How did they do it?



While domestic market growth was certainly good news, better news was that

the top tier distributors had all bounced back. In terms of companies, it is

interesting to note that the top three distributors all bounced back to good

growth. While Tech Pacific and Ingram posted growth in the 20% plus spectrum,

Redington showed a slow down. But this was not because the company did not do

well, but because of the removal, from total revenues, of revenues from the

telecom business. Today distributors are trying to play a dual role, integrating

the persona of market maker with their traditional supply chain function. For

example, Tech Pacific handled market development, channel management and brand

management in the B, C and D class cities for EzeeBee, HCL's desktop, and saw

good success.

Not just the distributors, most other Top 20 players also registered double

digit growth figures. HCL Infosystems was the only company left out, with a 10%

growth rate; however, include its mobile business of nearly Rs 2,500 crore, and

the growth rate zooms up considerably.

For the domestic focused Top 20 players, the mantra was very clear: move

beyond the metros. While this has been happening for quite some time now, the

last fiscal saw very active market movement by the players, with the channel

players taking the lead. For example, Redington appointed over 350 new partners

along with increased staff at smaller locations. To improve its reach, Intel

launched special workshops for children and parents in several up-country towns

like Jaipur, Bhopal, and Pune.

Verticals



As expected, the BFSI and IT/Telecom verticals, which together held about

50% of the domestic market, ensured that the Top 20 players continued to grow.

No wonder then, that most of the domestic players have special focus groups to

cater to these verticals. In terms of absolute numbers, the DQ Top20 survey

estimates that the Top 20 players' revenues from IT/Telecom jumped 88% to Rs

4,700 crore. Interestingly, in terms of absolute numbers, the Top 20 also saw

action from the SOHO segment, which jumped by 25%. Also interesting was the

action in the manufacturing segment. For example, in the Intel based servers,

the manufacturing share was around 21%, while in the non-Intel space,

manufacturing had a 24% market share.

Talk about manufacturing, and you can't ignore the lone Indian hardware

exporter, Moser Baer, which continued to do well. While it lost out on its

chance to notch a hat trick for being among the fastest growing companies for

the third year running, it did well with a 45% growth rate. Celetronix (formerly

Celetron) very nearly jumped back into the Top 20 league, based on a stupendous

performance with a 132% growth rate, climbing 17 places in rank. Given this

display, we can safely expect the company to not miss the bus to a Top 20

ranking the next time round.

However, before we move on to the analysis of the Top 20 players, we should

list the few changes we have made this year. Do not be surprised if you fail to

find any BPO companies in the Top 200 listing, for we have decided to exclude

the BPO revenues of IT companies. Given the increasing importance of BPO and the

different nature of this business, DQ felt that it must be treated separately.

We will be carrying a separate BPO ranking in DQ Vol. 4, in August 2004. The

impact of this change has certainly been felt across the rankings: Wipro's

revenue has been scaled down by Rs 437 crore, while Infosys' revenues do not

reflect Progeon's business. Second, we decided to remove from IT companies'

revenues all business from selling telecom products. If we were to include the

telecom business, HCL Infosystems' would shoot up by Rs 2,500 crore, while

distributors like Ingram would see their revenue jump by Rs 267 crore. We will

let our sister publication Voice&Data handle the same.

That's the brief story of the Top 20 companies for FY 2003-04.

Yograj Varma in New Delhi