IT Outsourcing India

Four of the top five Indian IT services vendors have now released their results for the latest quarter.That includes TCS, Infosys, Wipro and Satyam, leaving fourthranked HCL yet to report as it wraps up what is now its year end. Uncertainty about the economy, predominately in the strongest US and UK markets, has meant that these players have hit alltime lows in revenue growth and margins. This is except for Satyam, which managed to increase both measures thanks in part to its lower dependence on the US financial services sector and a string of acquisitions.

Ranked fourth largest of the Indian IT services firms, Satyams revenues are dwarfed by the likes of TCS, Infosys and Wipro, which each generate between USD500 million and USD1 billion more in revenues per quarter. But Satyams growth is still above 41 percent yearonyear in this quarter leading all the firms in this list. It is also the only firm apart from Infosys which managed to grow its operating margin albeit fractionally while others are falling backwards.

Satyams growth is only matched by Wipro, which technically gained a boost by consolidating its Indian IT services arm worth 10 percent of total business into its overall IT services revenues this year. This has helped reported services growth hit just over 41 percent yearonyear. But, for a more comparable figure, we reckon Wipros export IT services business grew anywhere between 20 percent and 25 percent. Thats dependent on the performance of its Indian arm, which is achieving spectacular growth and bounded ahead by 60 percent last year. Unfortunately for Wipro though, this consolidation of revenues resulted in a 0.3 percent drop in margins.

In line with Wipros export services growth, TCS and Infosys have also reported growth at 21 percent and 25 percent respectively. These darlings of the Indian export services market have had the biggest exposure to the credit crunch of all the Indian firms. To put it in perspective, this sector generates 36 percent of revenues for Infosys and 42 percent for TCS. The companies achieved growth of 43 percent TCS and 92 percent Infosys in the previous year, but this quarter both have seen this stall to 19 percent. While thats a significant drop, both are bolstered by growth in Europe, as well as in other sectors such as manufacturing and telecoms, which continue to do well.

With less than a third of its business focused on financial services, Satyam has gained from strong growth of 41 percent in the telecoms and media sector, and steady 20 percent growth in manufacturing. It has also seen 48 percent growth in Europe and AsiaPacific. Finally, the company continues to commit to its acquisition strategy. It paid USD75 million in the first six months of this year to pick up two specialist consulting firms in the US and Belgium, and an infrastructure services vendor in the UK. These firms should give Satyam further sales traction in these regions.

But Satyams business is not firing on all pistons. Its involvement in business process outsourcing is costing it, and questions are being raised about its relevance to the business. BPO revenues fell by 18 percent to USD7 million due to the loss of an animation services contract, and losses have almost trebled to USD4.7 million, dragging down overall margins. We believe BPO expertise is increasingly a crucial component of winning business with large global clients. And, as Wipro, Infosys and TCS have shown, a close combination of IT services and BPO work can generate new combined business opportunities. But just as crucial is the integration of BPO and IT services offerings, and at this stage it seems Satyam has yet to get that right.

This year will be a challenging one for all the Indian offshore outsourcers. They are being forced to shift their business focus towards new regions and sectors faster than expected thanks to the credit crunch. The longterm future remains bright for these players, but the current complications will put further strain on their business models and drive more competition in new markets outside the US financial services sector.

Source : http://www.offshoringtimes.com/