Indian IT suppliers are facing the toughest slowdown in business
in their decade-long history.
But in interviews with Computer Weekly, senior executives at
India's two biggest IT suppliers revealed an appetite for growth
during the economic stagnation.
Tata
Consultancy Services (TCS) and
Infosys have been on the
world stage for about 10 years and have so far reported nothing
less than double-digit growth.
They have seen the dotcom boom and a recession, but nothing like
the current slowdown. The Y2K crisis at the end of the 1990s helped
these companies win major contracts and establish themselves as
global players.
Single-digit growth
But despite the recession, they still expect to grow, albeit in
single digits. Both companies say they are flexible enough to react
to the slowdown and are changing their strategies to ensure they
continue to prosper.
In contrast to some of their western counterparts, such as IBM
and HP, neither firm is slashing jobs in response to the
slowdown.
And although each company is worth billions of pounds, like
every Indian outsourcer they have gained only a couple of percent
of the potential business available.
"This year is going to be tough. We are used to growing at
double digits. Even during the last recession in 2001 we were
growing at 20%," says BG Srinivas, UK head at Infosys.
Meanwhile, TCS's head of global communications, Pradipta Bagchi,
says the company grew 23% last year but expects only single-digit
growth this year.
Building business strength
Both companies have identified strategies that will not only see
them through the recession, but will enable them to emerge from it
stronger. Some of their western counterparts could be storing up
difficulties in the future by cutting costs too much.
Bagchi says that TCS has advantages over competitors, including
its skills with the latest technologies and a highly motivated,
skilled and mobile workforce.
"India is cheaper, there is no doubt, but price is not the only
reason that customers choose it," he says.
TCS is India's biggest IT service provider. It is not recoiling
into its shell amid recession. Rather, it is targeting growth in
previously untapped areas.
Bagchi says the company is currently selling its services as
packages to appeal to cash-strapped customers. "Customers are
looking for integrated solutions such as IT, infrastructure, BPO
and testing services from one supplier. Over one-third of the deals
we won last year were for two services or more."
Most of TCS's big customers are based in Europe and the US,
where businesses are cutting costs heavily, he says. As a result,
Bagchi feels the company has a great opportunity to grow in other
parts of the world. Brazil, Russia, India and China, known as the
BRIC countries, are
developing fast and offer good business opportunities to IT
suppliers, while western Europe and the US stagnate.
TCS is also planning to profit from the global financial
services
sector.
Its acquisition of Citibank's captive BPO unit in India has
opened up new business. In contrast to the traditional recessionary
reflexes of cutting jobs and closing units, TCS paid £300m for the
Citi unit and gained an extra 13,000 employees.
"This gave us the skills and experience to fully service banks,"
says Bagchi.
He says as well as retaining the business processing
responsibility for Citi, it has already picked up new banking
customers.
Srinivas at Infosys also sees the banking sector as an
opportunity to grow. He says the company's core banking software
known as Finacle, which is basically an ERP system for banks, has
been taken up by tier-two banks in Europe. Banks are trying to
replace legacy systems because their current systems are not
flexible enough to react to new business models and they are not
compatible with new financial services regulations.
Staffing flexibility
Perhaps the greatest advantage that Infosys, TCS and other
Indian companies have over their western counterparts is the
ability to react to market conditions through a highly flexible
workforce.
About 30% of Infosys' staff are known as
"bench workers", which means they work full-time when a project
is on but are retained even when there is no work.
"When the bench are not working on a project, they are doing
things such as building new platforms and developing intellectual
property for Infosys," says Srinivas.
This will help the company move into new markets quickly and
ensures the business does not suffer through under-investment in
the long term, he says.
"The current market is challenging for all of us, but we think
we will weather it better than most and come out stronger because
this is the time we are investing in our employees, our business
and building business models for the future," says Srinivas.
While western IT outsourcing service providers such as
IBM and
HP are slashing jobs to meet tough cost-cutting initiatives,
India's big players are investing in employees. It is only a matter
of time before Indian suppliers which grew because they offered
customers low-cost services will overtake western competitors
through competitive advantages such as flexibility, ambition and
employee commitment.