Indian service provider growth drops by a third

Indian IT services firms suffered a dramatic fall in sales in 2012, but still far exceeded the average growth rate across the industry

Indian IT services firms suffered a dramatic fall in sales in 2012, compared with the previous year, but still far exceeded the average growth rate across the industry.

According to Gartner, the top five Indian suppliers’ revenues grew at an average of 13.3%, compared with 21.8% in 2011. The industry average growth was 2% in 2012, compared with 7% in 2011.

Cognizant achieved the highest growth among the top five, with a 20.1% increase in sales in 2012. This took it to number two in terms of total sales, knocking Infosys into third position. Tata Consultancy Services (TCS) was the best performer, with sales worth $10.9bn last year.

Arup Roy, research director at Gartner, said the Indian firms have been targeting large corporates with the intention of expanding what they sell to them once deals are won. 

“There is a strong focus on, and investments in, cloud, analytics, mobility, infrastructure and knowledge processes. India-based providers have become much more aggressive in infrastructure management because it offers them the potential to grow bottom-up within accounts,” said Roy.

He said revenue contribution from project-based and staff augmentation deals has continued to decline for the top five Indian-based providers. 

“The outsourcing service line component has steadily increased. They have also made significant strides in developing industry-specific BPO [business process outsourcing] services through acquisitions and/or organic growth. There is an increasing focus on integrated services play," said Roy.

According to ISG, between 2005 and 2008, western suppliers’ revenues grew at a 7% combined annual growth rate, compared with a rate of 32% for India-heritage providers. 

But since the recession began in 2008, western firms have seen annual revenue growth of 0.4%, while Indian firms' growth rate has halved, at 16%. ISG said this is the result of a maturing market.

Sid Pai, president at ISG Asia-Pacific, said things are changing and the India-based firms are reinventing themselves. "They are trying to cut off the link between bodies and revenues,” he said.

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