Indian outsourcers leaning on new growth strategies

Vanilla Indian IT services firms are carving out niches to bolster their balance sheets under pressure from increasingly crowded traditional outsourcing markets.

In an interview with ZDNet, Sundararaman Viswanathan, engagement manager at Bangalore-based consulting firm Zinnov, said that IT services companies fiercely competing for the shrinking application development and maintenance service revenues have developed new growth strategies.

He pointed to HCL's 60 percent profit jump in the first three months of 2013 as validation of the company's focus to providing infrastructure services.

Meanwhile Infosys and Wipro, whose fourth quarter profits grew modestly or even shrunk slightly, are committed to high value platform development and business application services, respectively.

Conversely, TCS, which logged the biggest profit this quarter at US$663 million, continues to do "anything and everything", he noted.

"There are no winners or losers in this reporting season," Viswanathan said. "In some cases they deliberately don't go after a certain deal because sometimes they're just looking to build capacity in a particular field."

For example Infosys may not want to pick up an infrastructure deal because it feels its energies and efforts are better focused in another direction, according to the analyst.

The quarterly numbers tell each company's story.

During the quarter ending March 31 2013, HCL generated 29 percent of its revenue from infrastructure services, including remote infrastructure management, and supporting networks and desktops.

In FY13, Wipro's business application services division produced 31 percent of the company income--the highest of any business unit.

While application development and maintenance (ADM) was Infosys's biggest earner, this was closely followed by "consulting, package implementation, and others," which occupied 31.4 percent of overall revenues. This work includes lucrative SAP and Oracle ERP implementations. contested by the likes of Accenture and IBM.

For the year ending March 31, ADM constituted 42.8 percent of TCS revenues. The next biggest service areas--enterprise solutions, BPO, and infrastructure services--all had percentage shares in the teens.

While they have clearly laid out their strengths, Viswanathan said Indian organizations would have to clarify their weaknesses.

"For example, HCL has a highly concentrated revenue stream, so it will have to provide more clarity about its plans in other areas. Overall this diversity is good for the industry," said Viswanathan.