Indian IT firms are laughing all the way to the bank

Doubling of revenue share sets the cash tills ringing. Agility and adaptability against the pressure imposed by the second wave of the pandemic has illustrated their resilience and ensured growth.

India based IT companies have literally been laughing all the way to the bank. Several companies have literally doubled their revenue share from 13.9% in the 2011 fiscal to a mammoth 28% in the 2021 fiscal. At the same time, the share of foreign headquartered firms in India – namely Accenture, DXC, Atos, Capgemini and Cognizant) saw their grip loosening from 86% to 72% during the same period.

The revenues of foreign firms in India grew to $151.6 billion from around $148.8 billion, while their Indian counterparts registered a jump of $59.3 billion from $24.1 billion. The competition is, therefore, on in earnest.

Companies like TCS, HCL and Tech Mahindra more than doubled their performance to set the revenue tills ringing. Infosys also grew to 6.1% from 3.5%. The rise of the Indian IT firm is not a new phenomenon. They have been agile and adaptable while considering the tectonic shift from mainframes through client server to mobile applications and the cloud native era.

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Posting good report cards

Indian IT powerhouses like TCS, Infosys, HCL Technologies and Wipro post promising report cards in the first quarter (January-March 2021 period) and this was largely due to the growing tech adoption in the US, Europe and India. As a result of this many companies went on an aggressive hiring spree to ensure that they could keep up with the requirements of the market and also ramp up their own capabilities.

In another indication that the Indian economy is more than ready to post a fightback against the second wave of the pandemic, the country’s IT sector was poised to post solid fourth quarter numbers in five years on the back of strong investments by US and European companies in digital technologies.

The markets seem to corroborate this given that Tier 1 IT firms have been putting in some solid performances, week after week. Investors are hopeful that the sector, which began the 2020-21 financial year on a dull note could end the year positively. The work-from-home concept has obviously been one of the key drivers for this optimistic turnaround from the IT sector. The WFH method has led to an increasing application of technology across the IT value chain, not just in India but also in the West and across Europe.

Higher rate of digital tech consumption

India Global Business had earlier analysed the growth of the Indian IT industry last month attributing their progress to a higher rate of digital technology consumption in the West including domestic markets and the ability to win business due to a sharp rise in spending on IT platforms and their upgrades by many of the world’s leading users of their services, have come as a boon to India’s IT services majors. Even stragglers in technology adoption in these markets also jumped into the bandwagon, thus, increasing the size of the pie; this has contributed to a significant proportion of the additional revenues to the sector.

A report by leading Indian brokerage Edelweiss dated April 1 said: “The upward guidance revision by IT companies three quarters ago would be followed by upgrades in consensus forecasts for quarters to come.”

A litmus test looms

The next few months would prove to be the litmus test for the sector’s resilience as analysts are predicting a slump in the country’s economic growth brought about by the debilitating second wave of the pandemic.

While the GoI remains unmoved from its forecast that the economy will grow 10.5% in the fiscal year, that started on April 1, the State Bank of India (SBI), which is the country’s largest lender, has revised its outlook to 7.9% from 10.4%.

Against such predictions the Indian IT sector will feel the onus yet again to come up with a promising performance and provide a panacea to an economy which has been challenged by the pandemic.

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The demand for IT services is not expected to slacken and this will be matched by an equally high demand for professionals with advanced skill sets in and knowledge of critical technologies such as articificial intelligence, machine learning, data science & analytics, data engineering, data visualisation, network and information security (cybersecurity) and cloud computing.

As India Global Business had observed in April, this is also expected to hasten the pace of new technology adoption in the Indian IT sector and will help it scale up its capabilities and put it in a better position to move up the ladder to a higher level of technical competence.