Information Technology

August 25, 2006
IT majors project rising growth graph

Rajendra Prabhu

NEW DELHI -- The entire IT industry that grew by 36.3 percent in 2005-06 is all set to grow even better during the FY07, according to Q1 results and projections by leading companies. What is more, IT industry is proving to be the big employment generator with headcounts going up by over 15,000 in Q1 alone and more recruitment on the line.

Tata Consultancy Services (TCS), the topmost IT services company, was in the lead with a profit after tax of Rs. 796.69 crores for the quarter ending 30 June 2006 against Rs.578.86 crores in the same quarter last year. Its revenue was Rs. 3465.90 crores against Rs. 2276.32 crores in Q1 05-06.

S. Ramadorai, CEO and MD, TCS, promised continued management focus on driving “sustainable, robust growth.”

“Q1 has been marked by strong growth in volumes coupled with increasing traction for our new growth engines like BPO and consulting. Our global work delivery model has been validated by customers who are increasingly leveraging these centers effectively to take advantage of our bouquet of full services on offer,” he said.

Wipro

Results for Q1 were “Quite satisfying. We enhanced our strategic investments to sustain long-term growth even as we continued solid execution leading to improvements in operation performance. Our global IT services business continued to witness broad-based growth, across verticals, geographies and service lines,” said Azim Premji, chairman, Wipro.

The company reported net profit of Rs. 619.1 crores against Rs. 404.9 crores in the same quarter previous year. Total income increased from Rs. 2035.2 crores to Rs. 3051.9 crores. According to Wipro chairman, the external environment remains buoyant. “We see offshoring at the center-stage of IT strategy of global corporations.”

On what makes the difference, Azim Premji said: “ In these exciting times, we are well-positioned to benefit from our diversified service portfolio and deep industry expertise. Looking ahead, for the quarter ending September, we expect revenue from our global IT services business to be approximately US $577 million.” (against US $539 million in Q1)

Infosys

The 49.2 percent increase in net profits in Q1 for Infosys Technologies, was the high point of the IT icon’s financial statement. Revenue Rs. 3015 crores (against Rs. 2071 for previous Q1), net profit Rs.794 crores (Rs. 532crores in previous Q1). As in the case of Wipro, Infosys has also raised the full year revenue forecast to 40.2 to 40.7 percent as against earlier estimate of 28.7 to 30.7 percent.

The higher profit was mainly due to a volume growth across multiple verticals, aided by improved pricing and a depreciating rupee. “Robust growth and declining rupee” were two factors, for the performance, said CEO Nandan Nilekani. He is also president and managing director of the company.

Following retirement of founder-chairman N. R. Narayana Murthy, management changes effective 21 August 2006. Murthy would now be non-executive chairman and chief mentor, S. Gopalakrishnan, COO and deputy managing director would become president, COO and joint managing director, Nilekani would be as now CEO, president and managing director.

Satyam

What enhances Satyam’s growth potential is a bouquet of achievements that chairman B. Ramalinga Raju defined while presenting the Q1 results: “Increase in number of service offerings, arising out of enhanced domain and technology understanding that makes us more relevant and applicable to a broader cross-section of our customer organisations.” These achievements impact “the demonstration of the ability to create business value much more innovatively.” And that in turn “will determine our future growth rates.”

Satyam has now a global presence. Recently, the company opened its 19 th development center. That is at Hartford, USA; another is to be opened at Budapest, Hungary. This is apart from the expansion underway of existing centers in India. Total income for Q1 was Rs. 771.50 crores, net profit Rs. 173.48 crores. The net rose by 43 percent. Revenue was up by 37.85 percent compared to same quarter previous year. As a result, company was able to report higher EPS at Rs. 5.48 than what it forecasted, Rs. 4.78.

The buoyant situation in the IT industry that all these results indicate, is not a flash in the pan. Over the last two years, the growth has been sustained and the Indian industry is conquering new geographies. More new clients are coming to it while retention of the old one is as high as 90 percent in most cases of the top companies. Even SMEs in this sector are doing well. And NASSCOM, the industry association, is providing special attention to the SME companies.

Despite occasional slip ups and data safety concerns, the reports from abroad reassure the industry that India continues to be preferred destination for the outsourcers in the US and elsewhere. But the industry is also recognising that the road ahead is getting tougher as the competition from other destinations gets tougher.

IT-ITeS sector now employs 1,287,000 people against 284,000 at the turn of the century. A million people added in six years. It is no longer a low wage trough. Wage rise in the IT sector has been very high according to Kelly Services salary guide 2006. Besides, competition for best personnel is creating lot of churn with frequent changes in higher management levels as well as at middle level.