Last year, Indian IT market, missed its revenue forecast owing to the global economic crisis. Last time it was in 2004, that the market faced a similar situation when global IT market was melting. Apart from the delayed recovery of the economic downturn, there are many other issues that are causing concerns for the IT players in India. An industry which is largely dependent on the economy and spending power of US and European countries is affected by the slow growth in these regions. Also, the tightening policies of the western companies on their IT spending are causing much worry for the IT/ITES service providers in India.
The IT companies in India are now being pressurized by their clients to provide the services at a lower cost that delivers high value for their business in a very short span of time. The new trend has triggered the IT providers in India to change the way they do business. TCS was the first in list to adopt a new business model to withstand in the ever changing market. In 2007, they initiated a new concept called platform based BPO where the services are ‘templatised’ and some process are leveraged across other sectors. For example, some process in publishing is similar to internet publishing and so they don’t need to develop applications separately for all. By adopting this model, TCS were able to win million dollar contacts in life insurance and finance verticals.
Wipro is concentrating on new strategy that will position them as consultant and Technology Company rather being looked as only technology providers. On the other hand, Infosys is trying to increase their revenue from their products and services. They expect 30% revenue from products.
The need for the revision in their business structure came post the economic crisis. Before the global turmoil, the IT companies had the privilege to choose the outsourcing projects they wanted, and the deals were usually big. But in the post crisis era, there is increasing stress on the clients to cut costs and deliver high business value. This has prompted the clients to rework on their outsourcing projects and make the deal cycle small. Also, it is seen that many mid-sized companies have achieved growth and are providing services at very low cost.
Inorder to counter the strategies of clients to spend less in IT, many companies are trying new business models that will allow them to explore new geographic locations. Many companies have already extended their services to Middle-East and Latin America. Companies have also started bundling their IT services, support and BPO to offer an integrated package of services to their clients.
IT being one of the fastest growing industries in India and greatest contributor to economic growth is always under scrutiny by analysts. Industry players and analysts are eagerly waiting for the next financial performance of IT companies to be released to analyze if these strategies have really paid them any benefits.