Indian IT exporters should quickly changing market

Expert commented on Indian IT companies business activities

Indian IT exporters will be left out in the cold if they do not quickly adapt to the changing market. Over the last 7-8 years, the global tech sector has been making the shift from traditional to cutting-edge technologies to keep pace with customer demands. But Indian tech companies haven’t kept pace and so now, since they do not have a track record for large transformational projects, big clients choose to go with market leaders such as Accenture.
Data from HfS Research shows that of all the 371 deals of the 70 large and mid-size IT companies that it tracked in 2015, 137 were digital deals and over half of it was clinched by global IT service providers, including IBM (45 deals) and Accenture (16). India-centric service providers — Cognizant (8), Infosys (5), TCS (4) and Wipro (4) — won only a few deals. This trend has remained the same in 2016 too, says Pareekh Jain, Research VP, at HfS. “I see nothing has changed in the last one year, IBM and Accenture continue to win most deals.”
A recent Nasscom report states that digital revenues contribute 14 per cent of the Indian IT industry’s overall revenue. To grow the digital business, Indian companies will have to look at inorganic expansion. All MNC digital majors have done it only through M&As. Accenture, awhich sees 40 per cent revenue contribution from digital, cloud and security services, made more than a dozen acquisitions in 2016. Of these, several were in the digital space — Karmarama (UK), OCTO Technology (Paris), Allen International (UK), MOBGEN (the Netherlands), IMJ Corporation (Japan), dgroup (Germany).
Cognizant, too, was on an acquisition spree last year, with four of its five deals being in the digital consultancy side — Adaptra (Sydney), Idea Couture, ReD Associates (49 per cent stake) and KBACE Technologies.
But looking back at India, there have hardly been any acquisitions by IT service companies. Though they are sitting on piles of cash, they have not been open to inorganic expansion. TCS, for instance, has made only three major acquisitions in the last 10 years — E-Serve International, Citi Bank’s BPO arm, in 2008, the Pune-based Computational Research Laboratories in 2012 and Alti, an enterprise solutions provider from France, in 2013. In the same period, Infosys made seven acquisitions — three of which happened after Vishal Sikka took over as CEO in 2014 — Panaya, automation provider, Skava, a digital solutions provider and Noah Consulting, an information service management provider. Wipro, HCL Technologies and Tech Mahindra too went in for some acquisitions. However, if we count only digital deals, the number is less. Digital acquisitions in the last five years were just Wipro’s acquisition of Appirio in 2016 — a SaaS (software as a service) provider for $500 million and Designit — a design company for $95 million in 2015, PowerObjects by HCL Technologies (provider of Microsoft Dynamics CRM, in 2015, for $46 million), and Skava by Infosys (for $120 million).