By most counts, 2008 was a bad year for IT companies, mostly due to the credit-induced economic crisis in the US, their biggest technology market.
As we ring in the new year, ET spoke to IT company officials, analysts and industry experts to get a sense of the trends to watch out for next year in IT services, on the demand and the supply side.
Geography: India offers a spring of hope
While company officials and analysts say much of the business would continue to happen out of the US, they also see an up swell of demand in Asia Pacific and India.
For example, Cognizant, which derives a major portion of its revenue from North America, has been making investments in the last 12 to 18 months specifically in Japan, Australia and India to build its leadership team and sales engines. The company's president and managing director R Chandrasekaran said this would be the additional growth engines in the coming years.
At the same time, HCL Technologies, which is seeing more growth happening out of Continental Europe and Scandinavian countries, said it would pitch itself as an integrated service provider (infrastructure and application to gain a pie of the domestic Indian market. Apart from government contracts worth millions of dollars, IT companies also see more action in the retail and FMCG space.
Service offerings - IT Infrastructure services and BPO
Traditionally, application, development and maintenance services have been the bread and butter of a majority of the software services providers in the country. While this area will continue to grow, the merging growth areas would be IT infrastructure services (IT IS), remote infrastructure management (RIM) and business process outsourcing (BPO). "A large number of infrastructure contracts would be off-shored.
Expect more discussions and debates on IT IS, RIM, BPO, virtualisation and unified communications as companies try to work efficiently across locations and lessen travel costs," said Frost & Sullivan ICT practice deputy director Kaustubh Dhavse.
Pricing- Bang for every buck
While there is consensus that contract prices will be renegotiated, there is no clarity yet on whether there would rack-rate cuts or reduction on a project-by-project basis. Gartner India's principal research analyst Diptarup Chakraborti said, "Rack rates look difficult to sustain at least in the short run and price negotiations even in existing contracts is likely to happen. Both old and new clients pressure is likely. Every client will seek maximum bang for his buck."
At the same time, Dipen Shah, vice-president, private client group- research, Kotak Securities said that this would happen more in the case of small-cap companies who would be open to lower price points to save volumes.
Vendor consolidation- More offshoring
For months now, Indian IT companies have been saying that the consolidation happening in America's BFSI space, would result in more work transferred here, as banks look to save costs by moving operations low-cost destinations offshore. Some companies have been lucky to be a vendor of the acquirer and the acquired entity, thereby getting more business from the merged entity.
"In a few instances in recent large M&A situations in the banking industry, we has found ourselves in the position of being a very substantive provider to both the acquirer and the acquired entity. During the 3rd quarter (July-September), we began working on post merger integration work with a major BFSI client of ours who has recently completed significant M&A activity," Chandrasekaran said.
Similarly, Infosys found itself on the safe side since it was servicing Lehman Brothers and Bank of America. Polaris, too, retained its Bear Stearns business, because it was already servicing Bear Stearns' acquirer JP Morgan Chase.
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