46) IT Companies Seek Succour at Home

The earnings of Indian IT companies in rupee terms are dwindling with every upward movement of the currency. The domestic currency has risen by 11.6 per cent this year to touch a nine-year high today.

The earnings of Indian IT companies in rupee terms are dwindling with every upward movement of the currency. The domestic currency has risen by 11.6 per cent this year to touch a nine-year high today.

Moreover, with the global IT services players such as IBM and HP cannibalizing the home turf by winning multi-million dollar deals, the Indian IT companies are taking a serious look at the domestic market.

The Indian domestic outsourcing market is estimated to be around $2.2 billion, if one considers only deal sizes above $50 million.

Hedging alone is not enough. Hence, the domestic business is a viable proposition, said Sudin Apte, senior analyst and country head, India, Forrester Research.

Large MNCs such as IBM not shy away from picking up work that only gives them 5-10 per cent margins?

MNCs have an expertise in multiple verticals and emerging markets, while the Indian IT companies are experienced primarily in the North American markets, reasons Apte.

The scene is changing gradually, though. The Mumbai-based IT services provider Tata Consultancy Services (TCS) is a strong case in point as 9.4 per cent of its revenues (excluding CMC figures) in 2006-07 came from India.

Infosys has raised its revenue share from India in the first quarter of the current financial year, from 1.6 per cent to 1.8 per cent ($928 million). The company is now banking on Finacle to increase its pie in the Indian market. The Finacle Core Banking product enjoys 70 per cent market share among the leading banks in India.

While the domestic business accounted for a little over 2 per cent in end-March, 2007, we expect it to account for nearly 10 per cent in this financial year. We see the BFSI and telecom sectors driving the growth, said CEO and MD, Ananda Mukerji. The company recently won a large contract from Hutchison.

With the signing of a number of multi-million dollar deals last year, the domestic IT industry has come of age. The renewed interest in the domestic industry is a result of those deals. But the industry is still in its infancy, with growth rates lower than that of the export-based industry, said S Sabyasachi, senior director, neoIT.

However, noted that most of the major domestic deals had been clinched by service providers which offer a range of services from hardware infrastructure to data centres and software services. The Indian IT companies seem to be taking the cue.