The Hindu Business Line : `TCS, Infosys, Wipro way ahead of peers'

Bangalore March 14 The Indian IT services industry is seeing a massive polarisation as the gap between the top three vendors and the remaining firms continues to widen rapidly, according to IT research firm Forrester.

"Everything on offshore is not doing well," said Mr Sudin Apte, Senior Analyst and Country Head for Forrester in India. "While the top three firms — TCS, Infosys and Wipro — are growing well above industry average, over 500-odd firms are growing at or less than the industry average, while some of them struggle with revenue and profit growth. As a result, polarisation of Indian IT firms accelerates with every passing quarter," he added.

For the `billion dollar babies' — Cognizant, Satyam and HCL Technologies — whose revenues range between $1.2-1.5 billion, the next 18-24 months could prove to be the last window of opportunity to catch up with their larger peers, as the gap widens further, Mr Apte said.

Some of these `billion dollar babies' which clocked billion dollar revenues last year, have seen changes in management and strategies in the recent past and need to get their act together to keep pace with their larger peers, he added.

The top three firms, which accounted for about 26 per cent of the Indian export revenues in 2004, have increased their share to 41 per cent in the current year. Specialisation as key

Further, the small and medium firms are on shaky ground as their diminishing brands fail to attract talent, a dispersed client base prevents them from building domain skills, and a hand-to-mouth situation prevents devoting strategy to the future. As a result, they are unable to add clients on the same scale as that of larger peers.

Mr Apte felt that the SMEs need to specialise to tide over such a scenario or perish . "These companies need to get disciplined about specialities even if it means turning down work. Clients often push vendors to add capabilities, which may dilute the latter's focus," he said.

Further, as consolidation happens in the industry, clients working with Indian mid-size and small firms will mitigate risk, he said. Clients working with small vendors are concerned about the impact of a shakeout. Forrester has been advising its clients to prepare an exit strategy and on the need to keep a tab on the provider viability, their growth parameters among others, he said.

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