The Hindu Business Line : 2 TCS clients postpone projects in current quarter on US worries

Tata Consultancy Services (TCS) has said that two of its top 10 clients for IT outsourcing have postponed specific engagements that were to get under way in the current quarter. This development is a fall-out of the uncertain economic environment in the US, say analysts.

The company has not quantified the impact of the delay on its financials. The same two clients are ramping-up off-shoring activities with TCS in other areas, and hence, the impact at this point is not clear, Mr N. Chandrasekaran, TCS Chief Operating Officer, said on Wednesday.

On a trailing 12-month basis, the top 10 clients contributed about 29.7 per cent to TCS’ overall revenues.

Though the company refused to divulge names, IT analysts believe that both customers are in the banking and financial services space (BFSI). However, industry men do not see TCS taking a major hit on its bottom line.

It is the incremental IT spend that is being delayed, and hence, existing engagements will not be affected, said an analyst with a city-based brokerage firm.

Like most Indian IT vendors, TCS earns more than 50 per cent of its revenues from the US. Companies in the US (especially those in the BFSI space) have been reeling under the sub-prime crisis and a recession in the economy, prompting them to delay decisions related to outsourcing.

Separately, TCS expects to clock revenues of Rs 2,000 crore ($500 million) over five years from its new strategic business unit formed to serve the technology needs of small and medium enterprises.

The new unit will offer ‘IT-as-a-Service’ with flexible pricing options such as a monthly subscription model, said Mr Venguswamy Ramaswamy, TCS Global Head-Small and Medium Business. The new SBU will go live with 10 customers by April.

TCS intends to initially focus on the domestic market for this offering before expanding it to select overseas markets.

The TCS scrip was up 2.48 per cent to close at Rs 874.7 on the BSE on Wednesday.