The Hindu Business Line : No respite in client loss for IT majors

IT software companies continue to lose a large chunk of clients compared to the new clients they add every quarter. Significantly, this trend, noticed for several quarters now, continues in an atmosphere of relief in the IT industry - relief that IT spending in the US is looking up.

Infosys, in the quarter ended December 2003, lost 20 clients compared to the 30 new ones that came on board. Wipro Technologies lost 19 to the 24 that were new clients.

HCL Technologies has done relatively better with the loss of 13 clients to the 37 that it added.

For two quarters running, HCL Tech has acquired more clients than its peers have.

For Wipro, after a few quarters of sizeable acquisitions, this has been a silent quarter.

Considering that the industry has been spending on sales and marketing in the recent past to over come the effects of the slowdown, is such a churn among clients healthy?

Interestingly, the industry does not consider this a cause for concern.

Mr Vivek Paul, Vice-Chairman, Wipro Ltd and CEO, Wipro Technologies, told newspersons immediately after announcing its latest quarter results: "New clients come in for a while, take a small pilot project, go out and come back later. That is common."

He also confirmed that Wipro Tech has been able to renegotiate pricing upwards with some existing clients. (It may be recalled that during the slowdown, there had been media reports that clients had insisted on downward renegotiation on prices.)

Most other software companies have indicated that upward modification of prices is difficult and that only new clients or new projects start at higher prices.

An analyst with a foreign brokerage in Mumbai said that instances of upward price modification for existing projects were rare.

He added that even if some companies were able to achieve it, "they might not highlight it since it is more an aberration than a rule".

For a company, active client numbers also go down when it turns down clients.

Lack of future business potential is one reason why a company does this.

Many among these are clients that come into a company through an acquisition.

Wipro, iGate and Cognizant Technology Solutions are examples of companies that have announced more than one acquisition in the recent past.

A spokesperson for Cognizant clarified that during the September and December quarters, the company retired 25 clients that came along with an acquisition.