In a seasonally strong quarter, margins (EBITDA) of top 3 IT exporters continued to be under stress as they try to strike a balance between ‘bread and butter’ outsourcing services and new areas like digital.

The first quarter, which generally tends to be one wherein IT exporters report strong numbers, is seeing a different trend. Margins of the big three have gone down in the range of 102–170 basis points (1.02–1.7 per cent) compared to January-March quarter, according to analysts BusinessLine spoke to.

“Margins are definitely under pressure in the industry, especially in the light of changing technology consumption trends,” says Rajeev Sawhney, President—Strategic Business at Mphasis. The $130-billion Indian IT industry, adept at maintaining enterprise applications of large financial institutions, and telecom companies amongst others do not find the same level of acceptance now. “The nature of the beast is different now. It is no longer about going after budgets to maintain IT systems but also ways to get wallet share in the absence of fresh budgets,” according to Sanjoy Sen, Doctoral Researcher, Aston Business School.

Companies have started to acknowledge this: Infosys CEO Vishal Sikka has repeatedly said that the traditional IT model is almost dead and hence the emphasis on re-skilling and getting in multi-faceted personnel instead of plain vanilla programmers. While this is a long-term objective, in the near term, companies have been focussing on growing volumes, dropping prices, to hold on to some of the existing clients.

Emerging technologies

Almost all of them have signalled intent to invest in these areas. Both Infosys and Wipro announced investments and acquisitions in start-up companies in the past few months.

At the earnings press conference, Sikka pointed out that Panaya (a company acquired three months ago) along with Infosys team has won 15 large initiatives in retail, manufacturing utilities and services segments.

“It is too early to label it a success but it is a good start,” says Shashi Bhusan, IT analyst at Prabhudas Lilladher.

Similarly, Wipro in the recent quarterly results announced investments in two start-ups, one of which has got the backing of tech titans like Mark Zuckerberg, and Jeff Bezos amongst others. TCS, with investments in digital, is also confident that it can beat Nasscom estimates of 12-14 per cent, with a strong deal pipeline.

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