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With Q4 results round the corner, IT industry circles are buzzing with excitement: rumours of change of guard at Infosys are interspersed with expectations of neck-to-neck competition between rivals Wipro and Cognizant for the third place. Analysts, however, don't see any surprises in this quarter and are looking at the marathon rather than the sprint.
Mr Vikas Jain, Partner with the Everest Group, told Business Line , “Most of the players are on the growth path. They have recovered fully or partially from the recession. The CAGR of 30 per cent to 40 per cent that we saw in 2005 is a thing of the past, but big companies can't run fast and there is enough demand in offshoring.”
Mr Klaas Oskam, associate director, technology practice, Ernst & Young, agreed with him. “I don't think that there will be any major surprises. We can expect a decent quarter from major IT industry players. The IT services industry will do better than the BPO industry. And since there are going to be no surprises in Q4, I think that all eyes will be on the next financial year.” Mr Oskam felt that, since there was confidence in Europe and the US, FY12 would be positive on the demand front. “Of course, Q1 will be muted on the margins front because many IT companies are giving hikes in the range of 12 per cent to 15 per cent.”
While Mr Oskam did not want to discuss individual companies, Mr Jain said he did not wish to be drawn into the media's Cognizant Vs Wipro coverage.
. “The existing momentum of Cognizant is substantial and they have chosen to live with a lower margin target. They are more interested in capability building and in relationships. They have a lower EBITDA and they have a conscious strategy of not pushing it.” he noted.
Mr Jain said that Wipro's new boss, Mr TK Kurien, would not be able to make an impact immediately. “I don't think that he has had either the time or the bandwidth to change things. His plans will take time to fructify and there won't be any change on a quarter-on-quarter basis,” he said.
While analysts are not expecting any surprises in FY11, they are looking at FY12 guidance more keenly.
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