The country's top software companies are slowly reducing their dependency on the US and Europe for revenue.

Globally, the two markets are the biggest spenders on information technology.

The companies have started to focus on emerging markets where demand for IT services is likely to pick up .

Falling US revenue

In the last three years, they have seen revenue from the US declining year-on-year. It has been quite significant for Wipro, while it was marginal for Infosys and Tata Consultancy Services. Though the percentage may look small, the value could be huge, said an industry source.

It was a similar case with Europe for Tata Consultancy Services and Infosys while Wipro improved its exposure in Europe, according to data provided by the companies.

The top three have increased revenue from other geographies such as West Asia, South East Asia, Japan, India and Africa. Incidentally, research analyst firm Garner has said emerging markets will generate $1.22 trillion in IT spending in 2012, representing more than 31 per cent of the worldwide total.

“Indian heritage firms will seek to expand in new geographies. This is a stated long-term objective and is a natural evolution for most of them,” said Mr Siddharth A. Pai, Partner, Global Resourcing & India Operations, Information Services Group.

Dependency on traditional markets has been declining, and this is a conscious effort taken by the top companies.

They have realised that any financial or regulatory changes has the potential to hurt their business, said Mr Arup Roy, Principal Research Analyst at Gartner. Emerging markets have their own challenges. For instance, these markets are not mature as the Americas or Europe. The buying pattern of client is different. There is also the language barrier, he said.

Rollercoaster ride

“It has been a satisfying close to a year that saw tremendous global economic uncertainty. We went through worries about the US economy, imminent sovereign defaults in Europe and a rollercoaster ride on currency but still delivered a full year revenue growth much higher than the industry and a steady operating margin,” Mr S. Mahalingam, Chief Financial Officer, TCS, told analysts while discussing the company's fourth quarter financial results. The macroeconomic environment in the US is fairly robust, Mr Ashok Vemuri, Head of Americas, Infosys, recently told analysts.

“We are concerned about the volatility and the uncertainty that is there, globally and the implications it has for the US market. We also realise that this is an election year in the US and, therefore, there is accompanying rhetoric especially towards the business model that service companies use,” he said.

According to Mr B.G. Srinivas, Head of Europe, Infosys, the macroeconomic situation in Europe is still daunting and will continue to be a slow in decision making. The challenges are still there and there is no easy solution to the current challenges.

>raja@thehindu.co.in

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