3 predictions on IT industry in a year of inflection points
In the past few days, Tata Consultancy Services (TCS), Infosys and Wipro, India's top three information technology service companies, have produced decent quarterly profit numbers. N Madhavan writes.india Updated: Jul 23, 2012 14:56 IST
In the past few days, Tata Consultancy Services (TCS), Infosys and Wipro, India's top three information technology service companies, have produced decent quarterly profit numbers.
And this is a good time to try and guess what is ahead in the industry that helped put India's economy on the world up after reforms. First, the US economy seems to be well on the path to recovery, while Europe-though it led to a sluggish forecast by Infosys -should also be out of the uncertainty zone by mid-year. However, as Wipro chairman Azim Premji said, the days of "hyper-growth" are over for the industry.
What, in the current context, could happen over the next year or so? Let me make three guesses this week, based on the signals and whispers one is getting from the industry.
Infosys may make a large acquisition:
The Bangalore-based software pioneer lost out on the Axon deal to HCL and has been showing some signs of regret. It is sitting on cash reserves of $3.7 billion (Rs 18,600 crore). While European markets are sluggish, that precisely could be the reason why it can get a cheaper valuations to make that big purchase.
Wipro will behave more like Infosys:
The company has had a rickety ride, with heads rolling over the past couple of years in the face of slow growth. The reason: the old-fashioned way of getting a reliable but staid work-force working at optimal costs is not yielding that much. New CEO TK Kurien has been making aggressive noises, while Premji's son Rishad (with a Boston Consulting background) is bound to raise his head in a strategic way. Put the two together, and you could see Wipro doing more of high-end consulting or hiring ambitious managers (not a traditional Wipro trait).
Mid-tier IT companies will consolidate:
iGate got Patni, while Tech Mahindra has all but formally swallowed Satyam. Given the end of hyper-growth, it might make more sense for managements of smaller IT companies to go for mergers or acquisitions before restless staff flee and bleed them.