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IT majors seek to hedge their risks

Indian software cos are hedging the revenue mix better, adding newer domain expertise, reports Venkatesh Ganesh.

india Updated: Nov 08, 2006 18:46 IST

IT majors are not banking on businesses from the US any longer. Infosys, TCS, Wipro and Satyam are looking at revenue spreads to hedge their risks.

While a major portion of the revenues still come from North America (including US), software majors are looking to outsource at least 50 per cent of their business from non-US markets like Europe and Asia.

For the fiscal ended March 31, 2006, while business from North America accounted for 65.58 per cent of total revenues of Infosys, the share of Europe stood at 32.59 per cent. Revenues from Europe and Asia stood at just 19.5 per cent in 2001-02.

Similarly, business from North America contributed 59.06 per cent of total TCS revenues for the fiscal ended March 31, 2006, European and Asia Pacific revenues were at 22.4 per cent. In 2002, Europe contributed 20.7 per cent to the company’s total revenues.

Similarly, for the year 2006, Europe and Asia contributed 36 per cent to Wipro’s overall revenues in the year 2006l, a 7 per cent increase when compared to 2001.

This growth in numbers reflects the trend of Indian companies hedging their geographical bets. Pradeep Mukherji, MD, Tholons said, “Since the slowdown in the US economy in 2001, Indian software companies have hedged their revenue mix better and have added newer domain expertise such as in auto, retail and others.”

N Chandrasekaran, global sales head, TCS says: “Then there are better margins and IT spending has increased from companies in Europe and Asia.”

According to Gartner, the expected IT spend in Europe is about $852.3 billion and in Asia $461.6 billion by 2009.

“The increased IT spends of companies from Europe and more offshoring work is helping Indian companies to have a diversified revenue mix,” says K Venkataramanan, director engineering and construction of L&T.

“Despite Infosys making losses in its China subsidiary, the company is focused on the Chinese market for achieving a diverse revenue mix,” says an analyst from Motilal Oswal.