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Indian IT Companies Find it hard to get new clientsBy Dr arvind, Section Computer Gupshup
Indian information technology (IT) companies are struggling to add new cli ents amid a downturn in the US and Europe, from where they earn 80-95% of their revenues.
A review of last reported financial results shows that growth has come mainly from selling more services to existing clients rather than adding new ones. Indeed, all the top five Indian IT companies by revenue got between 93% and 99% of their total revenue from existing clients in the second quarter this fiscal.  India's second largest software company by revenue, Infosys Technologies Ltd, added 40 clients in the second quarter of the current fiscal down from 48 in the year-ago period. Rival Wipro Ltd added 28 clients compared with 59 in yearago quarter and Satyam Computer Services Ltd added 33 new clients in the second quarter slightly down from 37 in year-ago period. India's largest software services firm, Tata Consultancy Services Ltd (TCS), did manage to add 51 clients, the same as in the year-ago period while HCL Technologies Ltd was the sole exception, adding 29 clients in its latest quarter, up from 19. While the high percentage of repeat business suggests sticky customers, it also is a sign that expansion is becoming harder. Speaking to analysts after announcing second quarter results, Infosys COO S.D. Shibulal had said: "Our repeat business this quarter was 99% plus, which shows that we are able to mine our existing accounts. But, at the same time, it shows that we are not able to ramp up our new clients and that is something which we need to focus on." Said a TCS spokesperson: "Business from existing customers offers stability of revenues in a tough operating environment and long-term relationships help offer significant value to our existing customers as we come up with ideas to optimize business operations." Still, the company says, "it is also critical to increase our base of key customers simultaneously". Click on "Full Story" for more...
Satyam's chief financial officer Srinivas Vadlamani concedes that over-dependence on an existing client base is not ideal. Still, he says, "while the possibilities of downsizing of volumes by (existing) customers do exist because of the slowdown, there are (other) customers who are discussing projects which are transformational in nature".
All Indian IT companies say they are betting on winning more such transformational deals, where payment is tied to strategic results. The "nature of deals in the market has changed and we need to move from a business-as-usual approach to more of `transformation' approach", writes a Wipro spokesperson in an email. "With discretionary spending being cut, we believe that our growth will be fuelled by transformational deals." Market researcher IDC said in a November report that worldwide spending on IT would slow significantly in 2009 as a direct result of the crisis. IDC expects worldwide IT spending to grow 2.6% in 2008 from $1.37 trillion (Rs67.13 trillion), down from IDC's previous growth forecast of 5.9%. The US, from where the top five Indian IT companies get around 60% of their revenues, will be hit hardest, says IDC adding that in a best case scenario, IT spending in that country is expected to grow 0.9% in 2009, much lower than the 4.2% forecast in August. The worst-case scenario is for a decline in spending. IDC says at least $300 billion in industry revenues would be lost over the next four years, due to slower spending. Source: Live Mint, Nov-18-2008
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