IT companies need to take more risk, say experts

If Indian IT companies want to step up their growth over 25 per cent, they need to change their tack and take more risk, say experts.

"There are 10 to 15 deals up to $200 million in the pipeline," Pradeep Udhas, executive director (Technnology Advisory Services), KPMG India told Business Standard. While this is a positive development, the widening gap between the top players and tier II companies is alarming.

Explaining that the deal size is important, Ram Mynampati, president (commercial and healthcare), Satyam Computer Services, said: "The multi-million dollar contracts spanning 5 to 10 years will be limited to the tier I companies, outsourcing company would require an assurance that Indian partner would be around during the contract period."

Besides, even as the industry is garnering big deals, it has been observed that the Indian giants role is limited to application maintenance and the industry has a long way to go before it wins a complete end-to-end outsourcing deal.

Global MNCs like IBM have a 40,000 plus employee strength in India, Accenture's headcount is over 20,000 and they compete with domestic biggies for the same contracts.

Indian tier I companies like Infosys, TCS, Wipro need to take bigger risks.

Giving an analogy of the Japanese automotive industry where leading automotive manufacturers like Toyota and Hyundai set up production facilities in America and other markets including India to retain their leadership position, Sidharth Pai, Partner, TPI Inc said, "Indian IT companies need to do the same. The potential is there, but to grow to the next level, they need to take more risks."

The strategy to be adopted is, "to create on-shore facilities to take over the entire IT department of potential clients or lower their profitability on larger deals and maintain the cost advantage, as the delivery model for MNCs and tier I companies is the same."

Another feather in the industry's cap is the increasing confidence of IT sector as they are showing a deeper account penetration across their key clients. This can also be guaged from the fact that the offshoring component in deals is growing "from 15 to 16 per cent in 2003 to 40 per cent last year and 50 per cent currently," Pai pointed out.

However, "The landmark is to get an assured revenue component of 50 per cent or more at the start of the financial year," Pai stressed.

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