Monthly Archives: February 2012

Vertical Leadership Realignment among top Indian Service Providers

Indian tier-1 companies have shown good growth in second quarter of fiscal 2012. The combined sequential revenue growth for TCS, Infosys, Wipro & HCL is 4.5% with negligible growth in net profit. This can be attributed to salary increase, promotion and fresher’s joining the companies in the last quarter.

Cognizant had highest incremental revenue of US $ 116 million in the second quarter of FY 2012 followed by TCS with incremental revenue of US $ 113 million. Infosys and Wipro trails with incremental revenue of US$ 75 & US$ 64 million. A breakup of incremental vertical revenue compared to first quarter of FY 2012 is depicted in the table.

 

TCS

Infosys

Cognizant*

Wipro

HCL

BFSI

53.98

24.80

49.08

22.98

1.12

Manufacturing

&Hi   Tech

22.72

13.48

**

2.30

20.94

Telecom

-12.02

4.46

***

-5.44

-2.46

Retail

25.73

2.95

5.18

9.09

Energy&

Utilities

16.92

4.28

38.34

0.23

Healthcare   & Pharmaceuticals

8.40

17.57

29.63

0.64

0.08

*Cognizant vertical revenue distribution for 2010 is taken for calculations since the company does not provide vertical revenue break up on quarterly basis.

**Cognizant Manufacturing revenue is inclusive of retail revenues also so it has not been included for evaluation since a fair comparison will not be possible with other providers.

***Cognizant Telecom revenue is combination of multiple micro verticals so it has been excluded from evaluation.

Provider’s Retail vertical composition varies however major revenue contribution is from core retail. TCS classifies as Retail & Distribution, Wipro as Retail & Transportation, HCL as Retail & CPG and Infosys Retail is inclusive of CPG, Transportation & Logistics.

For TCS Hi-Tech and Manufacturing revenues has been combined while for other providers it is assumed that Manufacturing revenue is inclusive of Hi-Tech revenue

An analysis of provider’s vertical incremental revenue indicates that there is good growth across all verticals except telecom.  The top performing providers has shown robust growth in their strong verticals.

Banking Financial Services & Insurance (BFSI), a strong vertical for TCS and Cognizant the incremental revenue has been high for both the providers at US$ 53.98 and US$ 49.08 million.

Another strong vertical for TCS is Retail where the incremental revenue has been US$ 25 million even as Infosys has shown marginal revenue increase though the vertical is one of highest revenue contributor for the company.

Infosys is a leading provider in Manufacturing & Hi-Tech vertical however the growth is muted as compared to TCS and HCL who have performed better.

A bright spot for Wipro is its incremental revenue in Energy & Utilities where it is the leading provider while another strong vertical performer is TCS with equally good growth.

Once again Cognizant has achieved high incremental revenue of US$29.63 million in Healthcare & Pharmaceutical where it is the strongest provider even as Wipro another top provider in the vertical has shown flat growth.

TCS dominates the vertical leadership by leading in three verticals deriving highest revenue among all Indian providers. TCS leads in BFSI, Telecom & Retail and closely following Infosys in Manufacturing & Hi-Tech vertical. Wipro leads the Energy & Utilities while Cognizant leads in Healthcare & Life Sciences vertical with huge revenue difference with its closest rival.

By the end of third quarter, we can expect some rejig in the vertical leadership among Indian providers. There is possibility of TCS becoming leading provider in the Manufacturing & Hi-Tech vertical overtaking Infosys. TCS can move ahead of Wipro in Healthcare and Pharmaceutical to become the second leading provider following Cognizant if TCS maintains better growth rate.

The best course for Infosys and Wipro is to enhance competencies in their strong verticals and attempt to gain higher market share in those respective verticals. There is a need for focused approach in terms of geographical and vertical opportunities.

 

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