India News
Search Web Directory
 India News  
News Home
Lack of investments in new tech may crimp TCS growth
Posted on 6th January 2016
Bengaluru: It’s time chief executive officer and managing director Natarajan Chandrasekaran sheds the invented-here approach at Tata Consultancy Services Ltd (TCS), India’s largest software services company.

For the first time since TCS went public in 2004, its annual growth will be less than or at best on par with Accenture Plc., which is double the size of the Mumbai-based company.

Accenture’s aggressive acquisition streak (a little over $1 billion spent last year) in buying boutique design firms and analytics and cloud computing companies contributed significantly to its overall growth.

Analysts estimate TCS to report at-best 6% dollar revenue growth in the financial year ending March. Client-specific challenges, a negative cross-currency impact and macroeconomic uncertainty means TCS will likely see tepid 0.3% sequential growth in the third quarter, and 0.5% growth in the current quarter (See table).

TCS, which ended with $16.5 billion in revenue last year, has stubbornly shied away from making any acquisitions, as the management believes it can build new technologies in-house.

A spokeswoman for TCS declined to offer a comment as the company is in the quiet period ahead of declaring its third-quarter earnings on 12 January.

Accenture, which follows a September-August fiscal year, reported a 6% increase in revenue in the year ended August 2016. However, Accenture’s 15 acquisitions accounted for 2 percentage points of overall 10.5% constant currency growth. Constant currency eliminates the effect of currency movements.

In the current year, Accenture is expected by analysts to record 5% growth.

Considering TCS reported 15% growth in 2014-15, and 7.1% growth last year, a projected 6% increase in the current financial year underlines the biggest concerns analysts have on the future of India’s $150 billion outsourcing industry: growth is slowing because of not enough investments in disruptive technologies.

“We think that ACN (Accenture) has the best in class M&A (merger and acquisition) strategy within IT Services, which has helped drive digital revenue growth,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a note detailing the digital capabilities, last year. “Over the past few years, ACN has continually completed smaller deals that have either supported one of its industry verticals or provided new IP (intellectual property) for its New/digital strategy. While none of the acquisitions have been meaningful contributors to revenue growth by themselves, we think the collective sum has helped.”

Newer technologies, like data analytics and cloud computing, along with a strong consultancy practice, are the growth drivers for technology outsourcing vendors as customers across industries are spending less on traditional outsourcing work like application maintenance.

Worryingly, it is not TCS alone which is struggling for growth. India’s second-largest IT firm, Infosys Ltd, despite early signs of a turnaround under Vishal Sikka, will grow at-best 7.4% in the current year, while Wipro Ltd, which reported 7.1% growth in 2014-15, is expected to grow at-best 4.9% in the current year.

A few Indian technology firms concede that they were lagging behind in making investments in newer technologies.

“There is no doubt that Accenture leads,” said a senior executive at Wipro, who declined to be named as the company is in a quiet period ahead of its third-quarter earnings announcement on 25 January. “But there is enough and more opportunity in this space. We bought Appirio. So eventually the companies which make enough investments in these (digital) technologies should be able to grow faster.”

Wipro spent $500 million to buy Appirio, a US-based cloud services firm, in October.

Although digital remains a fuzzy word for now, growth in cloud computing or analytics or security offerings at home-grown companies lags that of Accenture.

Accenture claims its “New” offerings, which include digital, cloud computing and security-related solutions, accounted for 40% or $13.15 billion in revenue.

The new solution offerings reported over 30% growth in the year ended August last year. During the July-September period last year, TCS’s digital offerings grew 24% from the year-ago period to $704.2 million, or 16.1% of its quarterly $4.37 billion in revenue.

Hearteningly for home-grown technology firms like TCS, higher profitability is one reason which should assuage concerns for now. TCS’s 26% operating margin at the end of September period is far higher than Accenture’s 14.6% profitability at the end of August. This higher profitability offers Indian firms to offer price discounts in commoditized outsourcing deals, and enough cash to spend on acquisitions.

Related Companies: TATA Consultancy Services ( TCS )   

Other Latest News
 
The All India Muslim Personal Law Board (AIMPLB) on Monday, filed an affidavit in the Supreme Court in the Triple Talaq matter.

In its affidavit, AIMPLB said that it would issue an advisory requesting individuals who perform the nikah (marriage) to follow the following steps.


 
China today said there is no change in its stance on admission of non-NPT states into the Nuclear Suppliers Group (NSG), marring India s chances of entering the 48-member elite club at its crucial meeting next month.

China's support is crucial for India as new membership in the NSG is guided by the consensus principle. "China's position on the non-NPT members participation in the NSG has not changed,"


 
The Swedish premium carmaker Volvo Cars is aiming to double its marketshare in premium segment by 2020 from the current close to 5 percent share.

While the Indian premium market is still relatively small, it is forecast to grow rapidly in coming years. In 2016, Volvo sold over 1,400 cars in India, an increase of 24 per cent compared to 2015. Year-on-year sales growth in the first four months of 2017 amounted to more than 35 per cent.


 
Maruti Suzuki India's hatchback Swift dethroned sibling Alto as the best selling car model in April this year in the domestic market.

The company also maintained its tight grip on the Indian passenger vehicles market with seven of its models in the top 10 best selling models with the remaining three spots taken by rival Hyundai Motor India Ltd (HMIL).


 
MUMBAI: The rupee strengthened by 15 paise to 64.49 per dollar in early trade on selling of the US dollar by banks and exporters. Stock markets opened on a firm note which supported the rupee in early trade, dealers said.

However, the US dollar's strength against major global currencies overseas capped the rupee's gain, they added. The rupee had closed with gains of 20 paise at 64.64 a dollar at the Interbank Foreign Exchange market on Friday.


» Post a FREE Classified Advertisement
Inviting Real Estate Agents, Job Placements Agents, Educational Institutes, Software Service Providers, Real Estate Builders, Marriage Bureaus, Travel Agents, Restaurant Owners, Health & Fitness Centers and other Local Businesses to Post a FREE Classified Advertisement on IndiaCatalog.com Classifieds Website.
Jobs in India India Real Estate Automobiles Matrimonials Beauty & Fitness

Add a comment for Lack of investments in new tech may crimp TCS growth
Please only use this form to enter comments on the above company. All comments are reviewed before they are displayed on the web site. Not all comments may be displayed. Check back with us to see if your comments have been displayed.
If you want us to email the comments posted by users, please Subscribe by email
Name*
Comments*
Security Code*
 

Be the first person to write a business review for Lack of investments in new tech may crimp TCS growth

Most Read News

FDI inflows rose 9% to record $43.5 billion in fiscal year 2016-17

Modi govt pumped Rs 16,800 crore into bleeding Air India

PNB mulling new strategy to cut time to clear JLF decision

Mukesh Ambani tops Forbes' list of Global Game Changers with Jio

Maruti launches the lighter, efficient Dzire. Starting price Rs 5.45 lakh

More India News

India Resource Center
» Free India Classifieds
Introducing IndiaCatalog Free Classifieds. Post your free classified ads. Inviting Real Estate Agents, Travel Agents, Job Placement Agents and others to post their advertisements for free.
» Global Web Directory
Web directory listing of Global companies. Send enquiries to international companies.
» India Yellow Pages
Yellow Pages for Mumbai, Delhi, Bangalore, Chennai, Kolkota, Hyderabad, Pune and more Indian cites.
» Logistics Directory
Find supply chain management consultants, freight forwarders, trucking companies in India.
» Photo Gallery
This page provides you with links to images of India displaying Celebrities Photos,Automobiles Photos,latest Movies Photos,Sports Photos,Photos of Bollywood Stars and many more.
» Agriculture Directory
Find Fresh Vegitables, Fruits, Basmati Rice, Meat, Poultry and Seafood producers in India.
» Real Estate in India
Real Estate directory of India. Find agents, builders and suppliers.
» Gems & Jewellery
Find jewellery, gems and diamond merchants in India.
IndiaCatalog.com
  India Web Directory
Business Profiles
Automotive Directory
IT/ITES/BPO Directory
Hotel Directory
Health Directory
Business Directory
Gems & Jewellery
Education Directory
Real Estate Directory
Agriculture Directory
Logistics Directory
Yellow Pages
NRI Guide
Photo Galleries
Global Web Directory
*** FREE India Classifieds
Safety Tips For Classifieds
Order Premium Listings
Submit a Site
Business Reviews
Home
About us
Link to us
Advertise
Contact us
Google Search Keywords: India Catalog, IndiaCatalog, India Web Directory, India Free Classifieds
    © 1999 - 2017 IndiaCatalog.com
    All Rights Reserved
Privacy Statement    
    © 1999 - 2017 IndiaCatalog.com
    All Rights Reserved
Privacy Statement