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IT Services Firms to Stay on Strong Growth Path in 2015: Analysts

Improving economic scenario in the US, enhanced IT spending by banks and large deals are expected to help Indian IT services firms post strong growth, similar to the pace seen last year, analysts said.
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IT Services Firms to Stay on Strong Growth Path in 2015: Analysts

New Delhi: Improving economic scenario in the US, enhanced IT spending by banks and large deals are expected to help Indian IT services firms post strong growth, similar to the pace seen last year, analysts said.

Besides, new business models, emergence of disruptive technologies, new buyer segments in the emerging markets and good governance will help India retain its position in the global IT/ITeS market.

"Ongoing trends in technology upgrades for infrastructure (as well as applications) such as data centre modernisation and virtualisation and emerging areas such as artificial intelligence, automation, IoT, collaboration and design technology will drive the market in future," PwC India technology leader Sandeep Ladda told PTI.



The new government and its technology-centric initiatives in different areas such as infrastructure development, revised National e-Governance Plan (NeGP), 'Digital India' campaign and development of 'smart cities' has boosted the prospects of the IT/ITeS players in 2014, he added.

For IT/ITeS, disruption drove digital transformation and focus was enhanced on SMAC technologies, Mr Ladda said.

"In the coming year, newer business models, the emergence of more disruptive technologies, new buyer segments in the emerging markets and good governance will help India retain its position in the global IT/ITeS market," he added.

BPO services provider, Aegis's global CEO, Sandip Sen, said growth of multichannel and SMAC-led (social, mobility, analytics and cloud) BPO services continue to weigh on the industry as a whole.

"Traditional BPM companies has driven tremendous efficiencies and cost reductions, the 2015 trend would be on prioritising and aligning them in the age of digitalisation," he added.

Fiscal year 2014-15 witnessed immense consolidation as revenue and margin pressures continue to drive service providers to expand and grow inorganically to achieve greater geographical presence, penetrate new verticals and better economies of scale, Mr Sen said.

Growing demand from emerging markets and an integrated service delivery models would lead to more alliances, partnerships, JVs and M&A, he added.

"At Aegis, during the last one year, we too focused on consolidating our competitive advantages. Aegis' expansion into Malaysia is aimed towards setting newer delivery hubs in the emerging markets, with the increasing levels of domain/ language capabilities and use of multichannel services."

According to a technology report by Kotak Institutional Equities, demand strengthened in select areas and weakened in some in 2014, and 2015 is expected to show similar trends.

"2015 will be similar to 2014, if not better, in terms of demand. Positives are an improving economic scenario in the US, expected recovery in IT spending in the banking vertical after the past two years were impacted by regulatory fines in the US; and large deals and continued market-share gains," the Kotak report said.

Negatives that could impact results, it added, include the decline of oil prices on energy and utilities (which could hit segments like manufacturing) and volatile demand in emerging markets.

For the quarter ended December 31, 2014, cross-currency headwinds could have an impact of 160-220 basis points besides the usual seasonal weakness, resulting in muted 0-1.2 per cent in US dollar revenue growth, it added.

Infosys, the country's second largest IT services firm, will announce its financial results for the quarter ended December 31, 2014 on January 9, followed by sectoral leader Tata Consultancy Services (January 15) and Wipro (January 16).

Traditionally, the October-December quarter is a weak period for IT companies as the number of working days is less compared to other quarters due to the holiday season at the client locations in the US and Europe.

The US and Europe are key markets, accounting for close to 80 per cent of the export revenues of the over $100 billion Indian IT services industry.

TCS has already said it expects its third-quarter revenue to be "in line with seasonal trends" as holidays and furloughs impact some of its key businesses.



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