IT Blues: Why are Indian infotech firms losing steam?


Bengaluru: A few months can make all the difference.

On 15 April, Infosys Ltd, which had clawed its way back to almost being the bellwether of the $150 billion Indian information technology (IT) services business that it once was, announced an upbeat forecast for 2016-17. It projected constant currency growth in revenue of between 11.5% and 13.5%, higher than Street expectations.

Three months later, India’s second largest software services company cut the forecast to between 10.5% and 12%, after a poor fiscal first quarter. Chief executive officer (CEO) Vishal Sikka said the disappointing 2.2% sequential dollar revenue increase to $2.5 billion in the June quarter was both unanticipated and unexpected.

It isn’t just Infosys. NASDAQ-listed Cognizant Technology Solutions Corp. expects to grow at-best 9.5% this year, compared with the 21% growth posted in calendar year 2015 (Cognizant follows the calendar year as its business year).

Indeed, analysts expect that none of India’s top-tier IT services companies will see double-digit growth in revenue. That means they will perform below the IT services industry lobby group Nasscom’s prediction of 10-12% growth for the entire IT outsourcing business in India (provided the group doesn’t lower its own estimates). The April-June numbers of the companies bear this out.

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