The latest research report by Nomura raises concerns that though large Indian IT companies such as Infosys, TCS , Wipro , HCL Tech and Cognizant have retained their market share in the past twelve months , the pace at which they are gaining market share has progressively slowed down in the last four years compared to tech giant Accenture.
According to the report, in the last twelve months, Tier -1 IT services companies that includes TCS, Infosys, Cognizant, HCL Tech, Wipro and MNCs such as Accenture and CapGemini have added nearly $9 billion in incremental revenue. While the market share of the Tier -I companies saw 0 per cent growth, Accenture on the other hand saw its market share growing by 0.6 per cent. In the near-term, the scenario is unlikely to change, says the report. Despite strong deal wins, the year-on-year growth in Tier-I IT companies still remains similar to Accenture (Accenture's guidance of 8- 9 per cent growth). It means that there is no indication of outpacing the growth.
The other reason involves digital revenues. While digital revenues for large Indian IT companies have now crossed over 30 per cent of their overall revenues, it is still nearly half compared to 60 per cent as claimed by Accenture. This becomes critical as the sector is seeing incremental client spends coming in from areas around digital, cloud and security. However, on the brighter side, the Tier-I IT has been able to outpace growth compared to Accenture in the Banking, Financial Services and Insurance (BFSI ) space over the last one year. In the first quarter of FY19, the BFSI revenue growth for the IT sector hovered around 7- 9 per cent and around 18 per cent for Accenture. It stood at 5 per cent in Q1 of FY20 for the Indian Tier-I companies while for Accenture it fell into the negative territory of 2 per cent. In the coming days, sustenance of deal win momentum, concerns around weak macros, largely led by Brexit will hold key in defining the growth.
The report also indicates that management commentary of global IT companies such as Accenture, Cognizant, CapGemini and Epam have indicated macro concerns, which even Indian companies such as TCS, Wipro have alluded to. Infosys and HCL Tech have been an aberration where the companies have indicated better momentum driven by strong deal wins. However, the area of concerns for most global IT players remains around BFSI and manufacturing space. Apart from Epam, rest of the companies have indicated weakness largely led by clients that are large banks in the North America and Europe. For Accenture and Capgemini , manufacturing also remains a concern on the back of trade wars, macro concerns and softness in the auto sector.