With the financial results of Tata Consultancy Services (TCS) and Infosys, the two big Indian IT giants (other than Wipro), out for the last quarter and the full year, analysts point out that TCS, the oldest Indian IT company seems to be better positioned with greater stability in its strategy and slightly ahead in terms of spending. In contrast, Infosys is still busy coping with internal changes.
"Both the companies - TCS and Infosys - have seen leadership changes but the results show that TCS is a little bit ahead of the curve and has not seen the kind of disruptions that Infosys has seen over the last few years. TCS has been able to stay focused in terms of strategy and identify its niche with the clients," said Sudin Apte, CEO & Research Director, Offshore Insights.
He further added, "One can argue that the pace of moving up in the value chain for TCS is slow but they have been able to identify spaces where they are getting volume and that is helping them to continuously engage with the clients and win deals."
"TCS is doing more spending in sales and marketing compared to Infosys. Also, automation is a much more stable story for TCS than the one with its ups and downs or flip-flops in the automation strategy at Infosys. All of these have been taking a toll on Infosys performance," Apte said.
Others expert also agree, in terms growth and investments, that TCS seems to be better positioned than Infosys. The difference between the two is marginal though every percent counts when the overall growth is low for the sector. But then, analysts also point out that one cannot ignore the fact that TCS, the largest IT company from India and one of its oldest, is growing faster at a significantly higher base.
Edelweiss in its report while pointing to the bigger message that the revenue acceleration is certain and that it is an important message for the sector, makes observations about the two companies and their quarterly numbers.
A report by the financial services company observed Infosys issuing a 6-8 percent constant currency revenue growth guidance in spite of it being just 5.8 percent in FY18 and TCS commenting positively on all segments and verticals.
"Even simple math suggests that without a meaningful contribution from BFSI and retail, which contributes 31.5 percent and 12.3 percent of TCS's revenues, the company clocked 11.7 percent USD growth and 7.2 percent constant currency growth. Hence, the chances of it touching double-digit growth are extremely high with a slight recovery in both these verticals which is anticipated by management as well," the Edelweiss report said.
They, of course, see this in the context that the "entire IT sector has strong tailwinds led by structural changes in the business mix with low growth legacy businesses losing proportion and getting replaced by high-growth digital businesses."
Others experts, referring to the BFSI segment and in terms of the outlook that the two companies have indicated for the next 12 months, said TCS sounds a bit more positive. This is based on talk of strong traction in Europe for the company and 'green-shoots' in the North American market, which had been slowing down till now.
The third important component of the results that many saw was in terms of the new investments required in the digital services space and the impact on margins. Some of the analysts think that TCS appears slightly ahead of the curve, having already made some investments and looking a bit more comfortable at protecting its margins.