It's Not Infy Alone: TCS, Cognizant Too Joining the Downturn

Global Macroeconomic Environment

The U.S. government’s Act of bailing out its banks in the post-Lehman have so far saved the companies. But, when the crisis comes in which the U.S. government itself may require bail out, it will be a real disaster for the world economy.

The industries exposed to the U.S. consumer such as retail, airlines, autos, etc. will be badly affected.  And it is also believed that the companies that are more dependent on non-exportable industries within the U.S. would be hurt a lot more. Thus, there is no doubt the Indian IT giants are to face more critical days soon.

All through these difficult days the industry has grown in the country comparably well, keeping aside the performance given by the four large IT companies. And much of its credit goes to those deserving people who built the scalable enterprises as compared to others. It was like the industry producing the real leaders than vice-versa.

Whereas the industry didn’t seem to provide much to the four big companies that could make any significant changes for them in the crisis period.

Understanding of the Evolving Macroeconomic Environment

It is only TCS who has at least taken the leadership in geographical diversification but whether this was a conscious decision to guard against an unraveling U.S. economy is unknown.

Fortunately, this could be the right move. TCS’ recent outperformance has probably led to their greater onsite concentration. These strategies may be replicated by the others over time.

But there is major difference, one that cannot be easily replicated. While the Greece-style downturn in the U.S. economy is ready to impact all four in much the same way operationally, the ability to invest the cash balances appropriately would make the difference among these companies.