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IT firms shift focus to smaller clients
By siliconindia
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Wednesday, 06 August 2008, 16:59 IST
Mumbai: As the revenue accruing from big clients has been declining due to the U.S. slowdown and the sub-prime crisis, Indian IT firms are now immensely pursuing smaller clients, reported Business Standard.
Revenue accruing from the top clients of the five leading IT firms including Tata Consultancy Services (TCS), Infosys Technologies, Wipro Technologies, Satyam Computer Services and HCL Technologies dropped by anywhere between 0.2 percent and 4 percent over the last two quarters.
Since a majority of the clients are from the BFSI segment (which is bearing the brunt of the sub-prime crisis), they were not able to ramp up their budget. While the U.S. accounts for 40-60 percent of their revenues, the BFSI segment accounts for up to 40 percent of the revenues.
However, analysts note that the managements of the top-tier firms tend to focus their bandwidth on clients that can return higher revenues, and hence the focus almost always on Fortune 500-type firms. The trend that is gaining momentum among IT firms is catering to a wide dispersion of clients as well as service lines to tackle the recessionary phase.
N Chandrasekaran, COO and executive director, TCS, says: "If you look at our client metric over the last eight quarters, you will see a systematic ramp-up in our $1 million, $5 million and $10 million clients. When you grow in large numbers, you have to migrate to them also and in turn become a full service player. When we had a hit in the financial sector, we were able to cope due to the growth in this client segment."
A few quarters back, the Satyam management said that focus should be on mining smaller ($1-5 million) clients and engaging with these customers in their growth. In case of Satyam, dependency on top clients has been diminishing over a few quarters.
Ram Maynapati, president, Satyam Computer Systems, said, "Our top customer changes from quarter to quarter. Each quarter, we take revenue from every customer and put them in the descending quarter and see which customer has contributed the most."
Sudin Apte, senior analyst and country head (India), Forrester, believes that the large IT firms are consciously broadening their cross-selling opportunity within the smaller clients.
