Indian tech vendors to be 'selective' in domestic deals

By siliconindia   |   Wednesday, 27 February 2008, 12:39 Hrs
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Bangalore: In a bid to protect their overall profit margins, Indian software exporters such as Tata Consultancy Services (TCS), Infosys Technologies and Satyam Computer Services will be selective in choosing deals in the domestic market. Indian vendors, excluding TCS, Wipro and HCL Infosystems, have traditionally stayed away from domestic market and focused on the U.S. to take advantage of higher billing rates and lower costs of delivering services from India. But in recent quarters, vendors such as Infosys and Satyam have stepped up their focus on the Indian market where customers are increasing their investments on deploying technology to fight competition, offer better services and cut costs. "India is the world's fastest growing market for tech products and services. We are selective about the deals that we want to focus on," said S. Venkataramani, Head of the domestic business at TCS. The domestic business accounts for 10 percent of TCS? total revenues and the firm expects to increase it by two-three percentage points over the next 18 to 24 months. TCS has net profit margins of 18 to 20 perecent from its India business, while operating margins have been around 40percent. Technology researcher Gartner forecasts that the Indian IT services market will grow at a compounded annual rate of 23.2 percent to $10.7 billion (Rs42,907 crore) by 2011, up from $3.7 billion in 2006. Large contracts in India in the recent past include deals such as a $600 million contract between phone firm Vodafone Essar Ltd and the Indian unit of IBM. Following its peers, Satyam plans to stay focused on select services deals in the domestic market that contribute to profit margins. "Though the margins are not as lucrative as with the U.S. market, the domestic business helps in skill building initiatives and improving margins," said Virender Aggarwal, Director and Senior Vice-President at Satyam. India accounted for around 4 percent of Satyam?s global revenues of Rs2,195 crore for the December quarter.