Software sector in good health

By agencies   |   Monday, 29 August 2005, 07:00 Hrs
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CHENNAI: The quarter ended June 2005 saw Indian IT software companies add more clients and lose less than they normally do in a quarter. It also saw a healthy growth in the average revenues per client.

Most companies also saw the contribution from their top ten clients decreasing from June 2004 till now. Reducing dependence on top 10 clients is seen as healthy.

While Infosys continued to see not too many more client gains than client losses, smaller companies such as HCL Technologies and Cognizant Technology Solutions saw net client gains numbering more than those they saw last quarter

For March 2005, HCL gained 18 clients but lost 22. Cognizant got as many (30) as it lost. Interestingly, TCS signed up double the number of clients that Infosys did, but lost the same number as its competitor did (31) in the quarter.

During the quarter, Cognizant signed up a large pharmaceutical company as a new strategic client. Cognizant earmarks companies that have a potential to clock annual revenues between $5 million and $40 million in the long-term as strategic clients.

Cognizant's CEO, Lakshmi Narayanan, said while announcing results that the company is seeing good demand from clients in the area of enterprise resource planning, customer relationship management and BPO skills with which it targeted pharmaceutical companies.

Wipro Technologies and Satyam Computers continued to gain far more clients than they lost, compared to competitors. But that has not impacted the ability to get more revenues per client.

As with Infosys and Satyam, Wipro too was able to see a rise in revenues per client.
Wipro gave out client details for IT and BPO operations separately. Asked for a combined number, a spokesperson clarified that a combined number would include clients for whom Wipro offers IT as well as BPO services.

"There is some amount of cross-selling. So, when you combine client numbers for these two arms, there is bound to be some duplication."

Even on a larger base, Infosys saw the highest growth for revenues in rupees, year-on-year in average revenues per client. Cognizant, whose figures are in US dollars, saw higher growth, though on a smaller base.

All companies seen in the table (except for Mastek and HCL Tech) have seen a slump in percentage revenue contribution from top 10 clients between June 2004 and June 2005. As indicated earlier, this is healthy.

For most companies, revenues from other than the top 10 have grown faster than revenues from top ten clients while comparing figures of the same periods.

HCL Tech and Mastek have seen a reverse of that trend for the June quarter comparisons. HCL Tech's top ten client revenues grew 31.8 per cent, while the revenues from other clients grew at 21.4 per cent. For Mastek, those figures were 43.4 per cent and - 34.61 percent respectively. Revenues from the top ten clients, considered along with the number of $1-million clients and $5-million clients, give us an idea of the shape of the industry.

Industry watchers feel that if companies have been able to maintain or decrease percentage contribution from the top ten clients and the number of $1-million clients has grown, then it is a positive sign.

Even if the percentage contribution from the top ten clients has gone up (which signals more dependence on a lesser number of clients), and the number of $1-million clients has gone up, it can be considered positive as long as the average revenue per client has increased, industry watchers said.

TCS increased its $1-million clients from 166 to 219 between the June quarters. For Infosys, those figures rose from 141 to 172, while clients who contributed at least $5 million went up by 20 to 73. Significantly, HCL Technologies saw its June quarter numbers go up to 137 $1-million clients from 105 in June 2004, while Satyam's numbers went up from 96 to 134.

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