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Indian IT firms spend more on marketing
By siliconindia
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Thursday, 13 November 2008, 23:47 IST
Chennai:In a tough economic situation, Indian software companies practice the strategy of spending more on sales and marketing to add more customers. Cognizant, by spending 8-9 percent more on marketing compared to the other major IT firms such as Infosys and Wipro, managed to add 182 clients in the last three quarters, while TCS had 138, Infosys 129, Wipro 107 and Satyam added only 99 clients, reported The Economic Times.
Cognizant has spent more on its sales, general and administrative (SGA) component, which is believed to be the reason behind acquiring more clients. The companies SGA comes in 23-24 percent range, which is almost 8-10 percent more investment compared to Wipro or Infosys. The big firms, of course did not make any large acquisition in this period, the bulk of the customer addition is organic. Indication is that others in the top five will improve spending in this segment. In a recent earnings call with analysts, Infosys officials said SGA investments is one of the levers it would use as its clients go through a period of indecision in the next few months.
Howeever, Satyam's CFO Srinivas Vadlamani said, "In nascent markets, the objective would be to invest in front end for customer acquisition while in mature markets, we would look to mine customers, especially when we have around 185 Fortune 500 customers. To achieve these objectives, investments would not only be made in front end sales and marketing to strengthen relationship management but also in brand."
"Normally higher selling and marketing expenses help in client acquisition. The lead-time in getting new clients for Indian IT companies has usually been six to nine months. However, in the current economic scenario, the results from these spends will take time to materialise," said Kotak Securities private client group-research Vice-President Dipen Shah.
Gartner India's principal research analyst Diptarup Chakraborti said, "The leaders in the industry might go for that kind of aggressive strategy but not the smaller firms."
