Focus on e-commerce to benefit from IT spending: Zensar

As the Presidential elections looms in the United States, the biggest market for the Indian IT services sector, the contentious issue of the H-1B visa is raising it ugly head again. But there is no immediate cause for concern though the IT industry is watchful of the  new visa reform Bill, Zensar Technology's vice CMD Ganesh Natrajan told CNBC-TV18. Natrjan said the trend in IT spending is going through a change wherein the share of e-commerce will go up and spending on traditional fields will come down. Zensar is making changes to its business model to stay ahead of the curve. "Our ecommerce business is doing extremely well and we are very optimistic of the quarters ahead," he said. Below is the verbatim transcript of Ganesh Natarajan’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: First a word on what is happening in the US, do you think there is some cause for concern in terms of the latest developments whether it is the visa issues or any other issues for Indian IT companies? A: We have to be watchful because obviously Senators Durbin and Gracely have been around for a long time, they have tried to implement this bill which is curtailing H1 and L1 for quite some time. My concern is not that it will get passed because comprehensive immigration is not something that is easily passed in the US. The concern clearly is that segments of this bill like what happened with the Security Bill could get kind of attached to something else. So, we have to be watchful and of course we have to ensure that there is adequate local employment and so I don’t think there is an immediate cause for concern but as I said it never hurts to be watchful. Ekta: One of your peers, Infosys suffered from quite a setback in terms of its stock performance recently because of the outlook in Q3 with regards to margins as well as maybe IT spending not being as robust as anticipated. What is happening in terms of large clients at this point in time in the US, are they genuinely cutting back and could we see further large spending coming now? A: You have to understand that the entire parameters of spending in IT have changed.  If you look at it over a longer period of time, you will find that what is today maybe 95 percent spending on traditional areas, 5 percent on digital and ecommerce and the expectation is that it will shift to maybe 65 percent traditional spending and 35 percent on digital and ecommerce. So, clearly the opportunity for all of us, today a company like Zensar, today we are touching 20 percent of our revenues coming from digital and commerce. So, I think that is the area that one has to focus on. There will be cannibalisation of traditional infrastructure management, applications business; there is tremendous automation in industry so there will be less people required. So, all-in-all there is a distinctive change in the business model. It doesn’t mean that there is dooms day for anybody. It just means that all of us running companies will have to be very watchful that we are ahead of the curve and making changes to our business model to suit the buying patterns of our customers. Anuj: For your company, last quarter was extremely good but this quarter is seasonally weak for the entire sector. You may not want to give specific numbers but if you could give us the broader outlook in terms of what kind of numbers we can expect from companies like Zensar? A: I don’t want to comment on this quarter for obvious reasons. As you rightly said, it is a seasonally weak quarter, customers will do cutbacks in terms of number of billing days, furloughs, etc. So, this quarter is always a bit of an aberration. However, overall, we have a solid deal pipeline not only in the traditional areas of applications and infrastructure but also in digital and commerce. Our ecommerce business is doing extremely well. In fact they have been growing at over 25 percent. So, I don’t see any reason to doubt that not only this year but the next couple of years are going to be fairly strong for Zensar and I think we are in the right places at the right time with the right plans. So, I am very optimistic.