FY17 growth for IT to be lower than FY16: Offshore Insights

IT companies could face significant headwinds in the coming year, and may struggle to match industry body NASSCOM's guidance of 10-12 percent growth, Sudin Apte, CEO & Research Director, Offshore Insights tells CNBC-TV18.The actual growth could be in the range of 9-10 percent, he says.Below is the verbatim transcript of Sudin Apte’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Reema: We know that it is lower on year and year basis 10-12 percent but do you believe that this number is also achievable? What would your own estimates be?A: This is inline with what we saw in our 400 plus client interactions. The market because of economic forces is quite weak and that is the reason why the growth expected in FY17 is less compared to what we are seeing now in FY16 which itself is under stress. Is that 10-12 percent achievable? Our data actually tells us that actual numbers for FY16 may be little lesser for a mounting economic pressures very different competitive landscape. The risk of point solution and ecosystem companies offer, enterprise resource planning (ERP) providers snatching some of the business from Indian IT companies there is some possibility that we again will be at just about 9 or 10 percent in terms of FY17 numbers. Nigel: If the top companies don’t report that 3 to around 3.50 percent revenue growth in this March quarter there is a risk that FY16 estimates would not be met?A: I feel that largecap at an average level possibly would be anywhere between 3 percent to 3.50 percent sequential growth. There will be better numbers in quarter (Q4) because it don’t have the challenges that we faced in quarter four like holiday season, furloughs etc. Also, from US client perspective as Budget start rolling into new fiscal year for a United States clients, generally there is a little bit of a uptake of a discretionary spend in quarter one of their Calendar which happens to be quarter four of Indian companies. I feel that quarter four would be relatively better compared to what we saw in December quarter.Reema: NASSCOM laid a lot of importance on digital, what would your view be on it?A: People to hype up their performance are lumping range of services including app integration or system integration work that they do along with say mobility or analytics. So, predicting that number, what is the share of that is little difficult. However, if you really focus on core digital which includes transformation, which includes emerging technology like mobility analytics, Cloud, software as a service (SaaS) etc and if you include internet of things (IoT) in that and if you just focus on these three components of digital then I think that component is very small. It is a fast growing possibly at 40-50 percent higher than the industry average growth.However, that percentage of business is small so to me really I think it is too much of a hype around digital. It services around digital which are doing bigger number really from SI and app integration type of work. Digital traction from client perspective is good. However, as I said earlier that percentage of work coming from digital is still very small.