Swathi Moorthy Moneycontrol News
Infosys CEO Salil Parekh in a recent interview harped on the growing importance of digital services, and how the company plans to ramp up its digital capabilities both organically and inorganically.
What Parekh said was not anything new. What the interview demonstrated is the need to accelerate digital capabilities. Top IT companies have already woken up to the growing importance of digital, and are making significant investments in this space.
Digital revenues are growing significantly every year. On an average, revenues from digital now account for 25-30 percent of the total for most IT firms. At HCL Technologies, businesses that include digital and analytics, cloud native services and cyber security have crossed a revenue run rate of $1.5 billion. The company said that its digital revenues now account for about 29 percent of overall revenue in the third quarter ended December 2018.
Similarly, TCS' revenue from digital engagements comprised about 30.1 percent during the same, a growth of 52.7 percent YoY.
Even at Wipro, digital revenues now contribute 33.2 percent of overall revenues. Though Infosys did not reveal digital revenues in Q3 results, the company in an earnings call said digital revenues grew 33.1 percent YoY in constant currency terms.
There are two broad areas where the digitization movement is happening – The modernisation of IT systems and business transformation in digital. IT firms are employing digital strategies to cater to these two businesses.
Though companies are seeing success, analysts said that a few companies are faring better than their peers. Chirajeet Sengupta, Partner, Everest Group, said that companies which are faring better in the digitisation space are TCS and Accenture.
Elaborating on the digitisation space, Sengupta said: "TCS has historically been exceptionally good at doing IT modernisation. Now what is happening is as TCS matures its capabilities, they are trying to move aggressively in whole business transformation of digitalisation. They are having some strong initial success."
So what has worked well for TCS? According to Sengupta, one of the key factors are their clients' trust. The company has built innovation internally since a long time ago, and was the first to partner with worldwide network of startups.
“Those capabilities have matured and are driving some of the technology innovation. When it comes to digital, the ecosystem is important. Nobody can do it all alone. The whole point around building a network of partnerships and capabilities is something that is strategically very important. TCS has done it organically through partnerships," said Sengupta.
Though Cognizant (CTS) and Infosys has done these, the scale and intensity at which they have done some of those is not the same.
Another area is the investment. TCS, CTS and Infosys have made strategic investments. For instance CTS has acquired a lot of design and interactive agencies.
The investment strategy and investment profile of HCL has been very different. HCL, as a part of its Mode 3 strategy, is strictly focused on acquiring technology assets. HCL has acquired a lot of legacy technology, which the company aims to modernise and monetise. That in itself is going to be a challenging strategy to implement.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
