There was a time TCS, Infosys and Wipro routinely outperformed market expectations, ran up highly impressive top and bottom line figures and leaped past forecasts with ‘disgusting’ consistency. Since 2008, global economic realities underwent a sea change and Indian IT’s fortunes got submerged in the process. It never really got out of the woods, though it offered glimmers of hope in 2010. There is a feeling—perpetrated by a section of the IT analysts community as well as the media—that all is over for companies like Infosys and Wipro. Every quarter, the attack on these top tier IT firms intensifies as though the companies have failed miserably and are about to go belly up. There is also this tendency to see TCS in a totally different light, even when there are clear shortcomings. This penchant of painting the sector in black and white looks like a lazy attempt. This needs some re-examination.
The attack is especially severe on Infosys—once regarded as the beacon of India’s software success story—on two accounts. Its dormant $3.7 billion cash pile and its clouded near-term visibility have become pet projects for critics. There is no denying that Infosys has underperformed in the last two years or so, with TCS consistently overpowering it in all parameters. Infosys never had to deal with a situation of having to consistently compromise on its revenue growth forecasts, but that’s a reality now and in the first quarter it had to nearly halve its guidance. Wipro, too, has offered only a muted forecast and together they paint a gloomy picture. TCS is not a part of this picture, simply because it does not give out any guidance.
Just because Infosys’s and Wipro’s numbers are below expectations, it does not necessarily mean that those of TCS have been impressive. Sure, it has done far better than its Bangalore-based rivals, but there are chinks in its armour as well. Sequentially, TCS’s revenues grew by only 3% to $2.73 billion. In the previous quarter, it had grown even slower. At the current growth rate, its revenues will grow only 12% at the end of the year. This is only par for the course. But TCS looks good because Infosys is sliding down the pole as though someone has slapped good bit of grease on it. Infosys posted a sequential revenue drop of 1.1% in the June quarter, which is only marginally better than its