The banking, financial services and insurance (BFSI) vertical, Indian IT?s driving force, is growing more creases on its forehead than the sector ever anticipated. At the end of the recently announced quarterly results, top tier services companies like TCS, Infosys, Wipro and HCL Technologies reported either a decline or flat growth in revenues from the BFSI sector, making it amply clear that the industry needs to reduce its dependence on the vertical.
Top four Indian IT services companies earn more than 25% of their revenues from this vertical, and in the case of TCS, it is as high as 42%. But with the segment giving disappointing returns for the past two quarters, IT majors are revisiting their strategies. The BFSI sector has been the bread-and-butter vertical for the $100-billion sector for the past two decades.
Sudin Apte, CEO, Offshore Insights, an outsourcing advisory, said the traditional competitive positioning of Indian IT companies with regard to the BFSI industry is slowly fading out. The only way forward is to provide solutions and services in emerging technologies such as cloud computing, software as a service and technology platforms, he said.
Wipro IT CEO TK Kurien told FE that depending too much on one vertical can prove counter-productive. Wipro, traditionally, has a low exposure to BFSI when compared with Infosys and TCS. Cognizant has the highest exposure to the vertical, with over 50% of its revenues coming from BFSI. Thus, any change in fortunes in the banking and insurance sectors in the US can upset the calculations. Out of the estimated $800-billion global IT services market, the contribution of BFSI sector is around 40-42%.
Infosys, which reported a 4.6% sequential decline in revenue from the financial services industry, is gearing up to meet the new challenge. Ashok Vemuri, head of Americas, Infosys, told FE that the company wants to take a different approach, focussing on areas such as systems integration, consulting and platform-based solutions which will all be about bringing value-added services. ?We have to learn how to sell and price it better?we are not good at it yet but we are trying.?
TCS CEO N Chandrasekaran during an interaction with analysts said discretionary spends by BFSI clients had slowed especially from the beginning of this calendar year. TCS too had a marginal dip in BFSI revenues last quarter.
Amneet Singh, country head, Everest Group said there has been some pressure on BFSI spends of late. The banking sector is looking at increasing technology adoption in areas such as distribution channels, social media, compliance and regulatory networks. ?Hence, I feel this is not a secular trend and we can expect a turnaround in the next two-three quarters.?
