Wipro and TCS results – what do they say about 2009 ?
Wipro and TCS both had their earning release today. No surprises there – both of these firms have been caught in the financial storm, have shown tepid growth if any and a cautious outlook. Interestingly TCS seemed more confident of their current and future growth relative to Wipro. Where Wipro management was talking about potential delays in projects with clients, slowdown in some verticals and focus on transformation deals, infrastructure, TCS confidently talked about no cancellation in financial services projects a new win in financial services with a large client and get this prices coming in higher for new contracts!
TCS had an interesting comment on Citibank backoffice acquisition. They have been hammered by the analyst community on doing a bad deal with Citibank. TCS believes that they have acquired a great domain expertise and will be able to leverage their domain expertise with other clients. How that happens is yet to be seen!
Wipro talks a lot about going ‘transformation’ which I still believe these firms are going to struggle with and will put them right in the bulls eye for Accenture, IBM’s of the world. Wipro is also talking about going to other markets – focusing on India, Middle east, focusing on growth verticals like Manufacturing, Retail ( not sure if retail is a growth sector for 2009!) and going transformation.
TCS seems to leverage it’s relationship with their acquiring banks and sees some work coming down the chain in integration activities for these banks. It does not seem to have picked up but something they hope they can leverage with existing clients.
On an hiring front TCS again seemed more confident of their hiring outlook and that they will hire all the people they have committed to and talked about sticking to their hiring targets for next year.
Wipro was a bit more cautious and in fact talked about a staggered and just in time hire.
What does this all mean for the industry ? I don’t believe these results give a fair assessment of the entire industry but do talk to the larger vendors in India and how 2009 may turn out for these firms.
A number of the larger vendors in India will continue to maintain aggressive cost containment measures, extend hiring of new and experience hires and continue to look at other geographies and non – ADM related activities.
The growth story for the next few quarters is primarily a survival story. If the markets take a turn for the worst history shows that self preservation, focus on local economies become prominent the realities could become harder for globalized firms, building a domestic market presence is a good idea! For these larger firms they are pulling all triggers to avoid the layoff of employees but again with the market uncertainty growing and global recession around the bend, 2009 has the potential to be a brutal year. The larger firms will survive but will assume a different form and shape on the other side. The growth story for the near and mid term future is gone for now. For the smaller , niche firms the realities could be much harsher.
The vendors are all trying to put a brave front but the realities will create only a handful of winners in a large crowded space. TCS and Wipro do have the potential to be the handful of survivors!
