BackIndian IT firms bank on Europe for growth
TCS, Infosys, HCL report higher revenue from Europe than from their largest market US in the March quarter
Premium(Abhijit Bhatlekar/ Mint)
Mumbai: Large and mid-size Indian information technology (IT) companies earned more revenue in the March quarter from Europe, their biggest market after the US, as clients in the continent farmed out more work to reduce costs.
They are also set to maintain growth on the back of added revenue from recent acquisitions in Europe. Tata Consultacny Services Ltd (TCS), India’s largest software exporter, on 9 April said it has acquired French IT services company Alti SA. Its closest rival Infosys Ltd acquired Switzerland-based management consulting firm Lodestone Holdings AG in September.
TCS’ European revenue grew 2.5% in the quarter ended 31 March compared with the preceding three months, while revenue from the US increased by only 1.4%. For the year ended March, Europe’s contribution to its revenue rose to 26.6% from 25.3% a year ago.
“This quarter, continental Europe has done very well. Europe is a focus area both for inorganic and organic growth," said N. Chandrasekaran, TCS managing director and chief executive officer when announcing the company’s results on 17 April. “We have been looking at Germany, France and these kinds of markets. We are happy we have found the right asset, Alti. I hope the revenues will start kicking in from Q2 (July-September) onwards."
In Infosys’ case, for the year ended March, Europe’s contribution to revenue increased to 23.1% from 21.9% in the previous year.
“We have also seen a significant uplift with acquisition of Lodestone, particularly in Germany and Switzerland," said B.G. Srinivas, board member and head, Europe, at Infosys.
In the March quarter, the company’s revenue in Europe grew 5.7% from the preceding quarter while North American revenue grew a mere 0.1% in constant currency terms. “We continue to invest in the big markets—Germany, France and the UK," said Srinivas.
For HCL Technologies Ltd, too, European revenue grew 6.3% from the trailing quarter while revenue from the US rose 3.6%.
Total IT spending in Europe, the Middle East and Africa will reach $1.154 trillion in 2013, a 1.4% increase from 2012, according to a 5 November report by IT research firm Gartner Inc.
“Despite the ongoing economic malaise, Gartner sees pockets of growth in IT in Europe, mainly driven by devices and software. Big data (analysis of the voluminous data that companies churn out annually) will also change the landscape of IT, creating new jobs," said the report.
Analysts say the increased focus on Europe is at least partly because of the fact that the US market for IT services has matured and the country is tightening its immigration laws, making it difficult for software service firms to do more business there.
“For Indian IT companies, Europe offers growth as the US market is now restructuring and the marketshare that Indian providers have got themselves in the US is already fairly significant," said Sid Pai, president, Asia Pacific, at research and advisory services firm Information Services Group Inc. “Then there are visa issues in the US. From a macro-economic perspective too, there is little bit more certainty now on the European debt crisis and what the bailout package will look like."
For mid-cap IT services firm Hexaware Technologies Ltd, European revenue grew 15% compared with the preceding quarter, while the Americas business declined by 2%.
“Clearly, the worst is over for Europe, and it is gradually improving," said Atul Nishar, founder and chairman of Hexaware Technologies. “We have three to four more large deals in the pipeline. Europe has grown well this quarter (ended 31 March)."
Other companies have signed similar deals. On 14 March, Infosys said it has been selected by the BMW Group as its global partner for infrastructure management services. TCS announced a six-year, multimillion deal on 25 March with Norway Post.
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