Delayed remote working approvals hit IT sector performance in Q42 min read . Updated: 04 May 2020, 10:22 AM IST
- TCS noted that two-thirds of the revenue impact in Q4 was due to supply challenges coupled by lag in client approvals
- IT companies expect some of these concerns to last through Q1 of fiscal 2021 as the lockdown is yet to be lifted completely
MUMBAI: The inability of clients to clear work-from-home mandates for offshore employees was one of the biggest reasons for revenues of Indian information technology (IT) companies taking a hit in January-March, firms noted while announcing their earnings for the quarter.
IT services model is built around providing secure services from offshore data centres largely based out of India. While the cost arbitrage model has been evolving for some time, the basic premise has been constant. With the Indian government, as in case of many other countries, implementing a nationwide lockdown to prevent the spread of covid-19, this model was severely crippled.
“Getting remote working permissions from clients across Europe and Australia-New Zealand regions that have stringent data protection laws caused delays in transition to work from home," noted Tech Mahindra chief executive CP Gurnani during the post-earnings call last week.
With the implementation of the General Data Protection Regulation in Europe, scrutiny on movement and processing of customer data has increased drastically even for data that is processed on-site by these companies. IT companies expect some of these concerns to last through Q1 of fiscal 2021 as the lockdown is yet to be lifted completely.
The larger impact was across segments such as business processing services and banking and financial services (BFS).
Tata Consultancy Services noted that two-thirds of the revenue impact in Q4 was due to supply challenges coupled by lag in client approvals.
"It is one thing to give them (employees) the facilities to connect to their clients but the approvals also matter and all that contributed to a supply side impact. The BFS side, surprisingly took a lot more time to enable this remote working because they were concerned about regulatory and security concerns," said N Ganapathy Subramaniam, COO, TCS, during an interaction with Mint.
Foe clients, the chief concern is that while massive investments by tech companies in offshore data centres make them extremely secure, the same can’t be said about home internet connection.
According to research firm IDC, on the security front, investments on Endpoint Security Software and Network Security Software will see an increasing trend with growth in 2020 expected to be in excess of 6% globally. Many enterprises in developed economies such as in North America and Europe have already built capacities around enabling virtual workspaces, video conferencing, and data analytics. This has been primarily due to traditionally more flexibility provided by employers to their employees.
“However, enterprises in the Asia Pacific including Japan are, relatively speaking, focused more on building capacity to support virtual workspaces, remote learning/training, and video conferencing. Technologies such as remote/VPN access, home WiFi and collaboration applications are the main technology areas of demand since the beginning of the COVID-19 outbreak," said Vinay Gupta, research director, IT Spending Guides, Customer Insights & Analysis, IDC, in response to recent queries.