And as was wont in the previous year, this was another year of consolidation. The industry—and its giants—matured and learnt to walk on pins and needles. Also, as organic routes of growth dried up somewhat—given the seething price undercutting and margin pressures—acquisitions and tieups were the order of the day. In the final tally, the giants of this year had strengthened their hold on the Indian IT industry—increasing their share in the overall pie to 29%, at Rs 21,975 crore, against last year’s Rs 16,000 crore (26%). The one marked difference this year—the absence of Satyam Computer in the Top 5 lineup,     which was pipped to the post by Infosys, which was not a single company this time around and qualified as a group, thanks to Progeon’s first full year of operations.

A mentino here of geographies. Much as the the top companies tried to increase their domestic revenues and spread out risk in international geographies—all aimed at shaving off the heavy reliance on the US (read the United States and Canada)—it continued to grow. As against 64% of revenues coming from the US, Indian IT ended up showing 67% of US-based revenues. This was as surprising as it was a revelation, given that most companies have been going all out to embrance other geographies, Europe and APAC in particular.

The Giants
As mentioned, the one change in the lineup was Infosys Technologies—which completed its first full year under new CEO Nandan M Nilekani.

In descending order then, the Giants of fiscal 2002-03 were—the Tatas, Wipro, HP India, HCL Group and Infosys Technologies. The Tatas, riding on another strong year by Tata Consultancy Services, were way ahead of the pack, even as most of there fortunes rested with flagship Tata Consultancy Services, which became the first Indian billion-dollar IT company during hte year.

The software biggies, as is normal now, led from the front. Despite the cautiousness Infosys displayed in revenue projections, it showed the highest growth (39%). The other software major, Wipro, followed at 28%. The others three groups grew at rates below the industry average of 19%—HP at 8%, the Tatas at 15% and HCL at 14%. Revenues from the Top 5 groups added up to Rs 21,975 crore, making up 29% of the Rs 74,787 IT industry—the same proportion as last year.

The share of the domestic component in the giants’ revenues dropped from 36% to 33%, while the share of exports grew from 64% to 67%. The Top 5 saw revenues from exports grow 25%, while the domestic side notched up 10% growth.

The Top Gun: The Tatas
The crown jewel in the Tata Group, TCS crossed $1 billion in revenues, even as other group companies pulled overall growth down. The Tata Group’s revenues from infotech ventures stood at Rs 6,281 crore in Year 2002-03, up 16% from 2001-02, to remain by far the largest IT group in the country. Four-fifths of the group’s revenues came from Tata Consultancy Services, which grew 19.5%, while the rest—a sprinkling of companies focussed on various niché and largely domestic services—pulled down growth. Apart from TCS’ continued efforts at ramping up global operations, and some large domestic projects bagged by CMC, group companies had a tough year. The much-hyped TCS IPO also didn’t happen—due to depressed stock market conditions fueled by US-Iraq tensions and the spread of SARS.

Wipro: Shopper’s day out
In the year of the toughest margin pressure ever, Wipro went on an acquisition spree. Sure, margins were squeezed beyond levels the company had imagined. Sales and marketing expenses went up drastically. Things seemed to be looking up around the end of the second quarter across all segments, but then they collapsed again. Services exports topline growth remained mostly stable, but the bottomline dipped drastically. In the domestic market, hardware sales grew after a really bad fiscal 2002 but had still not reached the levels of fiscal 2001.

The only bright spot was the contact center/BPO business at Wipro Spectramind. Wipro acquired a 25% stake in Raman Roy’s Spectramind in the first quarter and quickly ramped that up to 100%. Revenues tripled by year-end and despite initial cynicism, there appeared to be true synergies appearing between Spectramind and Wipro Tech—the group’s services export division.

Across all these three divisions that form part of Wipro Ltd, IT-related revenues grew at a healthy 27%, compared to a mere 8% the year before. That was the great news. The not-so-great news was that gross profits grew only 7%, compared to 12% last year. That is something the group has to watch out for.

HP India: Against All Odds
One year down, HP taught skeptics basic merger maths: 1+1=2... backed by consistent performance across every member of the group. HP as a group is a new entrant in the Top Five coterie. But HP’s acquisition, Compaq, was already in earlier at fourth place in 2000-01. Perhaps Hewlett-Packard India group’s #2 position for 2001-02 was a bit of an artifice—we had simply added up the total revenues of separate companies that were not really together through that year. Yet the merger had happened. Well, the settling down has happened, and one plus one has added up to two, even with some missing products and revenues. Though the group has dropped from second to third place, there’s 8% growth. Given that HP India by itself had shown a –13% drop the previous year, this is good going for the now 6,000-person strong group. India is one of the few countries where the merger has been this successful in the market (HP India accounts for 7-8% of HP’s Asia-Pacific revenues).

HCL: Reinvention
At the HCL Group, it was a year of transition, and a four-pronged strategy—BPO, HW infrastructure, engineering SW and apps. The result was stronger growth. With a finger in every pie—from hardware infrastructure to high-end R&D and software applications to BPO—there was a fair mix of wins and losses for this giant, resulting in the final tally of 14% growth.

So what is HCL today? HCL Infosystems (HCLI), the group’s hardware manufacturing, systems integration and distribution arm, as well as the country’s leading manufacturer of PCs with subsidiaries like HCL Infinet (ISP). HCL Perot is a 50:50 joint venture with Perot Systems Corporation and HCL Holdings Gmbh. HCLT has categorized its businesses under three heads—software services, IT-enabled services and networking services. The organic entity consists of HCLT (the core entity), while the inorganic head comprises joint ventures such as Deutsche Software, HCL Enterprise Solutions and HCLT Jones, among others. The IT-enabled services head consists of HCL E-Serve and HCL Tech NI. The networking services head consists of HCL Comnet.

Infosys: Beyond projections
Ever the cautious player, Infosys had slashed revenue growth projections from 37% to 18.5%, sending tremors through the industry. It then revised those projections to 33%. And finally beat even that estimate with a 39% growth rate. But it was also a time when profit margins got squeezed like never before. When, for the first time in many years, operating profits actually grew at a much slower rate than revenues.

In some ways, this year was in fact better for the group than FY ’02. At 39%, its topline grew faster than the year before and was by far the highest growth among the giants. Even among software exporters, its performance was well above that of its closest competitors, Tata Consultancy Services, which grew at just 15%, and Wipro Technologies, which grew at 28%. The company’s BPO subsidiary, Progeon, finally went off the ground last year.

TEAM DQ