Chennai biggies unfazed by slowdown in Q1

CHENNAI: With most of the Chennai-based biggies clocking reasonably good
figures in the first quarter of the current fiscal, hysteria surrounding the US
slowdown affecting the bottomline of IT companies seems to have subsided to some
extent.

Software majors such as Cognizant Technology Solutions, Pentasoft
Technologies and Polaris Software Lab, have posted growth rates of 43 per cent,
36 per cent and 19 per cent respectively in Q1. But DSQ software, ranked 26
among IT companies by Dataquest in the year 2000, has recorded a decrease of 31
per cent for the AMJ-quarter. The company attributed its failure to move up the
growth chart completely to the downturn in the US. A pointer that not everyone
is able to surmount the downturn that easily.

Cognizant Technology Solutions (CTS) has been blazing up the revenue chart,
with its focus on retaining customers and applications management solutions,
which increased 66 per cent this quarter to account for 51 per cent of the
revenue mix. It had clocked a revenue of Rs 213.38 crore for Q1 as against Rs
149.46 crore for Q1 of 2000-2001. "Although billing rates for application
management are historically lower than the rates for e-Business development,
application management offers higher utilization and a higher offshore mix,
which allows us to maintain our margins at historical levels," explains,
CTS chief financial officer Gordon Coburn.

"Approximately 80 per cent of our second quarter revenue came from
customers who have utilized our services for more than a year," says
Coburn. CTS believes these assets would see it through the IT slowdown and help
it come up with financial performances in the same vein in the future also.

Polaris Software Lab, with its emphasis on Banking, Financial Services and
Insurance (BFSI) vertical, also continued its growth curve in Q1 registering
revenue of Rs 71.34 crore as against Rs 52.80 crore in Q1 of last fiscal. All
the business segments such as BFSI, Networking and

Communications, Transport, ERP/EIS had increased its contribution to the
total revenue this quarter. The BFSI segments leaped from 58 per cent last Q1 to
70.5 per cent this Q1. Polaris is now planning to strengthen its mainframe
competencies to help it provide end-to-end solutions to its BFSI clients.

What seems to have paid rich dividends for Polaris is its strategy of
broad-basing its business in various geographies to counter the US downturn. In
the Q1 of 2000, the US accounted for 69.25 percent of its revenue. But this
quarter, Europe, Asia-Pacific region and Middle East Asia has substantially
increased its stake slashing the US/ North America figures to 47.91 per cent.
Europe has scaled up to 21.20 per cent from 16 per cent last Q1 and Asia Pacific
and Middle East Asia to 22.4 per cent from 9.95 per cent. The US slowdown does
not seem to have deterred Polaris from its aim of becoming a Rs 1000 crore
turnover company by 2004.

Following the same strategy has been Pentasoft Technologies. It has grown by
19 per cent this quarter to clock Rs 155.45 crore as against Rs 131.30 crore for
Q1 of last fiscal. Interestingly, the contribution from its Business Software
division involving BFSI segments, logistics, ERP & CRM, and e-business
solutions have fallen from 72 per cent last Q1 to 45 per cent this quarter.
Meanwhile, its Engineering Services division and Education and Training division
have increased their stake from 20 per cent to 32 per cent and 8 per cent to 23
per cent respectively.

However, Pentasoft believes that its early entry and significant presence in
the new markets such as South East Asia, Middle East, Africa and Australia would
help it face the downturn and fetch itself success. This quarter, Asia Pacific,
Middle East and Africa (24 per cent and 21 per cent respectively) together
contributed more than North America (43 per cent) while UK and Europe (7 per
cent) and Australia (5 per cent) made up the rest.

So it seems the boogey of the US slowdown has stopped hovering over the
established companies for the time being. They are back to business with a
determination to take the downturn by the horn and continue with good financial
performances.