Will SMAC and digital aide Infosys, TCS and Wipro during tough times?

As global enterprises so far dependent on India for their IT services requirements re-think their IT outsourcing strategy and develop more and more solutions in-house, the decisions are likely to cast a dark shadow over the top IT services companies in the country.

According to research firm Gartner, global IT spending is expected to drop by 5.5 percent this year. Also amid concerns of a slowdown in China triggering a global meltdown, organizations are holding back on outsourcing deals.

Despite the nervous climate, the top outsourcing companies continue to invest in skills and technologies that will not only enable them to retain existing customers, but add more to their kitty.

For instance, Infosys, the second largest software services provider reported 5 percent increase in quarterly net profit, largely boosted by a surge in demand for IT outsourcing services from clients in the United States, its biggest market.

Infosys, which provides IT services to clients like Apple, Volkswagen and Wal-Mart Stores, made significant client additions this quarter, including six large deals, each greater than $50 million in total contract value. While a large number of deployments were still around application maintenance, some implementations reflected the new technologies Infosys is betting big on, namely SMAC and digital.

In a recent interview to the Economic Times, Paul D Ramsay, CIO, Lowe, said that the company is changing its strategy around third parties and vendors. The firm will work with fewer third-party vendors and partners who will focus on some niche activities.

He told ET that Lowe is planning to insource core capability, core functionality in global in-house center (GIC) in Bangalore and the US.

In effect, the decision will directly impact its ITeS services partners with whom the company has contracts worth approximately $1 billion every year.

Lowe's is not the sole company rethinking its outsourcing strategy. According to executives familiar with discussions, Indian firms' top outsourcing customers such as AIG, AstraZeneca and Deutsche Bank have also insourced some of their software development projects into their captive centres in India.

However experts say, the retaining clientele of the IT companies, which include Citigroup, General Electric and Bank of America, are still spending hundreds of millions of dollars on outsourcing to India.

The company has signed on influential clients such as Deutsche Bank, Allied Irish Banks, Service First, FTS International (FTSI), for bespoke development, application maintenance services, digital and mobility services.

Additionally, the company added 127 engagements for its Infosys Information Platform (IIP), of which it completed 16 pilot programs. Secondly, Infosys saw traction for its newly acquired Panaya; the company won 15 new deals across different industries through joint offerings.

It is using the capabilities of IIP to develop a predictive equipment maintenance process based on equipment operating conditions and maintenance history information for a global pharmaceutical company.

Its rival TCS proved once again that its bet on social, mobile, analytics and cloud (SMAC), was in the right direction.

N Chandrasekaran, CEO, TCS, said, that the demand from core markets like North America and greater traction for Digital solutions has driven volumes and growth in the first quarter. He said that the company’s investments in IP and platforms, digital capabilities and its execution track record gives TCS a firm foundation to capture growth in the current financial year.

The company added ten clients in over $20 million bracket and one over $100 million bracket in the retail, life sciences and BFSI segments for mobility, big data and analytics , digital and cloud computing.

According to Chandrasekaran, “Given the strong pipeline and market adoption of digital across industries, we are investing to train over 100,000 professionals this year in all relevant technologies.”

Not to be left behind, Wipro too is betting on digital and SMAC for growth.

At a recent press conference, TK Kurien, Member of the Board & Chief Executive Officer, Wipro, said, “On the run side, deals are getting increasingly competitive and we are focused on increasing the levels of automation. We continued to win deals which deploy Wipro HOLMES, our artificial intelligence platform to drive down costs for our customers.”

On the change side Wipro said that new stakeholders are influencing buying decisions in the Digital space. “We have announced the acquisition of Designit, one of the largest independent global strategic design firms. Designit’s design capabilities in synergy with Wipro’s scale in technology services will position the company uniquely in Digital, as an integrated design & technology player,” he said.

Overall, CIOL believes that the ITeS companies will have to continuously reinvent themselves not only in terms of offerings, but also enhanced skill-sets and investments in the right directions.

Focus on SMAC and Digital is two courses in the right direction. What more do you think can be done?