King August 11, 2019

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Quarterly results season for IT companies is over and it was not great for most of them. During press conferences addressed by company executives, it was stated that global economic slowdown, drop in customer spending and volatile political climate resulted in a slump in growth and it is expected to better in the coming quarters.

The slump, they said, was more visible in the banking space where the customers are cautious and indecisive. Sectoral growth declined across all IT firms, large-cap or mid-cap.

TCS, during its press briefing, said that the company is seeing softness in the capital markets in the US and dip in customer spending in Europe in lieu of Brexit.

For TCS, revenue from banking and financial services (BFSI), declined slightly both sequentially and year-on-year. This is one of the largest revenue generators for the company contributing to about 30 percent of total revenue.

In the case of Wipro, growth was marginal at 0.1 percent sequentially. For Tech Mahindra, the vertical saw drop in revenue. Revenue from BFSI accounted for about 13.1 percent in quarter ending March 2019. It declined to 12.8 percent in the quarter ending June 2019.

The story is more or less the same across most companies. But, there are outliers in this space. That is, companies who have managed to show growth despite the macro-economic conditions with technology as their differentiation.

Let us take the case of Infosys. The company registered a strong double digital growth in its BFSI sector for the quarter ended June 30, 2019, despite softness in the sector. The sector grew 11.5 percent on constant currency, one of the highest by far in this quarter.

Nilanjan Roy, in an analyst call, said, that this was possible because of its focus in unique sectoral technological offering in the mortgage space, where there is not much innovation.

Infosys’ digital banking platform Finacle and recent acquisition ABN AMRO Bank’s subsidiary Stater was the key driver for growth in this sector, he added.

According to Roy, the focus on technology and developing sectoral capabilities will drive growth despite the softness. He was not far off the mark.

For focusing on deep tech solutions is the only way one could move forward even under dire circumstances.

Nitin Rakesh, CEO, Mphasis explained that the era of long decision cycles of decision making is gone with clients looking for on-demand services and solutions.

At this juncture, the only way a company can stay a step ahead is to invest in technology and create products and solutions that clients would need in the future.

“The services that worked, for instance, in banking sector for the last 25 years will not work now. In fact the banks would say that they are going to shrink that services. They are migrating to newer technologies,” Rakesh said.

These newer technologies include blockchain, artificial intelligence, cybersecurity and cloud computing. The only way to grow business is investing in creating solutions that the customers would want. That is the only way IT firms can makes themselves future-ready.