IT Companies Adopt this 'New Norm' for Survival! What is it? Details

Most of the IT companies have reported good results and strong growth from digital businesses in the June quarter despite COVID-19 impact. Due to work- from –home, the demand for cloud, collaboration and cyber security related technology has increased rampantly. 

The definition of digital is subjective and varies across different IT organizations. Emerging technologies such as cloud, mobility, analytics, Internet of Things (IOT) and cyber security come under digital business. 

Until recently when most IT companies started reporting their digital revenues separately but the trend is changing currently as many companies are including it as a part of their mainstream offerings. 

“Digital is definitely mainstream for IT services providers. Comparing digital revenues across providers can be difficult because different providers use different definitions for digital revenue," Dean Blackmore, senior director analyst, Gartner, told Livemint. “We estimate that in 2019, non-digital IT services revenue was still around 52% of total IT spending. However, by 2023 that will drop to around 31%."

In the case of Wipro, digital is a part of their mainstream and the company has gotten rid of the separate classification for their digital business from June quarter onwards.

“We believe digital has now become a mainstream capability for us and also it has reached a scale where you don’t need to separately call it out as it has become very pervasive for us," Bhanumurthy B.M., chief operating officer, Wipro, said.

India’s largest software exporter Tata Consultancy Services Ltd (TCS) stopped reporting its digital revenues from Q3 of FY20 since the firm believes that the lines between digital and core offerings have started to blur.

CIOs are looking to optimize costs with accelerated adoption of public and hybrid cloud model, which is driving growth in cloud revenues this quarter, said Rajesh Gopinathan, CEO and MD, TCS.

“Our pipeline from a digital infrastructure and cloud perspective has actually been the highest in the last many quarters. A lot of the large deals that we see is coming from an accelerated adoption of the core infrastructure and compute fabric transformation which is a key enabler for switching to this mode at a large-scale basis," Gopinathan said in post-earnings call recently.

Infosys Ltd, is one of the companies that continues to report its digital revenue seperately. The company saw a 25.5% year on year growth.

Earlier this month, the IT firm signed a huge deal with American investment management firm Vanguard to enhance digital transformation of their record- keeping services and turn it into a cloud business platform. 

Earlier this month, Infosys signed a large deal with American investment management firm Vanguard to drive digital transformation of their record-keeping services onto a cloud business platform—which Infosys believes is an indication of strong growth momentum in digital.

“The whole crisis has really accelerated the digital thinking across most large enterprises. We see lot of demand in areas of cloud, workplace transformation, automation, and cost efficiency," Salil Parekh, CEO and MD, Infosys, said in the Q1 earnings call.

HCL Technologies Ltd and its partners are helping customers accept the emergence of digital transformation as a strong change in the post-COVID world. “I am confident that, with decisive action leveraging digital momentum and sustainable business practices, we will together emerge as stronger entities," said chief strategy officer and MD Shiv Nadar.

“Traditional services like application development and maintenance (ADM), testing and infrastructure support have been under severe pressure for long. So, the focus on digital will continue and especially areas like cloud and customer experience will become more and more mainstream in the coming days," said Harit Shah, a Mumbai-based IT analyst.

While one cannot be certain of the timeline, most of the IT companies are gradually recovering in the upcoming quarters. 

“While Infosys projected an FY21 annual revenue growth guidance of 0-2%, HCL Technologies expected a 1.5-2.5% growth in the next three quarters in constant currency terms. TCS typically does not provide a revenue guidance and Wipro preferred not to guide for the next quarter due to business uncertainty,” Livemint reported.