Business SynopsisIndian IT services peers of Accenture have faced challenges during the first quarter (April-June) due to delay or cancellation of certain projects in the wake of the Covid-19 pandemic. That said, Indian companies have comparatively less dependence on the segment that contributed majorly to the US giant’s decline this quarter.ThinkStock PhotosBENGALURU: Indian IT bellwethers, such as TCS, Infosys and Wipro, may see some short-term impact on business from their key industry segments as their US peer Accenture reported a decline in some revenue-generating sectors. However, unlike Accenture, local technology majors have little dependence on consulting, a revenue stream that witnessed a steeper decline for the US company.
Accenture reported a 2% year on year decline in Q4 revenue to $10.8 billion. The technology services major’s growth was primarily led by Health and Public Service, while segments such as Financial Services, Communications, Media & Technology saw flat growth and Consulting revenues declined 8% year on year to $5.7 billion.
“We believe that the other large service provider firms are also experiencing short term pain in consulting, particularly in their ERP implementation practices as well as all of discretionary spending. However, the industry pipelines for new work are very full and all firms including Accenture are posting record bookings,” said Peter Bendor-Samuel, chief executive, Everest Group, an IT advisory firm.
Bendor-Samuel added: “What this translates into is another difficult quarter followed by strong growth likely starting in the later part of this year and certainly next year.”
Indian IT services peers of Accenture have faced challenges during the first quarter (April-June) due to delay or cancellation of certain projects in the wake of the Covid-19 pandemic.
While many of the Indian IT companies have been cautiously watching the macroeconomic environment, HCL Tech, the third largest Indian IT services provider, on September 14 surprised the street with a mid-quarter update on higher growth undergirded by robust execution.
Wipro chairman Rishad Premji last week said the IT industry as a whole has faced challenges as clients cut their technology budgets. “We are not living in a vacuum. The industry has struggled a little bit in Q1 and seems to be stabilizing. Our customers have significantly cut spend, they are much more thoughtful,” he had said at a virtual event organised by All Indian Management Association.
To be sure, Indian IT firms have low exposure to consultancy business.
“Accenture has a much larger dependence on consultancy revenues; so expect their decline to be more aggressive than some of the Indian heritage majors,” said Phil Fersht, chief executive, HfS Research.
Dipeshkumar Mehta and Monit Vyas of Emkay Global wrote in a report that decline in Accenture’s growth was primarily due to “weakness in consulting”.
“We see a limited read-through from Accenture’s results for Indian technology companies in general due to business mix differences…Uncertainties around the outcome of the US elections, healthcare crisis and slowing global growth will keep the optimism in check and may weigh on stocks,” they wrote.
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