Tuesday, July 28, 2009

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Active client base of IT firms shrinks

Top Indian IT firms saw their active client base erode in the April-June period, on the back of project rampdowns and vendor consolidations.

In the case of Infosys, the number of active clients came down to 569, down sequentially by 10. Wipro’s active client base fell to 830 from 863 and that of TCS was down by 52 to 933. According to Infosys COO, S D Shibulal, the company added 27 new clients in the first quarter, even though the total client base came down. “Some clients will not figure in the list, if the business carried out with them is below a certain threshold limit,” he said.

During the quarter, project rampdowns saw contribution by Infosys’ top client by revenue, BT, come down below the $300 million mark. Top five clients accounted for 16.3 per cent of total revenues, dipping sequentially from 17.2 per cent. “In some quarters, revenue contribution from top 10 will be higher than in other quarters. This is not a secular trend, but is more situational. We are very focused on getting new clients and will continue this focus. There might be some additional work we have to do since the business environment is challenging,” said Shibulal.

For Wipro, the top five customers accounted for 11.4 per cent, up from 10.8 per cent in previous quarter. The number of new customers went up from 20 to 26, but down 31 from the first quarter of the previous financial year.
Wipro CFO Suresh Senapaty said that the company had not lost any customers, but some of them had fallen below the threshold of $150,000 per quarter in revenue run-rate and hence were not counted. Joint CEO Suresh Vaswani said that because of the focus being given to customers, many of them are becoming high value clients and are moving up into higher bands or giving larger revenue.

Jens Butler from analyst firm Ovum in his bulletin said this about TCS: “Maybe of bigger concern is the fact that only 26 new clients (and only 0.7 per cent of new revenue contributions, down from 6.9 per cent) have been added during the quarter (with contributions of less than $5 million), alongside a fall in its active client count to 933 from 985. This may be due to a focus on client retention in turbulent times, or possibly underinvestment in sales resources, or TCS’ unwillingness to enter into pricing wars. The likelihood is a combination of all three.”

Rajeev Mehta, IT analyst at India Infoline, said that too much should not be read into top IT firms losing out on active clients. “The recessionary pressures are still on, and this kind of thing could happen. Also, revenues from some top clients drop during a quarter and lose their ‘active client’ tag,” he said. “This will pass.”
Source: FinancialChronicle

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