Market share analysis india-based providers' performance show mixed results in it services market worldwide 2009 (2)

Dataquest
Publication Date: 23 April 2010 ID Number: G00200249

Market Share Analysis: India-Based Providers'
Performance Show Mixed Results in IT Services Market,
Worldwide, 2009
Dean Blackmore, Allie Young, Arup Roy

Collectively the impact of the leading India-based IT services providers continued to
incrementally improve in 2009, with Tata Consultancy Services (TCS), Infosys
Technologies, Wipro Technologies, Cognizant, and HCL Technologies all achieving
growth rates that outpaced the overall market (which declined 5.3%). However,
compared with the past, when the growth of these providers clustered in the 20% to 40%
ranges, beginning in 2006 their individual growth rates started to diverge, reflecting their
different strategies and levels of success. In 2009, this trend was accentuated further,
with the global economic crisis being the foremost factor impacting the service sector as
a whole.
A complete breakdown of market share rankings by service line (consulting, IT
management, development and integration, process management, software support
services, and hardware support services), platform, and geography for 2009 can be
found in the document, "IT Services Market Metrics Worldwide Market Share: Database"
available on gartner.com.

Key Findings
In 2009, the top six India-based providers' collective share of the global IT services
market was 2.7%, up slightly from their 2.5% share in 2008. These providers collectively
posted stronger growth in the U.S. market (6.5% growth) than they did in Western
Europe (2.7% decline).

The largest of the India-based providers, TCS, with $5.7 billion in worldwide revenue in
2009, is ranked No. 25 in overall IT services market share; however, it would need to
roughly double its revenue to be among the top 10 market share leaders.

The top India-based performers in total IT services revenue growth were HCL (27.6%
annual growth on $2.2 billion in revenue) and Cognizant (16.4% growth on $3.1 billion in
revenue). In rank order, HCL moved up from 75th position in 2008 to 60 th in 2009 and
Cognizant moved up from 48th to 42 nd in the same time period.

Only Mahindra Satyam's growth rate declined dramatically greater than the overall
market negative 26.7%, ending in 87 th position, down from 79 th in 2008; as an aftermath
of an executive financial scandal and the subsequent acquisition by Tech Mahindra. The
new company Mahindra Satyam is regrouping under new leadership and continues to
serve 380 clients. Executives anticipate it will take two years to fully recover from the
damage caused by the financial problems.

© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
without prior written permission is forbidden. The information contained herein has been obtained from sources believed to
be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although
Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal
advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors,
omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein
are subject to change without notice.

The India-based market leaders' market share performance has had a material impact
on the IT services competitive landscape; in 2001 market share analysis, their worldwide
ranking positions spanned from No. 68 to No. 212; by 2009, their positions spanned
rankings from No. 25 to No. 87, proof of their outperforming the market in the past
decade, and that the adoption of the global delivery platform is building, yet still nascent
in its evolution.

The top six India-based providers are also clearly diversifying their geographic
presence, as well as expanding their service lines. These providers will likely challenge
current market share leaders in key regions and in service lines, such as infrastructure
services. It is clear that their offshore services value proposition resonates in the market,
and buyers continue to reward them with a growing share of their spending.

Recommendations
Strategic planners — Review market share performance of these India-based providers.
Although the collective revenue growth performance of India-based leaders has declined
over the past several years due to their maturity, relatively larger size and, more
recently, the macroeconomic environment conditions, the group continues to make
incremental market share gains.

Service marketers/communication specialists — Continue to refine and communicate a
conclusive position on your global service delivery strategy and position; buyers'
adoption of offshore service delivery and their willingness to consider the leading India-
based offshore service brands continues to increase, making buyers' decisions more
complex and providers' strategies for differentiation in global delivery of paramount
importance.

Service executives/strategic planners — Don't underestimate the aspirations of some of
the India-based leaders today to gain market share. Their continued focus on
diversifying their portfolio of services will include expansion into cloud and alternative
delivery models. If market share leadership is a goal, it will have to be accomplished
through an acquisition of considerable size. We also see the potential for the global
services leaders' accelerating global delivery capabilities, which could drive industry
consolidation — stressing the need for contingency plans.

Publication Date: 23 April 2010/ID Number: G00200249 Page 2 of 14
© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

TABLE OF CONTENTS

Analysis ....................................................................................................................................... 4
1.0 Worldwide IT Services Revenue for Top Six India-Based Providers in 2009 ............... 4
2.0 Annual Growth Rates for the Top Six India-Based Providers ...................................... 5
3.0 IT Services Revenue in the U.S. for Top Six India-Based Providers in 2009 ............... 6
4.0 IT Services Revenue in Western Europe for Top Six India-Based Providers in 2009 ... 7
5.0 Revenue Analysis of the Top Six India-Based Providers ............................................. 7
6.0 Summary ................................................................................................................. 12
7.0 Recommended Reading........................................................................................... 13

LIST OF TABLES

Table 1. IT Services Revenue Worldwide for the Top Six India-Based Leaders, 2008-2009
(Millions of Dollars) ....................................................................................................................... 5
Table 2. IT Services Revenue in the U.S. for the Top Six India-Based Leaders, 2008-2009
(Millions of Dollars) ....................................................................................................................... 6
Table 3. IT Services Revenue in Western Europe for the Top Six India-Based Leaders, 2008-
2009 (Millions of Dollars) .............................................................................................................. 7

LIST OF FIGURES

Figure 1. Worldwide IT Services Annual Growth Rates for the Top Six India-Based Providers,
Year to-Year, Since 2003 ............................................................................................................. 6
Figure 2. Cognizant's ($3.1 Billion) 2009 Worldwide Revenue Analysis by Service Line ................ 8
Figure 3. HCL's ($2.2 Billion) 2009 Worldwide Revenue Analysis by Service Line ......................... 9
Figure 4. Infosys' ($4.4 Billion) 2009 Worldwide Revenue Analysis by Service Line ...................... 9
Figure 5. MahindraSatyam's ($1.2 Billion) 2009 Worldwide Revenue Analysis by Service Line ... 10
Figure 6. TCS's ($5.7 Billion) 2009 Worldwide Revenue Analysis by Service Line ....................... 10
Figure 7. Wipro's ($4.1 Billion) 2009 Worldwide Revenue Analysis by Service Line..................... 11
Figure 8. Summary Chart of India-Based Leaders' Service Revenue Distribution ........................ 11


ANALYSIS

1.0 Worldwide IT Services Revenue for Top Six India-Based
Providers in 2009
Collectively and individually, the impact of the six leading India-based IT services providers
continued in 2009, with HCL, Cognizant, Wipro, TCS, and Infosys (in order of growth rates) all
achieving growth that outpaced the rest of the market, which was at negative 5.3% (see Table 1).
MahindraSatyam, alone, impacted by a corporate scandal in 2009 and a subsequent acquisition,
turned in a 26.7% decline — well below the market growth.
HCL recorded the highest growth in 2009, benefiting from the acquisition of SAP consultancy
Axon, as well as winning some large total outsourcing deals signed in 2008, revenue of which
flowed into the subsequent quarters of 2009. These total outsourcing deals also included
rebadging of client employees quite unlike other Indian providers. High growth was also the result
of aggressive and focused sales efforts to retain clients. Moreover, HCL experienced relatively
little impact in the vendor consolidation activity during the downturn, which signifies high customer
satisfaction among HCL's clients; contributing factors of quality process focus, as well as the
company's "employee first, customer second" principle. HCL's acquisition of Axon also yielded
business growth, as it continued to upsell/cross-sell services to this newly acquired client base.
Cognizant, on the other hand, continued to show strong growth that is attributable to its customer
investment philosophy, strong management oversight, emphasis on a local presence in the
countries in which it operates and highly focused industry vertical approach (where it targets a
limited number of vertical sectors). Cognizant has been able to drive "mind share" and visibility
through its high-quality methodologies, thought leadership in service delivery and strength in
portfolio rationalization projects for its clients.
Although MahindraSatyam's performance lagged behind other India-based providers, its new
leadership team is communicating regularly on its performance. Recent reports from its
management outlines the position of its turnaround on a two-year horizon to recover from the
damage inflicted by financial irregularities caused by fraudulent activities of former executives
(see "Vendor Focus for Mahindra Satyam: Progress Update on Key Milestones").
Positive signs of investment and hiring, retention of clients, and expansion of its delivery
operations were recently reported.
Other key findings are as follows:
TCS maintained its position as the largest of the India-based IT services providers
worldwide in 2009, rising from a ranking of 28th in 2008 to 25th in 2009 on revenue of
more than $5 billion and a year-to-year growth of 1.2% (in terms of U.S. dollars).

The highest annual growth was turned in by HCL Technologies, with 27.6% revenue
growth in 2009; Cognizant followed with 16.4% growth and Wipro with 9.5% growth;
Infosys turned in a 1.3% decline, ahead of the overall market, yet comparatively lower
than its past performance.

In 2006, these top six providers accounted for 1.9% of the total worldwide IT services
market, and in 2007 their share of the market grew to 2.4%; by 2009, their overall share
reached 2.7%. With maturity and new market challenges, however, their market share
growth is less aggressive than in the past


Table 1. IT Services Revenue Worldwide for the Top Six India-Based Leaders, 2008-2009
(Millions of Dollars)
Share (%) Share (%)
Rank Service Provider 2008 2009 AGR (%) 2008 2008
25 TCS 5,657 5,725 1.2 0.7 0.7
33 Infosys Technologies 4,504 4,444 -1.3 0.6 0.6
35 Wipro 3,730 4,084 9.5 0.5 0.5
42 Cognizant 2,703 3,146 16.4 0.3 0.4
60 HCL Technologies 1,713 2,186 27.6 0.2 0.3
87 Mahindra Satyam 1,636 1,200 -26.7 0.2 0.2
Totals for Top Indian Providers 19,943 20,785 4.5 2.5 2.7
Top 20 Market Share Leaders 300,047 286,415 -4.5 37.3 37.5
AGR = annual growth rate
Source: Gartner (April 2010)

Note: MahindraSatyam's numbers represent Gartner estimates for this table, and all following
tables/figures in this research note. Gartner estimates are based on secondary data and
discussions with financial experts. In 2009, Satyam was acquired by TechMahindra following a
financial scandal. At that time, its name was changed to MahindraSatyam and full accounting of
its financial accounts was undertaken with auditors. Mahindra Satyam is yet to report its final
audited numbers; in April 2010, as reported to the press/media, company executives of
MahindraSatyam reported that the company's accounts for the past six to seven years are still in
the process of being restated. Gartner will update figures once additional information is provided.

2.0 Annual Growth Rates for the Top Six India-Based Providers
For several years, the top six India-based providers individually performed consistently high (plus
30%), but starting in 2008, we began to see a more disparate picture, with varied levels of
performance. Figure 1 provides a historical view of the annual growth rates of the India-based
leaders.
With time and maturity (and corporate upheaval in the case of Satyam), as well as the impact of
the 2008-2009 economic recession, the overall growth rates of these companies have moderated
considerably and a less-aligned picture has begun to take shape. Although in 2008 we could say
that the growth rates for these companies came "down to earth," the 2009 growth rates paint an
even more fractured picture — that of maturity, divergence of strategies and performance, and
challenges to address an evolving set of buyers' needs in a rapidly changing market. In 2009,
growth rates range from a high of 27.6% (HCL) to a decline of 26.7% (Mahindra Satyam). As
stated above, when final reports from MahindraSatyam's restated financial accounts are
provided, Gartner will update our market share information.


Figure 1. Worldwide IT Services Annual Growth Rates for the Top Six India-Based
Providers, Year to-Year, Since 2003

Note: Gartner estimates for MahindraSatyam 2007 and 2009.

3.0 IT Services Revenue in the U.S. for Top Six India-Based
Providers in 2009
Table 2 shows the U.S. IT services revenue of the top six India-based vendors. As a group they
increased revenue 6.5% in 2009. For comparison, in 2007 the group accounted for 3.6% of the
U.S. IT services market, while in 2009, this jumps to 4.3% of the market. As an indication of their
collective competitive impact in the U.S. market, each of the providers, with the exception of
Mahindra Satyam, gained an incremental (0.1%.) market share; two of the providers (TCS and
Infosys) are ranked within the top 20, and five of the six vendors occupy rankings within the top
50. Of note, in 2007, HCL was ranked No. 54, and Satyam was ranked No. 45; in two market
share cycles, the fortunes of these two providers have taken different paths — with HCL moving
up 13 places to No. 41, and Mahindra Satyam dropping 10 places in market share to No. 55.

Table 2. IT Services Revenue in the U.S. for the Top Six India-Based Leaders, 2008-2009
(Millions of Dollars)
Share (%) Share (%)
19 TCS 2,833 2,932 3.5 0.9 1.0
20 Infosys Technologies 2,767 2,870 3.7 0.9 1.0
22 Cognizant 2,218 2,472 11.5 0.7 0.8
23 Wipro 2,114 2,358 11.5 0.7 0.8
41 HCL Technologies 925 1,260 36.2 0.3 0.4


Share (%) Share (%)
55 Mahindra Satyam 988 725 -26.7 0.3 0.2
Totals for Top India Providers 11,846 12,617 6.5 3.9 4.3
Notes: Gartner estimates for MahindraSatyam for years 2007-2009.

4.0 IT Services Revenue in Western Europe for Top Six India-
Based Providers in 2009
The India-based providers have had less success in penetrating the Western European IT
services market than in the U.S. market. Growth in Europe was a strong focus, and the growing
appetite for Western European buyers for offshore services seemed promising. Nevertheless,
2009 was a challenging time in Europe due to the economic conditions, and the India-based
providers fared poorer overall than in the past. In our 2007 analysis, these providers reported
annual growth of 45% to 87% in Europe; in 2009, only two providers, HCL and Cognizant,
reported positive growth rates (21.9% and 35.1%, respectively). In terms of market share
leadership, TCS, Wipro and Infosys occupy market share positions within the top 50 of Western
European services leaders (see Table 3).

Table 3. IT Services Revenue in Western Europe for the Top Six India-Based Leaders,
2008-2009 (Millions of Dollars)
Share (%) Share (%)
24 TCS 1,669 1,557 -6.7 0.6 0.7
34 Wipro 1,078 1,074 -0.4 0.4 0.5
36 Infosys Technologies 1,243 1,043 -16.1 0.5 0.4
64 HCL Technologies 497 606 21.9 0.2 0.3
67 Cognizant 435 588 35.1 0.2 0.2
106 Mahindra Satyam 334 245 -26.7 0.1 0.1
Totals for Top India Providers 5,255 5,113 -2.7 2.0 2.2
Notes: Gartner estimates for MahindraSatyam for 2007-2009.

5.0 Revenue Analysis of the Top Six India-Based Providers
Each of the India-based leading providers is pursuing growth in the broad-based IT services
market. Although the roots of several of these providers were in the application service market,
over time, each has evolved its coverage of the services market, expanding into a broader base
of services, such as infrastructure services and business process outsourcing services. Although
most of their revenue still comes from application services, overall we have seen a trend to a
broadening service base and a growing revenue contribution from infrastructure and business
process services. Most India-based players are positioning themselves as end-to-end service
providers with full service offerings. Notably, the providers have also been trying to lessen their


U.S./U.K. exposure in the past couple of years and expanding into other growth markets. With
discretionary spending being hardest hit by the recession, the consulting and
development/integration service lines turned in lower performances. Those providers that were
highly reliant on project-based application services, not surprisingly faced a challenging decline in
user spending for these services (deemed "discretionary"); providers with a broader base of
outsourcing deals and product support services typically fared better overall. Expansion of service
offerings by India-based providers has enabled them to build and mine existing accounts, as well
as increase visibility as full-service providers. Consequently, they are now regularly invited to bid
for larger and more-complex outsourcing contracts, requiring multiple services. Notably in
Gartner's annual outsourcing contract review for 2009, Cognizant, Wipro, and HCL Technologies
each appeared in the list of top 25 providers with largest reported total contract value of deals
signed in 2009. Therefore, there is a gradual shift in increasing their revenue share from discrete
project-based outsourcing services to annuity-based multiyear outsourcing contracts, thereby
ensuring ongoing revenue streams.
The approach has involved expanding the portfolio of service offerings, tapping new regions and
focusing more on high-value services.
Figures 2 through 7 provide Gartner's analysis of the revenue distribution for each provider.
Figure 8 provides a summary chart of the India-based market leaders' service line distribution.

Figure 2. Cognizant's ($3.1 Billion) 2009 Worldwide Revenue Analysis by Service Line



Figure 3. HCL's ($2.2 Billion) 2009 Worldwide Revenue Analysis by Service Line


Figure 4. Infosys' ($4.4 Billion) 2009 Worldwide Revenue Analysis by Service Line



Figure 5. MahindraSatyam's ($1.2 Billion) 2009 Worldwide Revenue Analysis by Service
Line

Note: Gartner estimates for MahindraSatyam for 2009 revenue and service line performance.

Figure 6. TCS's ($5.7 Billion) 2009 Worldwide Revenue Analysis by Service Line



Figure 7. Wipro's ($4.1 Billion) 2009 Worldwide Revenue Analysis by Service Line


Figure 8. Summary Chart of India-Based Leaders' Service Revenue Distribution

Note: Gartner estimates for MahindraSatyam 2009 revenue and service line distribution.


6.0 Summary
Despite their relatively smaller size compared with the global market share leaders (for example,
IBM's 2009 worldwide IT services revenue was $55 billion), the six leading India-based service
providers continue to be a force in the IT services competitive landscape. Initially they challenged
the leading providers and paved the way for widespread adoption of the global delivery model;
their individually strong (and consistent) performance through 2007 showed that the "offshore
value" was inarguably a key to their individual — and collective — success. Now, however, we
expect to see greater individualism as they posture to improve their market share position and
strike their own brand value and identity in the larger IT services market.
The perception of these India-based service providers as primarily "low-cost providers" for
staffing/project work is gradually changing as they:

Compete for higher-quality work in client engagements
Qualify and win multiyear/multimillion dollar outsourcing deals

Expand into new countries and develop local talent resources — and client bases

Build consulting businesses to deepen client relationships and value

Add new service lines for long-term investment

Deepen and invest in vertical/subvertical expertise
Broaden pricing options to include performance-based

Expand into cloud services and alternative delivery models
Critical to their future competitiveness will be the evolution to "nonlinear" (leveraged) revenue
growth of utility and technology-as-a-service offerings.
With varying degrees of success, the Indian leaders faced one of the most-difficult economic
recessions in history; some performed considerably better than others. This leads us to the
conclusion that more autonomy in strategic positioning will be the norm for the future, as these
providers face new challenges to seek their unique response to emerging market forces:

Growing attrition (once again) in the Indian market as the Indian economy picks up

Appreciation of the Indian currency (rupee) against the U.S. dollar
Shifting buyer behavior to accept "standardized" solutions

Advent of the cloud as the new platform for infrastructure, applications and processes
Hypercompetitiveness and market consolidation
Protectionist measures in some countries

Cost pressures from buyers
We expect another challenging year for the IT services market as a whole. With more parity in the
global delivery capabilities among leading service providers, the India-based leaders will not be
immune from the challenges to retain or grow their share of the market. Clearly, the gap between
themselves and the traditional service providers in terms of global delivery competencies and
multicountry delivery sites has narrowed dramatically. And cloud adoption is accelerating and


changing the face of the IT services market, requiring a clear and compelling response from the
leading players.
Will any of the top six India leaders aspire to a top 10 market share leader role? Gartner believes
that this will only be possible through an acquisition strategy and aggressive investment in more-
standardized offerings.

7.0 Recommended Reading
"IT Services Market Metrics Worldwide Market Share: Database"
"Outsourcing Contracts Annual Review, 2009: Outsourcing Uptake Continued, but Megadeals
Declined"
"Track Satyam's Milestones to Plan for the Road Ahead"
"Vendor Focus for Mahindra Satyam: Progress Update on Key Milestones"

This document is published in the following Market Insights:
Business Process Outsourcing Worldwide
Consulting & Solution Implementation Services Worldwide
IT Outsourcing Worldwide
IT Services Asia/Pacific
IT Services Europe


REGIONAL HEADQUARTERS

Corporate Headquarters
56 Top Gallant Road
Stamford, CT 06902-7700
U.S.A.
+1 203 964 0096

European Headquarters
Tamesis
The Glanty
Egham
Surrey, TW20 9AW
UNITED KINGDOM
+44 1784 431611

Asia/Pacific Headquarters
Gartner Australasia Pty. Ltd.
Level 9, 141 Walker Street
North Sydney
New South Wales 2060
AUSTRALIA
+61 2 9459 4600

Japan Headquarters
Gartner Japan Ltd.
Aobadai Hills, 6F
7-7, Aobadai, 4-chome
Meguro-ku, Tokyo 153-0042
JAPAN
+81 3 3481 3670

Latin America Headquarters
Gartner do Brazil
Av. das Nações Unidas, 12551
9° andar—World Trade Center
04578-903—São Paulo SP
BRAZIL
+55 11 3443 1509


Market share analysis india-based providers' performance show mixed results in it services market worldwide 2009 (2)

More Related Content

What's hot

Similar to Market share analysis india-based providers' performance show mixed results in it services market worldwide 2009 (2)

More from Semalytix

Market share analysis india-based providers' performance show mixed results in it services market worldwide 2009 (2)