TCS has moved to top 10 ranking in the global IT services company list for 2013, while Cognizant will reach top ten in the next 2-3 years, said HfS.
HfS in a research report on 13 April said that Cognizant is likely to make to the Top 10 in the next 2-3 years – most likely at the expense of CSC.
TCS replaced CGI to make to the top 10 for the first time.
IT services vendor list for 2013 include IBM in first position. Fujitsu, HP, Accenture, NTT, SAP, Oracle, Capgemini, CSC are the top nine vendors, said Jamie Snowdon of HfS.
Cognizant is currently in 15 position, Infosys at 18, Wipro at 20 and HCL Technologies at 25 ranking, said HfS. These IT service providers improved their ranking in 2013 as compared with 2012. See the chart.
Indian majors doubled their market share in global IT services in four years. While access and management of lower cost offshore talent is a key factor, the sheer passion and culture of the Indian firms sets them apart from many of the flagging Western incumbents.
How TCS improved
The Tata group-owned TCS is increasingly being perceived by many as an alternative provider to the Western Tier 1s. TCS can fix messy contracts and implementations. The IT services vendor has shown willingness to pick up a lot of the low margin, low value work that seemingly every Western Tier 1 wants out of and makes the deals profitable and leverageable across clients, the BPO report said.
TCS targeting of renewals and new business, particularly in continental Europe is an important factor in driving its assault on the leaders.
TCS is having much more success in de-linking the direct correlation of revenues from FTEs: the firm has a laser-sharp focus on managed services, fixed price projects and has successfully monetized its product group.
The size of its referenceable client base and the executive connections of its leadership is a strong point. In addition, its tunnel-vision on developing its platform-based solutions is really helping the firm move gradually away from the FTE-pricing model, with real progress already being recognized in banking and insurance verticals.
The average operating margin for the top 10 (excluding SAP and Oracle) is 11.5 percent, with IBM, Accenture and TCS the only top 10 providers with margins in excess of 10 percent. IBM and Accenture growth may have slowed in the past 24 months, but they have maintained margins.
Challenges in IT services market
Challenges in the IT services market include price-squeezing and service commodotization, making it more difficult for them to invest in restructuring / offshore infrastructure / technology imperatives needed required to halt the decline.
HfS says disruptive factors such as advances in automation and robotics and cloud platforms, which could actively negate the need for outsourced labor, will be the bigger threats to the Indian majors.