Wipro, Infosys see decline in share of top-five clients in total revenues

Infosys had a total 1,162 clients as on March 31, 2017, while Wipro has nearly 1,300 clients

India's internet technology (IT) services firms such as Wipro and Infosys have seen revenue contribution from their top five clients decline as they have not been spending enough on traditional services and have shifted technology budgets towards areas such as digital and cloud.

These large clients, who have long-term multi-year outsourcing contracts with Indian firms, contribute nearly a tenth of their revenue. Any change in their IT spending would have an impact on renewals, forcing companies to invest more resources and time to get new contracts.

Infosys has a total 1,162 clients as on March 31, 2017, while Wipro has nearly 1,300 clients.

Infosys, India's second-largestt IT services firm, saw more than 10 per cent decline in revenue share from top five clients in the previous financial year. While it received 14.1 of the total income from top five customers in FY16, the share from top five clients in previous financial year stood at 15.7 per cent.

Cross-town rival Wipro, saw top five customers' contribution to overall revenue at 10 per cent in previous financial year, c

ompared to 11.6 per cent the year before. The Bengaluru-based company, however witnesses a higher decline in top 10 customers' share from 19.3 to 16.9 per cent, when compared at the same timeframe.

Tata Consultancy Services (TCS) , India's largest IT services firm has stopped sharing detailed client-wise revenue contribution numbers. TCS has added 2 less clients in the $100 million-plus league in previous financial year, while in all other categories below $100 million it has added more clients compared with FY16.

This is true for one of the mid-size IT services firms too.

Mindtree's revenue from top two to 10 accounts declined by 10 per cent mainly led by softness in three accounts. The company's management told analysts that revenue contribution from certain top accounts will amongst top two to 10 "would continue to remain volatile in FY18".

Analysts primarily attribute this to the restructuring of the work outsourced to Indian IT firms such Infosys or a Mindtree.

For example, for a large contract given to any of the Indian IT services firm, the client may look at giving cloud migration work to someone else thereby reducing the total size of the deal. "Another possibility could be, though not a common practice yet, doing a portion of the digital technology work such as analytics in-house," said Rajesh Gupta, India Partner, technology research and consultancy firm ISG.

What also may have resulted in dip in top client contribution is the uncertainty in their own businesses and markets as the banking, financial services and insurance (BFSI) and Retail segment have been volatile in the US and Europe, Indian IT industry's two key markets.

"Top clients of Indian IT firms are facing challenges in their own business environment. There are uncertainties in the global market. At the same time BFSI sector business models of banks are being disrupted by fintech start-ups," said Pareekh Jain, Senior Vice President, HfS Research India.