IT firms look beyond North America, Eu

Browbeaten by recession and anxiety about mounting protectionism in key markets have led Indian information technology (IT) companies to extend their reach in the countries of Africa, the West Asia and Asia Pacific.

“Indian IT sector is eyeing to increase presence across geographies, on account of growing saturation within US and UK markets,” said a National Association of Software and Services Companies (Nasscom) official. Of the $1.5 trillion that was spent on IT in 2009, 37 per cent was spent in North America and 31 per cent in Western Europe. Countries in Asia Pacific, West Asia, Africa, and Latin America account for the rest.

For Indian IT companies, in 2009, 62 per cent business came from just USA, with the rest of North America being largely untapped, while UK accounts for 18 per cent of the business.

“Countries in Africa and the West Asia along untapped markets in North America and Europe have been identified as areas of potential growth. To this end, the industry has sent delegations to potential market countries,” he said.

The extension across geographies is tangibly visible. India’s largest IT services provider, Tata Consultancy Services, opened a centre in Casa Blanca, Morocco, to cater to the demands of France and the French-speaking population.

“We are evaluating other centres for Africa at this stage, but we are localising work force across Africa, specifically South Africa. The focus in Africa is insurance, and telecom, oil and gas for West Asia,” said Girish Ramachandran, head, TCS West Asia and Africa.

Infosys has announced that it is looking at changing existing patterns of 65:25:10 per cent revenue generation from the US, UK and rest of the world, to a 40:40:20 pattern. Wipro registered a compounded annual growth rate in Africa, West Asia of over 100 per cent.

The trend of geographical expansion incidentally is not limited to the IT majors. Aegis forayed into Latin America by acquiring Argentina-based company Actionline and Firstsource Solutions announced its decision to expand in Australia and the Philippines.

Reasons explaining the interest are not tough to fathom. The markets accounting for almost 32 per cent of the world’s IT spends have untapped potential. Also development initiatives in Africa mean government spends on infrastructure have risen and will continue to rise.

“The region is seeing big investments across industry verticals. We are looking at opportunities presented in investments by governments for modernisation and e-enable government,” said Anand Sankaran, senior vice-president and business head, India, West Asia and Africa, Wipro.

Others like TCS and Infosys are looking at leveraging the Indian experience of working with the public sector while utilising frameworks for the sector across emerging markets.

Both TCS and Infosys registered double-digit second quarter growth of 11 and 13 per cent, respectively.

Conquering the new frontier, for the sunshine industry, might not be as easy as the US were a decade back. For one, language proficiency, which drove growth for UK and US, will be tough to nurture.

Companies have begun helpdesk operations for infrastructure and applications. There is also a tendency to employ more local staff than fly out Indian expatriates. Back-end technical support is provided through service managements centres that continue to be located in India.

After a fairytale run for almost a decade, the honeymoon seems finally to be over for IT with US and UK.