Monday, April 18, 2011

Critical masses more important than operating margins?


IT firms have for long focused on maintaining operating profitability but the stress area is now shifting to acquiring critical masses even if it is at the cost of reducing margins, sources reported.

As the global IT outsourcing field competition is on the rise, it has led to the focus shift reportedly. HCL and Cognizant in the last few years have concentrated in increasing their market share getting $3-4 billion in terms of revenue.

HCL has surpassed the compound growth rates of TCS, Infosys and Wipro even though its low margin profile existed. But HCL’s investment in areas such as sales and marketing and higher wages has helped it garner more shares in enterprise applications and infrastructure services.

HCL has leveled with TCS' infrastructure revenue and stands double that of Infosys, reports indicate. though the operating margins for TCS and Wipro are higher than that of HCL.

More and more ITs will shift to this strategy, experts believe, to garner more market share.

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