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Summary

Vendor rankings in the Indian IT services industry have remained fairly consistent for many years, with TCS leading the pack by a healthy margin. However, there is a change in the making as HCL Technologies (HCL) rapidly closes the distance between itself and nearest rival Wipro in a rather thrilling race. If HCL maintains its momentum (and Wipro continues to struggle), it will be able to overtake Wipro by the end of the next financial year in March 2018.

HCL is moving ahead at a steady clip on the back of consistent performance

HCL continues to grow at a faster pace than its competition by a significant margin. For the quarter ended December 2017 it saw a 3.3% QoQ growth (14% YoY growth) compared to Wipro which was flat (5.8% YoY). HCL has continued to perform consistently compared to Wipro (see Figure 1), which has been faltering due to internal problems compounded by external factors.

Interestingly, in the quarter ended September 2015 the difference between Wipro and HCL in revenue terms was around $250m. Since then, this has narrowed to about $25m – that is to say, on an annualized basis the gap has narrowed from around $1bn to $100m. In this period, HCL has already overtaken Wipro to become the largest Indian engineering services provider, and its engineering services business continues to grow at over 30% QoQ (it grew 38% for the quarter ended December 2017).


Figure 1: HCL continues to grow at a steady clip compared to Wipro

HCL continues to grow
Source: Ovum

HCL’s engineering services arm has been the major driver of much of this growth as it continues to sustain 30–35% YoY growth rates (the segment clocked 48% YoY growth in the quarter ending December 2017, while Wipro’s product and engineering service segments showed only 1.3% growth). Moreover, Wipro has had a few struggles of its own as it went through internal upheavals and difficulties with sustaining growth across its key markets. Both Wipro and HCL are betting big on the digital services space to carry the business forward; however, declines in the traditional service lines are hitting Wipro harder than HCL. Unless Wipro finds a way to plug the decline and boost growth rates, the next few quarters will likely see HCL overtake it to become the fourth-largest India-based IT services provider (third-largest if you remove Cognizant which considers itself a US-based company). The last time there was a shake-up of the rankings was in 2012 when then “upstart” Cognizant sped past Infosys to become the second-largest player in the Indian IT services space. Ovum will continue to track this space closely over the next quarters to see how it plays out. With the focus on many of these firms’ plans to expand into the US this year, this Wipro-HCL race adds an extra bit of excitement to the industry’s movements as it tackles market headwinds.

Appendix

Further reading

Enterprise Case Study: Automating CSP Service Delivery Processes, SPT001-000012 (February 2018)

Optus ups its game in IoT in Australia, ENS002-000011 (January 2018)

Telcos enter a new era of professional managed services, ENS002-000003 (November 2017)

Author

Hansa Iyengar, Senior Analyst, Advanced Digital Services

hansa.iyengar@ovum.com

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