Wednesday, 3 June 2015

Tech Mahindra forecasts Rs 3,100 crore digital revenue for 2015

Tech Mahindra, India's fifth largest IT services company, expects digital revenue to cross $500 million (about Rs 3,100 crore) by the end of 2015, helping the company move towards its $5 billion topline target.

TechM's had assumed that a tenth of that would come from new digital technologies, but growth has exceeded expectations. 'Digital is growing faster than we had anticipated and faster than the rest of the business," TechM chief executive officer CP Gurnani told ET. "We will end the year with much more than $500 million in digital revenue."

Typically, IT firms include revenue from analytics, cloud and social media-based services and mobility solutions in their overall digital sales. Tech Mahindra's digital unit, however, also includes technologies related to network, security and sensors that comprise the Internet-of-Things, an idea of connecting almost everything online. The company uses the acronym NMACS for these technologies that comprise its digital offerings.

The company has over 2,500 people trained in digital specializations and over 200 consultants. The unit is augmented by TechM's overall workforce, which is about 100,000 people.

"Digital has to grow faster because that is where there is demand," an analyst with a Mumbai-based brokerage said on condition of anonymity. "But for IT firms to grow at their previous levels, the contribution of digital has to go much higher. For some of the US outsourcers, it is reaching 20% of revenue."

Digital is expected to be the saving grace for Indian IT players, who are facing pricing pressure in their traditional businesses. The segment is growing fast, as companies look to spend more on digital while cutting back on their existing contracts.

The National Association for Software and Services Companies has said 12-14% of the industry's revenues came from digital offerings in FY15, a proportion that is expected to rise. In its latest financial year, Accenture's revenue from digital was about $5 billion, roughly 17% of its overall revenue.

Among the Indian IT companies, Tech Mahindra is one of the few to disclose overall digital revenue. Cognizant, the second-largest India-centric IT firm by revenue, said it generated $500 million in revenue from SMAC in 2013, after that the company stopped breaking out its digital revenue.

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