The latest TBR report analysed the business performance of Cognizant, HCL Technologies, Infosys, Tata Consultancy Services (TCS) and Wipro during the first couple quarters of the pandemic.
TBR analysts who prepared the research report include Evan Woollacott; Megan Dille; Patrick M. Heffernan; and Boz Hristov.
Most of these IT Services companies formed partnerships and sign new deals, especially those around cloud capabilities.
India-centric IT vendors will make resource management improvements, such as enhancing their training and hiring efforts, and solidify existing client relationships by supporting clients through optimization and digital transformation offerings as they transition to digital business practices.
Cognizant’s revenue growth was below as the company wrestled with multiple factors simultaneously.
Healthcare & Life Sciences revenue increased 2 percent in 2Q20 but failed to outweigh the impacts of the pandemic as weak demand led to a revenue decline of 4.2 percent in North America.
Cognizant’s employee layoffs increased due to COVID-19, higher than its estimates as part of the company’s 2020 Fit for Growth. As senior-level management also experienced layoffs and job changes, it is important for Cognizant to ensure transitions are swift and transparent to avoid miscommunication between management levels.
HCL Technologies experienced a near-flat revenue change in 2Q20 with a decline of 0.3 percent despite COVID-19 challenging the company’s supply chain and deal sizes. The IT vendor excelled in reducing expenses through shifting to offshore locations and curtailing hiring.
Though HCL curtailed most hiring efforts, the company continues its TechBee Programme, which aims to create a pipeline of consulting- and engineering-focused talent, and benefits from stable leadership, with 30 top executives averaging 26 years at the company. HCL was able to retain clients and support client needs more efficiently.
HCL’s reallocation of expenses has greatly benefited the company and recommends focusing on continual expansion of Mode 2 and Mode 3 services to increase revenues and remain competitive with its India-centric peers.
TCS experienced the worst revenue performance, with a decline of 7.8 percent from 2Q19 to 2Q20.
TCS noted that all service lines and geographic regions performed poorly, specifically the Americas and EMEA where revenues dropped an average of 6.25 percent in 2Q20. TCS has performed well in the Health & Life Sciences industry and stands well positioned compared to peers in pricing, attracting a number of diverse clients.
TCS’ low labor costs and expertise in automation and digital transformation allowed the IT vendor to remain competitive by reducing expenses and leading to potential revenue growth. TCS slowed its partnership strategy, which sets itself behind competitors that strengthened alliances amid the pandemic.
Infosys utilizes Celonis for robotic process automation. Wipro relies on IBM TRIRIGA’s Digital Inspection Solution for a workplace safety solution.
Under TCS’ Vision 25×25, only 25 percent of employees will work in offices by 2025, which is an innovative management strategy compared to peers. This is likely to reduce costs as the company would close office locations.
Wipro posted a revenue decline of 6.9 percent in 2Q20, and TBR expects low demand to influence further declines during 2020. Despite this, fixed-price contracts remained steady and expenses were controlled due to Wipro’s HOLMES platform, a solution highlighting internal automation.
If Wipro is to overcome revenue challenges, it must rely on partners, such as Amazon Web Services (AWS) and Microsoft, to take advantage of cloud market opportunities that have been further catalyzed by the outbreak of COVID-19
Wipro temporarily has laid off employees and plans to rehire when client needs return to previous levels. Roughly 50 percent of the remaining employees underwent advanced digital technologies training, a calculated effort by Wipro that is likely to drive greater innovation compared to its India-centric peers.
If Wipro is to regain revenue traction it needs to accelerate strategic acquisitions and signings in Europe, like that of its recent multiyear deal with E.ON. The company also acquired 4C, a Salesforce Platinum Partner, which strengthens Wipro’s position in EMEA through advanced software and cloud capabilities.
Wipro will need to continue to take action to improve its geographic performance, as the company experienced double-digit declines in the region during 2Q20, and develop modernized solutions to improve revenue for 2021.
Infosys outperformed Cognizant, TCS and Wipro, with similar 2Q20 revenue performance as HCL with a decline of 0.3 percent in 2Q20.
With Europe and North America making up roughly 85 percent of Infosys’ total revenue, performance in these regions remains significant, and the company signed several deals focusing on digital transformation and pandemic-related efforts.
Infosys navigated the rocky market with its investments in localization, AI-enabled project management tools and client retention. Infosys’ leadership has recently been successful in training current staff in next-generation technologies and avoiding the costs of hiring new employees.
Infosys transitioned 99 percent of employees to remote work, whereas HCL shifted 96 percent, and plans to have one-third of all staff work from home permanently.
In recent years, Infosys struggled to retain upper-level leadership, but the company has made improvements to its once feeble employee retention efforts by initiating a large-scale hiring campaign to employ 12,000 IT professionals and recent graduates by the end of 2022.