No Longer Soft

Always on the fringes but never the bridesmaid. That was the situation with Mumbai-based Tata Consultancy Services (TCS), the flagship of Tata Sons and the flag bearer of Indian software exports as far as memory goes. It has always been a case of so near yet so far. For a number of years, this company gave a tough fight to HCL as well as Wipro but always had to contend with the third spot in the DQ Top 20 pecking order.

No longer so. In 1998, TCS created history by becoming the number one IT vendor in India, in the process relegating Wipro to the second position which had been the number one in the previous two rankings. The most important fact here is that for the first time a software company had become the numero-uno IT vendor in India. Whereas till then, it used to be the preserve of hardware companies. In the early eighties it used to be ICIM, then HCL remained the head-honcho for a number of years and later on
Wipro.

Even till the third quarter of the financial year 1997-98, there were no indications that TCS was going to lead the pack. All indications were pointing towards Wipro retaining the top slot. But proving everybody wrong, TCS not only crossed Rs 1,000 crore in revenue, it also bagged the number one position. Although the margin between Wipro and TCS was slender--just about Rs 35 crore--still the fact of the matter is that it acted as a great psychological boost for the latter and the lead has only increased in the subsequent years. In the last fiscal (2000-01), the topline difference between the two was nearly Rs 200
crore.

Here one must keep in mind that the main reason because of which a software company has become the top IT vendor is the fact that the hardware industry as a whole is going through trying times which means that almost all the hardware companies are not able to record more than an average growth. On the other hand, the software exports sector is still booming which has resulted in software companies recording excellent growth. For example, while HCL InfoSystems whose major chunk of business comes from hardware, grew by just 18 percent, TCS recorded growth in excess of 55 percent.

Interestingly, out of the 20 companies in DQ Top 20 list, there are seven companies whose entire business comes from software. Apart from that, there are three other companies who also get a substantial chunk of business from software.

Is there a lesson for the industry? The answer is both yes and no. Yes, because vendors need to realize that they must have their fingers in software also which can cushion any adverse impact in case of a recession. No, because just one bad year for business doesn't mean that hardware selling has lost its relevance. Perhaps the vendors would need to look for a middle path.