Why Infosys is losing momentum in every vertical

BANGALORE: Infosys's overall revenues dropped below that of Cognizant last year. But what must be worrying the IT company more is its loss of momentum in almost every vertical. And in both its flagship verticals - BFSI (banking , financial services & insurance ) and manufacturing - its rank has dropped.

In BFSI, Infosys's revenue in the March quarter of fiscal 2011 was $571.9 million and this grew modestly to $657 million in March 2013. But Cognizant's revenue grew$570 million to $855 million in the same period , pushing Infosys to No. 3 in that space. In fact, Cognizant surpassed Infosys in this vertical in the June quarter of fiscal 2012.

In manufacturing, Infosys used to be No. 1, but in the September quarter of fiscal 2013, TCS's revenue ($402 million) crossed that of Infosys ($397 million) and has remained ahead since then. In retail, Infosys and TCS's revenues were similar in the March quarter of 2011, but by March 2013, TCS had grown its revenues to $407 million, while Infosys's rose to just $298 million.

This loss of momentum and ranking puts the company at risk of losing mindshare among customers in the long run. "It is critical for you to protect your flagship growth engines. Today, being No.1 or No.2 in a vertical is important for companies because they are known for their specialized offerings. If you think of Maruti, you would associate it with 800 or Alto, not with its big cars. Likewise, HCL has created a niche in infrastructure services , and Cognizant in healthcare and BFSI," said an industry analyst who did not want to be named.

Some experts say that clients are not concerned as much about relative rankings as about whether the IT vendor can demonstrate scale, stability and incremental value . "The IT vendor's credibility , past experience and delivery capabilities become a priority while contracting work. It's on auto pilot mode once these are factored in," said Sanjay Dhawan, leader for technology in consulting firm PricewaterhouseCoopers (PwC) India.

Siddharth Pai, partner and president of Asia Pacific in advisory firm Information Services Group (ISG), said an IT company should have a large enough presence in a vertical and that was more important than the relative position.

But in Infosys's case, the problem is that it has been weakening, relatively, in the areas that it was once seen to be experts in. "The big question is will they be in a position to demonstrate incremental bandwidth to clients? Infosys has no doubt managed to add new clients, but they are not necessarily growing them across the sub $10 million accounts," said Sudin Apte, CEO of IT advisory firm Offshore Insights.

"Infosys had set the tone in terms of market perception and brand value for others to follow. But they didn't read the market too well when competition took the lead and widened the gap, making it hard for them to catch up," said Sridhar Vedala, CEO of IT sourcing advisory firm QS Advisory.