Service cos managing improved margins from domestic business

In India, most of the deals are fixed-price deals. If you have productivity measures, can reuse knowledge, and implement projects faster, you can have better margins – Mr Binod

 

Despite the lower billing rates, some of the businesses in the domestic market are fetching Indian IT service companies margins comparable to what they get in mature markets such as the US or the UK. While pricing may not have increased significantly, a large number of India deals are fixed-price contracts, which give IT companies the room to improve profitability through cost management.

Also, though the market is still in early stages of maturity, some of the early adopters of technology are now investing in more value-added services such as business analytics where the margins are higher.

 

"In India, most of the deals are fixed-price deals. If you have productivity measures, can reuse knowledge, and implement projects faster, you can have better margins," said Mr Binod H. R., Senior Vice-President and Head, India Business Unit. "We are making good money by selling in the domestic market. In our infrastructure business the margins are comparable," said Mr Anand Sankaran, Senior Vice-President and Business Head, Wipro Infotech.

 

For application or consulting services, the company expects the margin in India to be equal to global levels in the next three-four years. "It is slightly lower today because we have to reach the critical mass in terms of volume," Mr Sankaran added. Pricing and profitability also depends on the nature of the business and varies from deal to deal. If a company can provide value and is willing to guarantee results, the profitability is as good as in any other market, said Mr Ganesh Natarajan, Vice-Chairman and CEO of Zensar Technologies. For vanilla services such as application development and management, the profitability would be lower, he added.

 

Source: The Hindu Business Line