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The View from the East

India's upstart IT-services firms face their own challenges from their giant rivals in the West.

At TCS, Mahalingam acknowledges that growing margin pressure. “A big part of the game will be about efficiency,” he says. “It’s vital to work out the optimum utilization rate for the people in your organization so that you have the maximum number working as a billable resource without ignoring the need to train staff and build for the future.” He says his target is to have 78 percent of all staff working on billable assignments at any one time.

Just as important, adds Mahalingam, is the need to drive out cost and continually improve TCS’s project skills and internal processes. To that end, of the 22 percent of staff who are not working for clients, a good number are employed building software tools that TCS uses internally to operate faster and more effectively.

Equally, Mahalingam oversees a program of activity-based costing that examines every project TCS undertakes to see where money is spent and where it could be saved.

Ultimately, increasing margin pressure creates something of a paradox for the CFOs at these Indian firms, argues McKinsey’s Sinha. “There is a weight of expectation around existing margins from investors,” he says. “And yet it will be difficult for the Indian vendors to make the necessary investments to survive without diluting those margins.” As such, with CFOs typically managing not only the investment-appraisal process but also merger-and-acquisition work and investor relations, the next few years will be tougher than any yet experienced.

Justin Wood is managing editor of CFO Asia, based in Singapore.

Battle Lines
How West and East stack up in terms of revenue.
Western Firms (in US$ millions)
IBM Global Services $42,600
EDS 21,500
Accenture 13,400
Hewlett-Packard 12,300
CSC 11,400
Cap Gemini Ernst & Young 7,100
Unisys 5,900
SAIC 5,900
ACS 3,800
LogicaCMG 3,200
Bearing Point 3,100
Perot Systems 1,500
Indra 1,100
Keane 900
Covansys 400
Cognizant $400
Indian Firms (in US$ millions)
Tata Consultancy Services $1,350*
Infosys 1,065
Wipro 1,000
Satyam Computer Services 566
HCL Technologies 355
Patni Computer Services 251
NIIT 167
Mphasis 120
i-Flex Solutions 97
WNS Global Services $85
All figures are for the latest full financial year. Figures for IBM, Hewlett-Packard, Infosys, and Wipro include only the IT-services divisions of those companies. *CFO estimate
Sources: Company reports

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