IT firms see cloud adoption to drive more business

TCS, Wipro and HCL Technologies, who have significant presence in the IT infrastructure management services (IMS) space are expanded to see higher growth for these services as global firms look at massive shift to cloud and move away from legacy IT infrastructure, a brokerage firm said.

"Enterprises are migrating some of their applications to public clouds as well as working on private cloud strategy. Indian IT vendors are gauging a medium-term opportunity in enabling the enterprise cloud strategy (consulting, migration, integration, security). We see steady traction in IMS over next two-three years as enterprises evolve their cloud strategy," said Madhu Babu, research analyst with Centrum Broking in a note.

This business could also be aided further by new outsourcing opportunity in IT infrastructure management services from countries such as Germany, France and northern European countries, he added.

Cloud adoption across global service engagements - a market measured at $40 billion in 2014 - is expected to continue its rapid growth through 2018, with 23 to 27% per year compound growth said Everest Group in April.

The expansion in the market is primarily comes under data centre outsourcing business and hence, Indian firms could witness growth in the segment, said a city-based analyst.

While the IMS business might flourish for a couple of years from now due to emergence of data centre which would provide cloud support to business houses, Centum cautioned, automation and commoditisation of such services pose risk of shrinking deal size in long term.

"IMS and BPO are the service lines witnessing the maximum impact of automation, led by cognitive and artificial intelligence platforms. However, this could be gradual and evolve over two-three years," it said.

In 2014-15, HCL, TCS, Wipro and Infosys earned $6.8 billion (Rs 45,519 crore) revenue from IMS services, which grew 21% over the previous financial year. The growth in IMS service business was more than double than the average of 10.4% overall revenue growth seen in the four companies.

Currently, Wipro and HCL Technologies generate 28% and 35% revenue respectively out of IMS business while Infosys's revenue from IMS was about 8%.Tata Consultancy Services (TCS) , India's largest technology services firm earns 13.8% revenue from IT infrastructure management.

Centum said that both HCL and TCS have better position in this business segment.

"Indian IT vendors have strengthened their positioning in the IMS market, with HCL Tech and TCS being highly rated by leading consulting firms. Over the past two years, Indian IT vendors have seen steady deal wins in Europe as well, owing to under-penetration in the region," Babu said in the report .