Good year ahead for IT sector amid Western upturn

The upturn in Western economies has had a positive impact on the Indian information technology sector in 2014, as was evident last week when industry leaders Tata Consultancy Services (TCS), Wipro, HCL Technologies and Infosys announced their fourth quarter and full year earnings.

Fourth quarter sales growth over the year-ago period ranged from 31 per cent for TCS to 21.3 per cent for Wipro. Net profit growth ranged from 59 per cent for HCL Technologies to 25 per cent for Infosys, although analysts felt the quarter was muted compared to the preceding quarter.

IT firms are well-equipped to cater to the increased demand and are venturing deeper into markets in Asia Pacific and Latin America. They are all present in the fast-growing social mobility, analytics and cloud (SMAC) space and have developed good competencies in it.

TCS indicated that going forward, increasing discretionary spend towards digital presents a $3-5 billion opportunity over the next few years.

The last few years were challenging due to poor demand and low expenditure. But now with companies increasingly going digital, it could well be a growth driver for IT companies. The sector is expected to surpass the guidance given by National Association of Software and Services Companies (NASSCOM) of a 13 per cent growth rate in FY'15.

Wipro and Infosys as per their own guidance may not find it so easy to surpass the NASSCOM guidance, but the industry as a whole is poised to surpass that figure.