TCS Profit Warning - Indicating all is Not Well in IT Sector


Recently TCS came out the profit warning and sent out shock waves across investor community. TCS is known for meeting profit forecast or beating it. Even though TCS tried to deflect the severity of the situation by pointing out that one or two sectors are performing below expectations.

We all should know that multi billion $ IT contract is under renewal which Indian IT companies are managing or developing. The competitor landscape changed completely in the 5 years and it is expected that clients will go for renegotiation on servicing price point.

Recently Infosys shocked the market with an announcement that they lost one of the contract worth $200 MN. We as an investor should be ready to digest more negative news from IT companies.Needless to say that the change in market dynamic and continuous pressure on TCS Profit margin is going to led slow resource hiring or recalibration of existing resources or layoff. It will be having cascading impact on smaller IT companies. At the same time Startup ecosystem is also facing funding issue and layoff is on the rise. 

In my point of view, Indian IT giant should transform their business and should be more focused to come out with their own products. The resources associated with these IT giants are superb in potentials and managed many complex project. If IT giant decide to come out with sector specific product line then only they will be able to sustain their growth. Sitting on multi billion $ cash, I don't think that they need to raise money to develop product. 

Recent announcement is just the warning bell and still it's not late for IT giant to change their strategy to become product, platform company

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Visionary Leader with 22 years of multi-functional experience - combine astute tactical, strategic, business, technology and industry skills in ICT domain at domestic and international level (Wired/Wireless/ networks /platforms/ connected device) .... More

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Monday, 12 September 2016 at 23:47:00 GMT-7 delete

It seems that all IT professional need to keep their seat belt tight.