In The key point of difference between Infosys and TCS in first quarter of the current fiscal lies in the growth rate of the telecom vertical. For both companies, the telecom vertical had been sluggish over the last few quarters. However, in the April-June quarter, TCS's telecom revenues have spurted to 24% annually and 14.3%, sequentially. The corresponding numbers, for Infosys, were 7.8% and -7.1%, respectively.
According to market analysts, the telecom vertical has played a key role in widening the gulf in the Q1 growth rates of the two companies. The overall year-on-year growth for TCS is 31.4% and for Infosys the figure stands at 20.8%. In the 2010-11 fiscal, the difference was narrower - TCS grew at 24.3% and Infosys at 20.9%. The spurt in TCS's telecom revenues also contributed to the company beating street expectations as it was factored in as a weak vertical.
For both Infosys and TCS, the telecom vertical contributes about 10-12% of revenues. As TCS is more focussed on emerging geographies and has previous expertise in wireless technologies, it is easier for the company to have growth in this vertical. Infosys lags as it is more focussed towards the developed markets and on wireline technologies.
As far as the third big player in the Indian software scene, Wipro, is concerned, the growth in the telecom sector is coming from emerging markets. Wipro recorded a 15.2% annual growth and a 1.8% sequential decline in the telecom vertical. Wipro is expecting the telecom vertical to see good recovery in times to come. The companys management feels that the growth forecast in data traffic, and increased digital consumption of media will drive investments in 3GLTE, 4G, WIMAX etc. Accenture and IBM have also posted good telecom numbers in the quarter.
During the recent years, the telecom vertical has been weak for IT companies as the telecom infrastructure in the large telecom markets, like US and Europe, have already been built out. Regulatory or technology changes drive a distinct cycle of boom and bust in the sector. On these fronts, there have not been any significant developments lately.
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