Firms have also recognised the huge opportunity that ‘digital’ represents

Things are certainly looking up for the information technology (IT) sector in 2014 and this was evident last week when industry heavyweights like 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. “The prospects though, are good and improving. The revival in the US, UK and European economies is promising,” Dipen Shah, Head – Private Client Group Research, Kotak Securities said.

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.

Importantly, according to Mr. Shah, the companies have recognized very early the huge opportunity that digital presents.

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

“Globally, consumer-oriented companies are being forced to accept going digital with several of them having to reconfigure their entire organization,” said Mr. Shah adding, “this could be the next big wave and demand is picking up fast.” 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, Daljit Singh Kohli, Head-Research, IndiaNivesh Securities told this correspondent. The IT 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, the industry is poised to surpass that figure, Mr. Kohli said, adding that prospects in terms of India business “continue to hinge on the poll prospects, as government spending has been slack but a clear mandate will shore up IT spend.”