The innovation and adoption of cloud platforms and technologies have heavily affected IT services firms in India. Both HCL Technologies and Wipro have witnessed close to 50% fall in revenue growth from managing technology infrastructure of customers.
The scalability and cost have pushed organizations around the world to migrate to the cloud. While this rise and adoption of cloud computing started pearl a decade ago, it has started hurting the growth of large IT services firms for the first time. These traditional IT services firms are heavily dependent on revenue from infrastructure maintenance services (IMS).
While HCL and Wipro are reporting a huge loss of revenue from these services, India’s largest IT firm, Tata Consultancy Services (TCS) has not been affected. The major part of IMS services includes writing and maintaining code for applications and sometimes even offer customer support.
As most clients of these firms are embracing the cloud, there is fall in revenue from IMS business. Right from 2011, IMS business has grown on par with the company’s overall revenue growth. The challenges are bigger for firms like HCL Technologies as at least half of the total IMS revenue comes from the legacy work of establishing data center business.
HCL Technologies has recorded 10.5% of growth in its IMS business between April-June 2016 and April-June 2018. Which is less than half of its overall growth. Similarly, Wipro recorded only 3% of growth in its IMS business. The IMS business growth of TCS and Infosys is unknown as these firms have stopped disclosing revenue from service offerings.
The Fortune 500 companies that relied on IMS business for almost a decade have established large data centers. Most of these companies have started replacing their own data center with public cloud services. TCS has always stayed away from setting up its own data center, it only maintains infrastructure needs for its clients.
The adoption and push towards cloud have helped the tech giants that are offering Platform-as-a-Service (PaaS). The rise of Amazon Web Services (AWS) and Microsoft Azure has led to the most organization to move away from traditionally setup servers to a cloud computing platform. As Indian firms stitch partnerships with these public cloud companies, they are tapping the newly created opportunity of helping their existing customers in migrating to cloud.