Bharat Kumar

Chennai , May 23

SENDING away clients who knock on your doors is the done thing now.

We have seen it happening across the last 10 quarters or so. But, earlier, it was easy to be seen losing clients. The IT slump was not over then.

Now, not only are Indian IT software services companies adding few net clients (client gains net of client losses), but they are also making more revenues per existing client.

This lends a semblance of predictability and IT companies seem to focus more on those clients who promise increasing future business.

However, such a trend cannot automatically mean that companies have a tight leash over sales and marketing costs. For, the number of gross client gain and client loss tells a story of several clients experimenting with a particular vendor and then going away.

Table I tells us that Infosys' is a classic case of not adding too many net clients. In the last four quarters, its active client base has seen an addition of less than 20, from 419 to 438. The client base growth in 2004-05 is less than it was for 2003-04.

Both HCL Technologies and Cognizant Technology Solutions also saw significant client loss compared to client gains for the quarter ended March 2005. (HCL's year ends in June, while Cognizant's ended in December.) HCL Tech saw 18 new clients in the quarter, but lost 22. Its client loss in the last four quarters has been nearly half that of client gains.

Cognizant lost as many customers as it gained in the quarter - 30. According to Cognizant's CFO, Mr Gordon Coburn, "We ended work for approximately 30 clients during the quarter, almost all of which were very small clients, which, when combined, generated less than a half of 1 per cent of our 2004 revenue."

Wipro Technologies, however, had a different story. Its client gains far exceed client loss both for the last quarter and the year. But that has not impacted its ability to get more revenues per client (Business Line looked at revenues from clients excluding those from top-10 clients.)

As with Infosys and Satyam, Wipro too was able to see a rise in revenue per client (Table II). While that figure rose even between 2003 and 2004, the rise between 2004 and 2005 is more, for all three companies.

HCL Tech saw lower growth (13 per cent) in revenues per client for the quarter ended March between 2004 and 2005 compared to the 17.2 per cent growth it saw between the March quarters ended 2003 and 2004.

Mastek saw a slump of 22 per cent in revenues per client between the last two March quarters. Cognizant saw a 46 per cent growth in revenues per non-top-10 client to $0.43 million. Extrapolating, it would amount to $1.72 million for a year.

All companies seen in the Table, (except for Mastek and HCL Tech in the March quarters), have seen a slump in percentage revenue contribution from top-10 clients between March 2004 and March 2005.

This is seen as a good way to reduce risk by not depending on a handful of clients for revenues and revenue growth.

Revenues from clients other than top-10 have grown faster than revenues from top-10 clients. Again, HCL Tech and Mastek have seen a reverse of that trend for the March quarter comparisons.

These figures, considered along with the number of $1 million clients and $5 million clients, give us an idea of the shape of the industry.

Industry watchers feel that if companies have been able to maintain or decrease percentage contribution from the top-10 clients and the number of $1 million clients has grown, then it is a positive sign.

Even if the percentage contribution from the top-10 clients has gone up (which signals more dependence on less number of clients), and the number of $1 million clients has gone up, it can be considered positive, as long as the average revenues per client has increased, they say.

Infosys increased its $1 million client numbers from 131 in March 2004 to 166 in March 2005, while clients who contributed at least $5 million went up by 20 to 71.

Significantly, HCL Technologies - whose fiscal year ends in June - saw its March quarter numbers go up to 126 $1-million clients from 104 in March 2004 and only 67 the previous March, while Satyam's numbers went up from 89 to 130 $1-million clients.

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