The golden middle

In a rapidly changing digital world, mid-cap IT firms have more headroom to grow than large-caps

When Sanjoy Jalona, an Infosys veteran of 15 years, quit and joined the much smaller L&T Infotech in August 2015, we should have known. Or when Sandeep Kishore left HCL after 27 years and joined Zensar Technologies as its CEO, we should have realised the tide was turning. 

Indian mid-cap IT companies, which had been in the shadows of Tier-I companies, have emerged to create a niche for themselves in the digital transformation race. Tier-I companies have long used their advantage of scale to snag multi-billion, multi-year deals in traditional services, while mid-cap companies waited for their turn in the fringes. But over the past couple of years, the tables have turned. 

Mid-tier companies finally have managed to outpace their larger peers in revenue growth and, what’s more, win deals against Tier-I companies. Over the next two years, some of the mid-caps such as NIIT Technologies, L&T Infotech, Zensar and Mphasis are on track to grow at 14-18%. Larger companies, on the other hand, are looking to post more sedate growth rates during the same period. For instance, Wipro, Tech Mahindra and Infosys in particular, are expected to witness single-digit revenue growth over the next two years. Yes, the growth does come on a larger revenue base. But, what makes the growth of the mid-cap IT companies impressive is that it is coming in the digital or emerging technologies space. 

As a large number of companies are lining up for a digital makeover, demand for emerging technologies, such as cloud, AI, blockchain and IoT among others, is on the rise. According to a report by Prabhudas Lilladher, in FY11, digital services accounted for only 3-4% of the overall revenue of Indian IT companies. However, these services now account for about 30% of overall revenue. “Digital services will be a key revenue driver for Indian IT companies as clients look to increase their revenue productivity and reduce cost,” says Aniket Pande, lead analyst, Prabhudas Lilladher (See: Topline synergy).

Nasscom has forecast that globally, enterprises will increase their spending on technology and business servi


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