Mid-sized IT firms like iGate, 3i Infotech and MphasiS face growing pressure in tough market conditions
MUMBAI/BANGALORE: Mid-sized IT services companies such as iGate, 3i Infotech and MphasiS are facing growing pressure in tough market conditions, underscoring the growth problem that small firms have faced for years.
In the past, Indian mid-sized companies either spent millions of dollars to buy growth or were dependent on servicing business passed on from one large client or holding company. Now the broader challenge is that they need to act on two fronts – future strategic vision and dealing with change in their existing services, experts have said.
“The existential crisis is something that companies across the board are facing, not just a handful of firm in the mid-cap segment. If you look at companies like 3i,, Polaris, MphasiS, etc., they’re suffering massively because of a basic lack of management quality, strategic vision and execution,” said a board member at a Bengaluru-based midtier firm, requesting anonymity.
“Also, none of them have defined ownership — if you look at the midtier sector, the companies that are doing well, actually have a defined ownership management stake.”
Experts also point out the fact that few mid-sized players chose to innovate, a key factor in winning the digital deals that are driving the industry’s growth.
“For the mid-cap sector, there are quite a few providers who have not specialized beyond the IT organization, there are those providers who have not come up with solutions that appeal to certain businesses, and also those who don’t have an understanding of the industry — they are the ones that are really struggling,” Arup Roy, research director at Gartner told ET.
And even those that tried to buy growth and clients are now dealing with the repercussions. Igate spent $1.2 billion to buy Patni and borrowed money from PE Apax to fund the deal. 3i binged on foreign currency convertible bonds to make several acquisitions and is currently in the process of selling assets to pay down its debt.
Source: The Economic Times