Betting big on digital

Earlier this week, software-services firm Wipro Limited announced that it has taken over the team at Syfte, an Australian design agency for an undisclosed amount to strengthen its digital business and expand its reach in Australia and the Asia Pacific region. Syfte’s team will be integrated with Designit, Wipro’s strategic design arm, the company said in a statement recently.  At the same time, rival Cognizant said that it has acquired New York-based Mustache, a privately-held creative content agency to boost its digital content offerings, video content and programming. The financials of the deal were, however, not disclosed.

Less than a decade old, Mustache specialises in creating original and branded content for digital, broadcast and social platforms. Mustache’s client roster include: Google, L’Oréal, Netflix, and Grammarly. As part of the deal, Mustache’s team including creative directors, writers, animators, graphic designers, and others will be absorbed within Cognizant Interactive business. “Creating engaging content remains a singular challenge due to the demands of ‘always on’ social media channels – especially when it comes to video. With the addition of Mustache, Cognizant Interactive is even better positioned to fill this need,” said Donna Tuths, senior vice president and global head, Cognizant Interactive.

There are others: Last month Tata Consultancy Services (TCS) acquired London-based W12 Studios, a design firm to grow its digital portfolio. It was TCS’s one of the first acquisitions in the digital space. The Mumbai-headquartered IT firm said that W12 Studios will be part of its digital design division, TCS Interactive. In April this year, Infosys acquired U.S.-based WongDoody, a digital creative and consumer insights agency for $75 million.

In the last few years, Indian IT-services majors have focused on building niche digital capabilities and reach to boost its revenue growth from the digital business, one of the biggest bets for the $167 billion Indian IT outsourcing industry today. However, the trend has picked up more momentum in the last one year.

In an export-heavy and highly commoditised industry where players clone each other’s offerings, software-services companies are looking to create a differentiating model backed by newer technologies and services.

“Design is now a part of every digital conversation that we have with our clients. Wipro has a well established presence in Australia. With this expansion [Syfte], we now bring a substantial and differentiated design and local engineering capability to the market,” said Rajan Kohli, president, Wipro Digital in a statement recently.

Analysts point out that for the Indian IT firms traditional businesses such as application development and maintenance, verification of software, business process outsourcing services, and others are hardly growing mostly recording a single digit. While revenue from digital business is growing at 20-30% year-on-year, notes reports. [Indian IT firms typically define revenue from digital in areas such as cloud computing, Internet of Things (IoT), analytics, mobile and social.

For the quarter ended September 30, 2018, TCS’s digital revenue contribution was recorded at 28.1%, while Infosys was 31%. For Bengaluru-based Wipro, digital business contributed 31.4% of its total revenue in the September quarter. Tech Mahindra’s digital revenue grew 10% quarter-on-quarter, contributing 31% to its total revenue during the same period.

Industry experts point out that in the changing business environment as clients push for more transformative services than just cost-savings outsourcing deals, the key is to be relevant to the market place. And that requires a combination of consulting, digital and the traditional services backed by acquiring capabilities and focusing on innovations. The key is to become a “relevant” player in the industry, say analysts.