Mobility curbs to disrupt IT cos' deal schedule
Bengaluru DOMESTIC IT services major Tata Consultancy Services (TCS) and Infosys see increased restrictions on travel hampering their abilities to close new contracts in the current financial year.
Both companies, in their annual reports for FY21, said that ongoing second wave of the pandemic in India and many other parts of the world, have led to ban on international travel. This, in turn, made the movement of their sales people difficult.
"Restrictions on travel, marketing events and in-person client meetings may result in sub-optimal branding and delays in our sales and commercial processes, affecting our revenue," Infosys said in its annual report for FY21.
The Bengaluru-headquartered firm, which cited this factor under key risks category, said that restriction on travel impacted its revenue and profitability in the last financial year.
Similarly, market leader TCS also flagged up restricted mobility as one of the risk factors amid the second wave of the pandemic. "Due to new strains of Covid-19 and increasing trend in infection cases globally, business disruptions due to intermittent lockdowns, international travel restrictions are likely, impacting the mobility of the company's workforce required to travel for work purposes, which in turn may impact service delivery and revenues," TCS said in its 2020-21 annual report. While travel restrictions are likely to bring in adverse impact on revenues of IT firms, it had already reduced cost for these companies in last financial year.
Travel cost, which is usually around 2-3 per cent of the total expenses, has reduced significantly in the last financial year. This had led to expansion of margin for most tier-I IT services firms. Apart from flagging up restricted travel as one of the key risks to growth during this financial year, TCS and Infosys also said that subdued demand environment may lead to low IT spends by clients.
"The Covid-19 pandemic extending into the second year has resulted in changes in consumer behaviors, impacting demand in various industries, hurting small businesses and necessitating large fiscal interventions. Tapering off of these interventions, or the emergence of new variants which trigger new lockdowns and other restrictions could disrupt the return to normalcy and impact customers' short-term priorities, growth plans and discretionary budgets," TCS said in the annual report. Similarly, Infosys said that the financial stability of its clients may get affected due to pandemic-related disruption.
"The financial stability of our clients may get affected or they may file for bankruptcy, jeopardising our ability to collect our account receivables and unbilled revenue," Infosys said. However, both companies exuded confidence that digitalisation among enterprises would lead to higher demand during this financial year.