pruning

http://www.livemint.com/Industry/FVOWfKxRnrQRqz6Nx9E4VN/Citi-to-Cisco-top-IT-clients-cut-spends.html


Bengaluru: While India’s $146 billion information technology outsourcing sector blames fewer working days for weak revenue growth in the October-December period, a more worrisome issue plagues its biggest names: Some of their largest clients—from Citigroup Inc. to Wal-Mart Stores Inc.—are either delaying projects or pruning their technology budgets.

Infosys currently generates about 22.7% of its revenue of $8.7 billion from its 10 largest customers as against a fourth of its $7.4 billion revenue two years ago. Its third-quarter growth is expected to be hurt by at least a 100 basis points due to a delay in a project for retailer Wal-Mart, which outsources annual business worth more than $200 million to the company, according to two people familiar with the development.

A basis point is one-hundredth of a percentage point.

Wipro, the country’s third-largest software exporter, admitted that two of its largest clients outsourced less business to it in the July-September period. It did not name these customers but Mint learned that Cisco Systems Inc. and Citibank, which together outsource work worth over $500 million annually, have cut back their spending. To make matters worse, Wipro’s management expects business from these clients to increase only from the third quarter of the next financial year.

An unexpected delay in Wal-Mart’s project means Infosys faces the brunt. Wipro is battling a situation where Cisco is looking to use more open source software than proprietary software, thereby impacting the IT vendor’s application development line, according to a senior executive at the company.

Citibank has been outsourcing incremental technology work to its own captive centres, thereby limiting any growth at both TCS and Wipro. Mint could not independently ascertain the reason behind the slowdown in business for TCS from Nielsen, which in 2013 had doubled its outsourcing work to the company.