In Bangalore, where it all began, the mood is of concern, but not alarm. While the city that championed the software export boom led by Infosys and Wipro remains choked by the traffic generated by the growth, the industry’s ride now faces some riders.
Industry insiders say a slew of external and internal challenges ahead in fiscal 2009 will prove beneficial for IT services companies in the long term. However, every player in this sector would have to endure retardation for a short duration during the next financial year.
In a sense, the impending US slowdown will prove a replay of that witnessed in 2001, when the deceleration lead to enhanced outsourcing orders from firms in that country. "When the global companies are under pressure to cut costs and become efficient, they tend to offshore more and that could be beneficial for Indian IT services companies. There could be some short-term uncertainty for all the players in the IT industry, if US goes into recession. But, in the long-term, it could be more beneficial for offshore players," says V Balakrishnan, CFO, Infosys Technologies Ltd. “The share of Indian IT services revenues is just five per cent of the global IT services spending and there are enough opportunities for growth available for the industry,” he adds.
Sources in Wipro Ltd said tech companies would work out strategies to mitigate the decline of revenues likely on account of the slowdown of US economy. One way would be to optimise productivity and reduce the strength of the “bench” (employees awaiting projects) in order to keep the overhead costs under control.
Some could even rid their workforce of employees with poor performance records. It is a time of rationalization and reckoning in the industry – and not one of gloom.