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No slowdown in IT sector: Premji

Premji says that there is no cause of concern when it comes to business from the US, reports Venkatesh Ganesh.

business Updated: Apr 21, 2007 04:25 IST

Indian software majors are not worried about the slowdown in the US economy nor do they forsee a 2001-type crash in the near future.

Announcing the fourth quarter results, Wipro Chairman Azim Premji and Satyam Chairman Ramalinga Raju on Friday dispelled fears of a possible slowdown in the IT sector. Premji said there is no cause of concern when it comes to business from the US. Satyam Chairman B. Ramalinga Raju said, "We continue to see a strong demand in the market,” he said.

TCS CEO S Ramadorai and Infosys Chairman feel that Indian software companies are in a better situation in 2007 and are in a win-win situation in case of a US slowdown.

"The key indicator is the application development and maintenance work, which is expected to go up,” says an IT analyst from a leading Mumbai-based brokerage house. According to research group Gartner, IT budgets will increase by an average of 3 per cent in 2007, up slightly from 2006 IT budget increases of 2.7 per cent.

Another analyst says that typically IT budgets in the US are finalised by the end of January. “That’s another key reason for Indian software companies to be optimistic for the year ahead,” says a CFO from a Bangalore-based software company.

Companies will have to cut costs and optimise IT their existing assets,” said Suresh Vaswani, President, Wipro Infotech.

Pradeep Mukherji, MD, Tholons, a software private investments company, said that since the last slow down, Indian software companies are better prepared on account of their understanding of different sectors like automotive, telecom, manufacturing and retail.

Indian companies are also diversifying into other geographies to mitigate risks arising out of a slowdown. “The margins in non US locations such as Europe and Japan are almost comparable with that of the US and Indian companies have realised this,” said Sid Pai of TPI associates.