The information technology sector (IT) that reported its slowest growth since the dotcom bubble burst in 2001 seems to be heading towards an era of snags.
With several of their clients in the US trimming down activity to suit an economy in a slowdown mode, the Indian IT sector that derives around 70 per cent of their annual revenues from them, seems to be running into rough weather too.
For example, a Latin American banking client of India’s biggest software exporter Tata Consultancy Services (TCS) is cutting its discretionary spending due to restructuring, resulting the IT major witnessing delays in outsourcing orders for the second consecutive quarter now.
“In the last quarter, two of its top 10 clients had delayed budget spends that impacted revenue,” said Harit Shah, IT analyst, Angel Broking. “These clients are yet to commit their IT budgets for the year.”
Announcing the first quarter results recently, S Ramadorai, chief executive officer and managing director, TCS, said the decision to outsource certain projects by several companies in the banking products segment has been delayed.
Meanwhile, latent fears of a slowdown finally got bolder in the books of IT bellwether Infosys Technologies, with the company reporting the slowest growth in core business in eight quarters.
“This quarter, volume growth in IT services was fairly sluggish at a mere 0.4 per cent as compared to the previous quarter,” said an analyst of a Mumbai-based brokerage house who refused to be named as the firm had exposure in the aforementioned stock. Volume growth is the amount of work that a company gets every quarter.