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IT companies change tack to beat crisis
Nasscom’s glossy projections for India’s infotech and outsourcing industry could turn out to be hard to achieve, thanks to the meltdown in the US, reports Suprotip Ghosh.
Nasscom’s glossy projections for India’s infotech and outsourcing industry could turn out to be hard to achieve, thanks to the meltdown in the US. The top industry body for software industry had estimated that the IT and BPO industry would earn as much as $ 64 billion (Rs 2.99 lakh crore), or 8 per cent of India’s GDP, in sales by 2008-09.
The US financial services sector, which contributed significantly to India’s IT sector growth is facing troubled times. This means, the lucrative contracts for the Infys and Wipros are in danger of drying up. In these troubled times, reinvention and reorganisation seem to be the mantra. It would also mean India’s 2.5 lakh IT
workers would get a chance to upgrade their skills.
The first signs of this shift are already evident. Infosys and HCL Technologies, two of India’s largest IT companies, are locked in a bidding war for Axon Group, a UK-based consultancy firm that has a large presence in SAP implementation.
Axon will bring a wealth of new technologies and clients to whoever gets it, allowing them a new source of revenues. Axon’s clients include car companies such as Ford, Nissan, Mercedes and Maruti.
“Indian IT companies have focussed on banking simply because banks were first to outsource,” said Gaurav Dua, head of research, Sharekhan, a Mumbai-based broking house. “In fact, other markets including entertainment and transportation are equally lucrative. Buying companies abroad can be a great entry there.”
This establishes the fact that Indian IT companies would now look beyond their usual banking and financial services clients to make up for lost contracts from Wall Street biggies, feel industry watchers.
That would in turn mean more contracts from manufacturing industry, healthcare, automotives and unlikely customers in logistics and entertainment.
“Using cash reserves for acquiring companies and new technologies is going to be the way forward as they expand services,” said Harit Shah, research analyst, Angel broking.
The silver lining could be Indian rupee, which has fallen from fallen from Rs 39.77 on April 18 to a low of Rs 46.95 Thursday. While this is a cushion, the experts say many companies would not be able to hold on to the advantage. Most companies are hedged against the dollar, which means that they would be paid at a fixed rate, no matter how much the dollar moves.
