IT Outsourcing India

BANGALORE: The country’s largest IT services exporter, Tata Consultancy Services (TCS), feels that the decline in demand for IT outsourcing seems to have been ‘arrested’.

“We believe that decline in demand has hit a plateau. But this would not mean that there would be an increase in IT offshoring,” said TCS CFO S Mahalingam here on Wednesday. TCS registered a consolidated revenue of Rs 27,812 crore for FY09 as against Rs 22,619 crore, registering a year-on-year growth of 23%.

The export-focused Indian IT industry has been heavily hit by the economic downturn in developed economies in the West namely US and Europe, resulting in lesser demand for its services. However, Mr Mahalingam said that they would adopt a more aggressive diversification strategy both in terms of newer business verticals and geographies.

TCS gets around 42% of its revenue from the BFSI vertical and is seeing emerging business segments like retail, pharmaceutical, utilities showing an upward trend in IT outsourcing activity.

Mr Mahalingam said that they would focus on emerging economies and the India market is becoming one of its priorities. In India, TCS expects e-governance projects to pick up momentum with the new government in place.

The TCS official said that the demand environment has not really picked up with the conversion of deals still taking its time especially with new businesses. TCS expects to move more work offshore along with cost reductions to improve its operating margins, though it expects the negative headwinds like fluctuating currency movement and pricing pressure to offset any of the gains it would have made.

Mr Mahalingam said customers are asking for price reductions anywhere between 5-15% as their IT budgets have been reduced. At the same time, TCS is engaged in a cost-optimisation drive both in terms of employees and infrastructure with no salary hikes this fiscal.

Source: http://economictimes.indiatimes.com/

New Delhi, June 9 (IANS) The IT industry worldwide grew by an estimated 8.2 percent in 2008 because of a good six to eight months of ‘business as usual’ despite the meltdown, though Indian exporters took a beating, leading IT market researcher and consultancy Gartner said Tuesday.

The industry recorded a revenue of $806 billion in 2008 against a turnover of $745 billion in 2007.

‘Vendors had six to eight months of ‘business as usual’ in 2008 and then approximately four months encountering the beginning of the global economic downturn, featuring widespread cost restrictions and cost reductions,’ Kathryn Hale, research vice president for Gartner’s worldwide IT services group said.

India’s growth trajectory during the period took a major beating with exporters managing only 12.9 percent growth last year, less than a third of the healthy 39.8 percent recorded in 2 007.

‘India-based vendors were impacted early in the economic downturn. This would be expected, as these providers sell especially heavily to the financial sector and typically lead with offshore application development services, which are relatively easy to delay in tough times,’ Gartner said.

It was widely anticipated that with the crash of the banking sector in the US, IT revenues worldwide would take a beating with the BFSI (Banking, Financial Services and Insurance) segment constituting a major chunk of the IT sector’s clientele.

‘The only two segments of the market that grew less than forecast were IT management and process management,’ Hale said, adding: ‘This is particularly surprising’.

‘However, apparently, buyer hesitation to commit to the long-term requirements of outsourcing agreements took precedence in 2008,’ Hale said.

Source :  http://sify.com/

Indian technology giant Wipro said it would step up investments in the Middle East and hire more women to reinforce its commitment to a region now emerging as one of the companys most promising markets. Wipro, which launched its Middle East operations from Dubai in 2001, is committed to the region and to hiring more local talent, its chairman Azim Premji said on Tuesday. We had a phenomenal growth in the Middle East in 2008-09 at 170 per cent, and we expect to sustain our regional growth rate at 50 per cent in comparison with a market growth of six per cent, global turnover of $4.92 billion, and the company plans to enter new markets in the region.

The Indian IT outsourcer, which provides software applications, back-office services, and data warehousing, already has expanded into Egypt and Kuwait, and it employs 800 people in the region. We will see our workforce growing in tandem with our business growth, Premji said, declining to make specific projections.

We will pursue a long-term growth strategy while continuing to support IT industry growth in the Middle East, he said, declining to specify the size of the new investments it planned? for the region.

While India will continue to be the main growth engine for the IT major, other potential growth markets include France, Germany and Canada. Wipro reported a 29 per cent surge in revenue for its fiscal year ended March 31, 2009. Apart from the Middle East, we see higher potential in markets that have not been penetrated such as Portugal and Brazil, he said.

Premji said that revenue growth for Wipros IT services in 2008-09 was lower in terms of US dollars, at 18.5 per cent, because of the appreciation of the dollar against the rupee. Telecoms and the banking and government sectors will remain areas of growth in the Middle East, he said, claiming that no other player in the Middle East could match the breadth of services Wipro offered.

Wipro intends to pursue a strategy of acquisitions more aggressively, Premji added. Our experience with acquisitions has been quite satisfactory, and we are looking for new opportunities to pursue inorganic growth. He claimed that Wipro had completed more strategic acquisitions during the past three years than any of its rivals.

However, he said he does not expect an immediate turnaround for the Indian IT sector. It will remain sluggish for some more time as its outlook is linked to the global economy, Premji said. Already, we can see sentiments improving, and we expect to see some positive signs by the last quarter of 2009. We are also seeing the first signs of ?stability in the US.

Asked if restrictions on the immigration of IT professionals to the US would affect Wipros business, Premji said that Nasscom, the Indian organisation representing the countrys software industry, has been actively discussing the issue with US authorities. President Barrack Obama has said he did not want a create a wave of protectionist backlash, and I hope he will not retract on ?his commitment.

Indian IT companies have been raising concerns that curbs on the movement of Indians with US visas could affect their businesses. In a move that could have wider repercussions on the Indian IT sector, a strong lobby in the US that oppposes outsourcing is pressuring American lawmakers to take another look at that countrys H1-B visa program amid huge job losses in the US. Moreover, the Obama administration wants to end tax incentives for US companies to create jobs overseas.

In its annual filing to the US Securities and Exchange Commission, Wipro said that restrictions on immigration to the US may affect our ability to compete for and provide services to clients in the US, which could hamper our growth and cause our revenue to decline.

Premji said that China posed a challenge to Indias IT sector, but he ruled out the possibility that China would overtake India as the worlds number one IT outsourcer.

Indias political stability under the newly elected government led by Manmohan Singh would help the country sustain its economic growth at six per cent this year, he said. We are already seeing some recovery happening in India. Sentiments are good. We expect large investment into infrastructure project further spurring the country growth over the next five years.

Source : http://www.offshoringtimes.com/