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Outlook bleak for India's outsourcing
Published in The Saudi Gazette on 26 - 01 - 2009

India's software sector, reeling from a huge accounting fraud in one of its flagship companies, faces further problems as US firms scale back in a troubled global business environment, analysts said.
Two of India's top IT companies - Infosys Technologies and Wipro - have acknowledged that their revenues are under pressure.
Meanwhile, India's largest software exporter Tata Consultancy Services (TCS) saw its third-quarter net profit rise by a lower-than-expected 1.57 percent from a year earlier because of the global economic slowdown. It traditionally gives no guidance. The flurry of dismal earnings news and a $1 billion false accounting scandal at Satyam Computer Services earlier this month has combined to cool investor sentiment toward the once red-hot sector, which employs two million workers in India. “We're seeing a clear slowdown for the IT giants (in the latest quarter) and it's not a surprise,” said Apurva Shah, head of research at brokerage Prabhudas Lilladher. Brokerage firms and analysts say the outlook appears bleak for the top IT companies for at least the next two quarters. “The near-term outlook for India's IT sector is cautious and uncertain,” said Harit Shah, software analyst at Angel Broking.
“Revenue visibility has become hazier than ever. With the US economy likely to undergo an extended period of painful transition, any recovery is likely to take some while,” Shah said.
Infosys chief executive S. Gopalkrishnan said last week the budgets of oversea in February and they were expected to be “slightly less or flat.”
Infosys' full-year dollar guidance was cautious with revenues expected in the $4.67 billion to $4.71 billion range – representing growth of 11.8 to 12.8 percent, a far cry from earlier growth of plus 30 percent. India's business community has been rocked by Satyam founder B. Ramalinga Raju's declaration on Jan. 7 that he had fudged the company's accounts for years and 1 billion in cash was falsified.
Uncertainty in the sector's future business volumes could be compounded if outsourcing laws changes with Barack Obama making good on promises where he said would offer incentives to companies that created jobs at home and halt tax breaks to those that ship work abroad.
Close to four-fifths of the world's biggest companies outsource work to India, with about 60 percent of the contracts coming from the United States. However, India's IT firms have brushed off concerns that Obama would formally seek to curtail outsourcing. NASSCOM has said it believes that these fears are unfounded, despite Washington's efforts to boost job opportunities at home.


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