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Riding the Economic Storm|
- By Abhinna Shreshtha, Nov 03, 2008 1733 hrs IST
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The just ended quarter of the current fiscal year, especially the second half of September, has been an interesting period from an unbiased perspective, but for IT companies its been chaotic, throwing their well-planned business roadmaps into confusion and forcing them to bring down their revenue expectations for the coming months.
SAP was among the first major IT vendors to come out and announce that they had failed to stay insulated from the financial crisis gripping the world. Speaking to analysts, just prior to announcing their quarterly results, SAP co-CEO Henning Kagermann said the company could not overcome the sudden change in the economic environment seen in the second half of September. Kaggerman had said customers expressed the need to focus on short term investments and put planned IT investments on hold.
M&As to create Opportunities
N. Chandrasekharan, COO & executive director of TCS feels the mergers and acquisitions happening in the American BFSI sector will create the need for IT consolidation, which could be exploited by Indian IT companies. "Mergers of banks and financial institutions has created the need for integration of data and application for central operation activity. The services require custom application development for interoperability, application management, and re-engineering. It is a huge opportunity and we are looking to tap it," he said.
Other IT majors like Infosys have also expressed similar views. V. Balakrishnan, CFO of Infosys Technologies said that growth in India could go down to 7-8% from the earlier 8-10%. He said, "In spite of the current economic scenario, companies will continue to invest in IT. There could be some short-term impact due to corporate clamp down on costs to wade through the present economic crisis. However, in the medium to long term, corporates would continue to invest in IT as it would bring more efficiency, better customer service, etc. As a result, the technology spending in the medium and long term will also continue to increase."
Outsourcing to show growth
Another possible opportunity will stem from the fact that with strict budgeting, outsourcing IT projects could see an increase, with cheaper destinations like India being preferred by Western organizations. Analysts and industry experts though believe that most organizations are going to put their non-core IT projects on hold and invest only on those projects that are critical for business. As a Gartner analyst puts it, "Investments on IT are going to get more tactical."
Synlog, a solutions provider for the BFSI sector, has a number of clients in America. According to Prakash Seernani, COO of Synlog, some of the effects of the financial crisis that they have witnessed include a slowdown in the flow of money. He also feels that a lot of outsourcing contracts might get re-negotiated.
Shankar Krishnamoorthy, CTO of Aspire Systems, gives a different perspective. He feels we could see IT outsourcing service providers fine tune their processes, leading to more innovative thought processes and more efficient working, finally leading to a 'survival of the fittest' scenario. Krishnamoorthy said, "Most of our American BFSI clients are in the private equity space and what we have heard form them is that till now they have not experienced any major impact of the economic downfall." However, he does say that he expects to see some kind of impact in the coming six months.
Related links:
SAP Sees Unexpected Slump in Revenue
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