The Hindu Business Line : ‘Market needs stability before spending picks up’

Bangalore, July 30 While it is still too early for the IT industry to predict the business environment for the next couple of quarters and some of the companies remain “cautiously optimistic”, Mr V. Balakrishnan, Chief Financial Officer, Infosys Technologies Ltd, tells Business Line what the future trends might be. Excerpts from an interview where Mr Balakrishnan speaks about the business environment, offshoring trends and customer behaviour.

Do you think your business would continue to be lean in the second half of fiscal 2008, or do you expect the situation to improve?

The financial services sector has been hard hit. A lot of negative news about the environment is coming in. I think the market needs some stability before spending picks up. Customer confidence is still low because the environment is throwing up a lot of negative sentiments. The economy has to stabilise for the customers to take comfort and start spending again. So, that stability must come. It will take some more time. The companies have finalised their budgets but that’s not the issue. If we have to look at incremental spending above what they have finalised, there should be some stability in the environment. The companies won’t open up their purse unless they are confident about the stability of the macro-economics issues.

Contribution to total revenue from your top client has decreased in the last quarter. Do you expect this to hurt revenue in the second quarter?

We have a portfolio of clients. At some point in time, some clients will be growing. At another, some other client will be growing. If we are able to grow at the portfolio level, that is enough for us. We have a portfolio approach. We are seeing good growth in our portfolio of customers.

Do you think your clients would offshore more because of the slowdown?

It could happen when customers have a limited budget. It is quite possible that they will offshore it more so that they can get all the work done within the budget. Customers clearly realise the value. So I think if the customers are under pressure, they could accelerate offshore operations. Customers can also accelerate offshore operations by consolidating vendors because they want value for money without compromising on the quality of spending. So I think both could happen.

Why would clients like to consolidate vendors?

Most of the clients, when they are under pressure, try to consolidate vendors because nobody wants to work with some 10 different vendors. They want to work with a few vendors where they see value, where they can consolidate spending, and where they can get maximum benefit of that spend.

Would big players such as Infosys, or small niche companies, benefit from vendor consolidation?

It could be both. There are customers who want scale, customers who want companies that have entire capability because they do not want to work with multiple vendors for multiple services. Therefore, all the big companies are growing faster. At the same time, customers would look for niche players who have industry and domain knowledge. So I think both could grow.

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