The Hindu Business Line : ‘Slowdown has made clients more cautious’

While some industry officials see little or no impact, others feel that the prevailing uncertainty has prompted domestic companies, especially in sectors like banking, auto, cement and real estate, to take a more cautious approach.

According to Mr Sourabh Kaushal, Industry Manager, ICT Practice, Frost & Sullivan, “In an uncertain environment companies will tend to cut their capex requirements, which might result in a slight slowdown in IT outsourcing.” IBM, one of the largest players in the domestic space, does not see any cut in IT spending by its Indian clients. “Even if customers are under stress in specific areas, they will continue with their engagements as IT is today seen as a strategic enabler,” Mr Shanker Annaswamy, Managing Director, IBM India, said on the sidelines of the company’s ‘CIO Implications 2008,’ event in Goa last week.

Most IT companies agree there are no specific instances of a slowdown. Still, every CEO is keenly watching the business environment for future directions.

Over the next five to six months, companies could take a more cautious approach when it comes to IT spending, said Mr Amar Chintopanth, Chief Financial Officer, 3i Infotech. “IT related to day-to-day operations will continue to be outsourced, but there could be a delay in new projects.”

Deal cycles are getting longer; they take anywhere between 6-18 months to close, according to a senior industry official. Moreover, unlike in the US, cost arbitrage is not the key driver for domestic companies outsourcing IT needs to specialist vendor.

Diversification helps

However, IT firms working with a diversified portfolio of sectors need not be perturbed. Sectors such as telecom and e-governance still continue to see sustained increase in IT investments, said Mr Chintopanth.

Agrees Mr Annaswamy of IBM, who feels that even if a particular sector slows down, there will be other sectors that will compensate

The domestic IT services market is pegged to grow to $10.73 billion by 2011 at a five-year compounded annual growth rate (CAGR) of 23.2 per cent, according to a research from Gartner Inc.

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