The Hindu Business Line : IT vendors see volume growth coming from Europe

Bangalore, Nov. 4 Europe continued to be muted during the September quarter even as the large Indian IT vendors reported better-than-expected numbers for the period, largely due to the ‘lag effect’ of the global downturn.

However, the vendors expect some volume growth from the European market over the next few quarters as the situation is beginning to stabilise and client activity has increased.

The crisis had hit Europe late and, therefore, recovery is also expected to be late, the IT services companies added.

Infosys

“With respect to Europe, this quarter we have not shown growth. But it is not surprising because typically there is always a lag effect and the challenges in Europe continue in terms of demand outlook and unemployment,” said Mr B.G. Srinivas, Head of European business at Infosys Technologies.

He said the company is seeing traction in terms of client activity across sectors both in the UK and the Continent.

“So this dialogue going forward could yield to a pipeline and the growth rate will pick up. But the pace at which the growth rate will pick up will definitely continue to be muted,” he added.

During the September quarter, Europe contributed 23.2 per cent of Infosys’ total revenue, compared with 24.7 per cent in the previous quarter and 28.1 per cent in the year-ago period. Revenue from North America was 65.9 per cent of the total revenue, up from 64.7 per cent in the previous quarter and 61.5 per cent in the year-ago period.

Wipro Ltd saw revenue from Europe as a percentage of its total revenue go up marginally during the quarter. Europe contributed 26.5 per cent of the company’s total earnings in the September quarter, compared with 25.5 per cent in the previous quarter. It contributed to 26.9 per cent in the year-ago quarter. Europe grew seven per cent sequentially during the quarter.

Tata Consultancy

In a presentation to analysts, the country’s largest software exporter Tata Consultancy Services said the challenging economic environment in Europe is putting pressure, but large wins in retail and utilities suggests a return to decision making in Europe.

The UK contributed to 16.5 per cent of TCS’ total revenue in the September quarter, compared with 16.9 per cent in the previous quarter and 20.2 per cent in the year-ago period. Continental Europe accounted for 10.6 per cent of its total revenue during the period, compared with 11.0 per cent in the previous quarter and 10.5 per cent in the year-ago quarter. North America contributed to 53.4 per cent of TCS’ total revenue in the September quarter, compared with 52.3 per cent in the previous quarter and 49.7 per cent in the year-ago period.

“I think Europe is doing well. As far as this quarter is concerned, we closed five deals in the UK-Europe market, including one very large deal,” said Mr N. Chandrasekaran, CEO and Managing Director, TCS, in a call with analysts.

“So, Europe is doing well and I think we will continue to see growth in Europe in the coming quarters,” he added.

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