The Hindu Business Line : ‘US east coast banks holding back some deals’

Bangalore, March 4 Polaris Software Lab is witnessing banks, especially those in the east coast of the US, holding back projects against the backdrop of the sub-prime crisis while those in western and mid-west regions are exploring outsourcing options, its Chairman and Chief Executive Officer, Mr Arun Jain, told NewsWire18 today.

Polaris, which counts seven out of the top 10 Wall Street banks as its clients, is also facing delay in pricing negotiations. Troubled Citibank accounts for 39 per cent of Polaris Software’ revenues. Banking, financial services, and insurance segment contribute nearly 90 per cent of Polaris’ revenues.

There have been concerns of a cut in offshore technology budgets as a consequence of the US sub-prime mortgage crisis, which has rocked the confidence of global financial services firms. “Sub-prime is a major issue right now. There is a knee jerk reaction when somebody is losing $10 billion or $20 billion,” Mr Jain noted, alluding to massive write-offs announced by some global banks.

This had prompted some banks, especially those based in larger US cities such as New York, to take stock of the situation and hold back some projects, he said. These banks are not open to incremental projects as of now. However, Mr Jain believes these are “short-term hold-backs.”

The unfavourable macro-economic environment and rising cost concerns have encouraged many banks in the western and mid-west regions to explore outsourcing possibilities. These, Mr Jain noted, are banks that had not joined the outsourcing bandwagon earlier. Also, Polaris is seeing order flow from non-US arms of some of its clients such as Citibank. “So it is a mixed bag. Overall, it is a stable kind of situation.” Mr Jain said the mood was cautious and the company was awaiting further clarity from clients. “We have to see how it pans out in three months.”

NO PRICE CUTS

Mr Jain said there were yet no instances where customers have sought out-of-turn pricing negotiations; but bill rate negotiations are turning into long-drawn affairs. “There is no out of turn (price) cuts at all. Pricing negotiations are going on. If the market was booming like 2005, then we would have gotnegotiated price earlier. But now those (pricing negotiations) are getting delayed.”

Wage moderation

Mr Jain expects some moderation in wages going forward. “Reality is hitting all the professionals. I think Infosys and TCS are not hiring as many people as they were hiring last year. And it (wage hikes) was going slightly berserk,” he noted. Also, “talent market, I would say, would become more sensible now, which is required today. Moderation will definitely happen. But moderation for good talent will never happen. Good talent is always in short supply but for bulk talent moderation will happen.” — © NewsWire18 Pvt. Ltd. 2008