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Our Bureau

Bangalore, April 15 Infosys Technologies has said IT budget for its clients would remain flat for the next couple of quarters, but would get better in the second half of 2008-09.

Mr S. Gopalakrishnan, Chief Executive and Managing Director, said 76 per cent of Infosys’s top 100 clients have told the company their IT budget would remain flat.

Because of the slowdown, the clients’ discretionary spend will be under pressure and their decision making cycle will get longer, Mr Gopalakrishnan said.

He said once the clients get a grip on the macro economic situation, they would outsource more.

Mr Gopalakrishnan’s statement is a confirmation of what analyst have been predicting. Mr Sudin Apte, Senior Analyst and Country Head (India), Forrester Research, recently told Business Line around September 2008 companies would know how much money they have and would be signing big deals.

There have been some sporadic project cancellations as well, Mr Gopalakrishnan said. But the number is very insignificant with just one or two projects being cancelled, he added. In response to a query he said no projects were cancelled in the banking and financial vertical.

Mr Gopalakrishnan also said the company expects billing rates to remain flat in the next few quarters, confirming analysts’ expectation. Mr Vikas Yadav, an analyst with Motilal Oswal, recently told Business Line he expects the companies’ operating margin to be hit because of flat pricing among other factors.

In a conference call with analysts after third-quarter results, Infosys had said its new clients are coming in about 3 to 4 per cent above company average and in many contract renegotiations it is able to get 2 to 3 per cent above company average.

The company has also seen a slowdown in the percentage of revenue from the banking and financial services vertical. For the latest quarter, revenue from banking and financial services was 26.9 per cent of total revenue, compared with 29.6 per cent in the year-ago quarter.

Mr Gopalakrishnan said this slowdown in the banking and financial services vertical should not be taken as a trend. The traction in banking and financial deals was on, he said.

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