Telangana issue: Political uncertainty hits IT firms in AP

Nightmares have come back to the information technology (IT) and IT-enabled services industry in Andhra Pradesh, with the State plunging into yet another bout of disturbances following the unsavoury events in the State Assembly last week.

Several IT and ITeS firms, most of them in the small and medium segment, have reported at least 20 per cent drop in attendance with the Political Joint Action Committee, which is fighting for separate Statehood for Telangana region, calling for 48-hour bandh. The shut-off, which began this morning, has hit transport services in the State Capital.

Challenges for SMEs

While bigger companies could organise special transport services, it is small and medium firms that are hit hard due to the bandh.

“It is true that the bandh has some impact. So far it is not a problem. But if this continues, it sure will pose a serious problem,” Mr J.A. Chowdary, President of The Indus Entrepreneurs (TiE-Hyderabad), said.

The IT industry says transportation is a smaller problem. The picture, however, is more worrisome for SMEs, particularly those which are crossing the threshold of Rs 100 crore and those who are entering the league of Rs 200 crore.

“The crisis may have posed different problems for those in the big league. It is small and medium companies that are going to face serious challenges. The big companies can always convince their clients that they can get the work done from another location. But small firms generally work from only one location,” Mr Ravi S Rao, who heads SME Forum at ITsAP (Information technology industry in Andhra Pradesh), told Business Line .

SMEs, which outweigh bigger firms in terms of fee, have booked rooms in hotels near by to take care of critical functionalities.

Brand image hit

Prolonged uncertainty could have an adverse impact on the brand image of Hyderabad that has already taken a beating. “Customers are well informed by analysts who prepare reports with empirical reports. We won't be surprised if they ask uncomfortable questions to the vendors,” Mr Ravi, who is the Managing Director of Value Momentum, said.

IT firms are devising creative methods to beat uncertainty. “We have changed work hours to 7.30 a.m. – 3.30 p.m. But we make it a point to inform our clients to ensure transparency. Thanks to the events in Egypt and elsewhere, they appreciate our situation and ask us to take care,” he said.

He is worried that this luxury might be short-lived. “In the long run, they might go to a safer location within India because they completely depend on the vendor. SMEs might end up losing the existing clients. Also, potential clients might go away,” Mr Murali, Chief Executive Officer of ZenqA, pointed out.

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