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The free fall of the rupee might help outsourcing companies such as Infosys and Wipro, in the short term but a further fall could mean customers lining up to renegotiate contracts to bring down prices.
Though outsourcing companies could suffer, captive units of tech companies might in fact benefit as their earnings are in foreign currencies while spending is in the rupee.
“If the rupee depreciates further, customers would want to renegotiate with outsourcing companies for the next fiscal,” Mr A.G. Muralikrishnan who runs Ujwal Management Services, a financial services consulting company, told Business Line .
He explained that software service companies which earn in a foreign currency would benefit more with the rupee falling further for the same amount of work they do. This could lead to customers demanding more work for the same price or a reduction in price as they would want to benefit from it as well, considering that they, too, have smaller budgets under the current recessionary scenario, Mr Muralikrishnan said.
For Wyse Technology, a global leader in client cloud computing, the depreciating rupee has been extremely beneficial.
“Most of the costs for the India R&D Centre is incurred in rupee and charged to the parent company in the US in USD (dollars). Our parent company is spending less amount in USD during the last few months for operating the India Centre. To that extent, competitiveness of India for carrying out R&D services for corporations based in USA has suddenly increased,” Ms Ela Krishnan, head of India R&D Centre for Wyse Technology, said.
According to an official with Cegedim Software, a world leader in life sciences customer relationship management, a depreciating rupee has helped soften some of the pressure from corporates to reduce costs. “For 2011, it helped us to provide substantial credits to our internal customers and also maintain a flat cost rate for 2012 despite the increased inflation of the country,” Mr Biju Davis, General Manager for Cegedim's R&D unit in India, said.
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