Indian IT, BPO majors opt for interim soft growth approach
Even as the $50-billion IT industry in India, which has succeeded in enduring the global economic slump, is gearing up for the ensuing fiscal year beginning April next, the export-oriented industry is still being hounded by cutthroat contest as well progressively more tightfisted clients.
Consequently, the industry that grew at a pace of 25 to 30 per cent since 2007 will now have to be content with a growth rate of mere 15 to 18 per cent. Quoting economic forecasters at the UBS, Angela Broking and CLSA, an Indian business daily reports that India’s leading software service firms will possibly witness a revenue growth of approximately 10 per cent, while the profits will see an increase of 15 per cent during the next fiscal. Earlier, the nodal body of the IT and BPO service providers in India, Nasscom has predicted a growth of 13 to 15 per cent in revenue during the fiscal year ending on March 31, 2011.
In fact, though compared to the previous year, clients like Bank of America, Citibank and JP Morgan have been offshoring much more; the rates offered by them are poorer by anything between 5 to 10 per cent. Nasscom says that the burden of billing rates, greater sales, marketing expenditures as well as R&D expenses will also have an impact of the productivity and profits of the top technological firms in the country. For instance, the retardation has led India’s leading technological companies, such as Infosys, Tata Consultancy Services (TCS), and Wipro to focus on back cost-saving on the client’s agenda, compelling these IT and BPO vendors to look for more projects at reduced rates with a view to increase their revenues during these rough times.
According to the CEO of a top Indian tech firm, growth is no longer the biggest challenge today, as the Indian IT and BPO service providers are gradually discarding the economical label and achieving a greater distribute of business that are high paying. He said that it is unfortunate for the Indian tech firms that global leaders like IBM and Accenture are already formidable in this field. On the other hand, Mumbai-based experts have predicted that HCL Technologies as well as Wipro will be witnessing their profitability fall from the present 18 to 23 per cent to around 16 to 17 per cent by 2013. They said that in addition to HP and IBM that are capable of bundling software services along with computer hardware, the Indian offshore outsourcing companies are also in jeopardy owing to the ascent of vendors like Cognizant that is predicted to witness a growth in revenue up to 20 per cent for the ensuing fiscal year.
Moreover, the possibilities of the value of the rupee gaining ground are likely to create disorder the scenario. It has been seen that all through the last few quarters, Indian tech firms like Infosys, TCS and Wipro added almost five to seven per cent in working margins, as rupee dropped almost 30 per cent against the dollar. According to a report published by the UBS, the value of the rupee may increase as much as 40 vis-à-vis the US dollar by 2010-end. The report further said that in such an instance, a great part of the profitability margin accessible to Indian IT and BPO service providers could disappear.