Leading Indian tech firms to revise stratagem for European market
Leading Indian information technology and ITeS firms, including Tata Consultancy Services (TCS), Infosys and Wipro, are planning to increase investments with a view to enhance their respective market share in Europe in the face of ambiguity in obtaining orders from the countries in the region. According to a news report, investors now intend to concentrate on the analysis of their management regarding flow of deals, the perspective for pricing as well as spending by their clients on technology.
According to a report released by Forrester, an autonomous technology and market research firm, postponements or annulments of a number of outsourcing projects is likely owing to the unsteady economic condition vis-à-vis corporate IT budgets in most European nations. Therefore, the Indian software and outsourcing majors are augmenting their respective investments with a view to enhance their market share in Europe.
Industry experts are of the view that Infosys, India’s second largest software exported which witnessed a drop in its Q1 profits recently, is likely to push up the forecast regarding the firm’s dollar revenue growth for the 2010-2011 fiscal from the present 16%-18% to 17%-19%. Analysts further say that the Indian IT industry is confronted with new risks owing to enhanced competition from multinational giants, including Accenture, IBM and Hewlett-Packard (HP). In fact, last Friday, shares of Infosys had gained 2 per cent to a historical high of $62 on buoyancy regarding its Q1 results, while TCS shares are up by 3.3 per cent against the 5.6 per cent increase in the IT sector index. Nevertheless, Accenture posted results beyond expectation in June 2010, which denoted that the company has been successful in maintaining its business impetus.
In addition, the Indian tech firms are faced with another problem – very high attrition rate. They are struggling to retain their employees offering increased salaries and other incentives. As the global outsourcing firms are keen to poach their employees with higher pay packages, the Indian tech firms have been compelled to raise the salaries of their employees by 10% to 20%. However, they seem to be helpless when the global majors are luring away their employees with around 40% salary hikes. On the other hand, it is expected that the weakening of the Indian rupee by 3.3 per cent vis-à-vis the US dollar during April-June 2010 would somewhat help to neutralize the bearing of salary rise as well as the instability of the euro for the Indian outsourcing and software exporting firms.
Meanwhile, another report says that TCS, India’s largest software exporter, expects that Europe will comprise 30% to 35% of the firm’s revenue over the next three to five years as the demand for outsourcing has been increasing. Quoting the company chief executive N. Chandrasekaran, the report said that TCS may increase prices some time during the end of the 2011 fiscal.