IT to bounce back soon

Software firms that were banking on a revival in the second half of the fiscal can take some cheer from the words of Gartner’s top man in India.

Partha Iyengar, who heads the India arm of the global research organisation, says the collapse of Lehman and other financial giants will not significantly worsen the slowdown for software firms and a revival could be in the offing before the fiscal end.

“Software firms are already in a slowdown. I don’t see that trajectory changing because of the events of last week. The December quarter will follow the quarter we are in currently. We will start seeing an uptake after the US elections. The sentiment will start to shift after that and software companies may recoup some of the losses they made in the earlier quarter in the fourth quarter,” Iyengar, vice-president, Gartner India, told ET.

Contrary to the gloom inspired by the fresh bout of bad news, his outlook for FY09 remains ‘cautiously optimistic’ and that for FY10 ‘fairly optimistic’ with growth returning to earlier levels. Iyengar said there were big differences across the key IT markets.

There was a higher level of uncertainty and close to a sense of panic among IT buyers in the US and UK (because of its proximity to US). But companies in Asia-Pacific, while being cautious, were going ahead with their IT projects. The sentiment among European buyers fell somewhere between Asia Pacific and US buyers, he said.

Since the events of last week, the BSE-IT index has lost 167 points over worries dogging some of the largest customers of Indian IT companies. Merrill is one of the top financial services clients for number one software exporter Tata Consultancy Services, while Wipro and HCL Tech have exposure to Lehman.

On Monday, outsourcing firm eClerx Services Ltd, which went public less than year ago, said it had outstanding receivables of $1 million from Lehman. The collapsed investment bank was one of its top five clients, accounting for about 13 per cent of revenues.

However, Iyengar said some of the consolidation among large financial services players such as Bank of America’s acquisition of Merrill Lynch and Lloyd TSB’s takeover of HBOS would provide huge integration opportunities for IT firms.

“It’s true, there will be some redundancies and IT vendor consolidation but they will take time to play out. The bigger issue will be the integration opportunity it creates in the near-term, integration is the biggest single issue for banks,” he said.

The most significant difference between the last slowdown in 2001-02 and the current one was the ‘incredible amount of credibility’ Indian firms have built. Gartner is also advising IT firms not go back on job offers they have already made and not cut too deep to the bone when they rationalise recruitment.

“Resources (people) tend to have fairly long memories, and when the company gets back to hire-mode, you don’t want it to have negative impact,” he added.
source : times of india