Indian IT Companies Don’t Agree on Outsourcing Demand in 2011

BY: India Briefing

Feb. 21 – Indian information technology (IT) firms have split expectations on the outlook of IT outsourcing demand in 2011, with the top three IT companies believing their revenue will keep going up and others thinking the opposite, a recent report on the Wall Street Journal said.

After a prosperous 2010, the big three Indian IT companies – Tata Consultancy Services (TCS), Wipro Technologies and Infosys – remain optimistic regarding their expected performance in the new year. N. Chandrasekaran, chief executive of TCS, India’s largest software exporter by revenue, said that he expects a greater demand for IT outsourcing services in 2011.

Meanwhile, Wipro Technologies is seeing growing opportunities and profit in the segments of financial services and healthcare, the two sections where Wipro will place its focus this year.

India’s second largest outsourcing firm, Infosys Technologies, also announced in January that it expects to see mounting IT budgets from clients in 2011. The company was happy to see its revenue growth between April and September of 2010 exceed its 16 percent to 18 percent forecast with performances of 25.7 percent to 26.1 percent, respectively. However, the revenue increase slowed down later last year, due to a decline in demand after large budget spending in the previous few quarters.

Quite a few other IT firms disagree with the big three, believing 2010’s boom in IT outsourcing services is temporary because clients spent more than necessary following the previous two-year global downturn.

Nasscom, India’s premier software trading body, predicted that the revenue growth of India’s software exports will slow down to 16 percent to 18 percent in the coming fiscal year, which starts on April 1, 2011, from the previous 18.7 percent in the current fiscal year.

The United States-based outsourcing company, Cognizant Technology Solutions, gave a forecast of 26 percent growth in revenue in 2011, while seeing a revenue surge of 40 percent to US$4.59 billion in 2010.

While both Nasscom and Cognizant made comparatively conservative estimations on 2011’s revenue, they are still confident of a single-digit increase in client budgets. However, C.P.Gurnani, chief executive of Satyam Computer Services, the company which was once India’s fourth largest software exporter by sales, uttered a different voice two weeks ago, saying “it is very clear that IT budgets are coming down.”

It seems difficult to tell which side is correct for now. The financial statements for January to March of 2011, the last quarter of India’s fiscal year, will probably give people a better idea on the client demand scale in the coming new fiscal year.