Bangalore/Mumbai: When the financial crisis struck across the world, India’s information technology exports were among those hardest hit.
The local IT industry relied heavily on the US and Europe and on the banking, financial services and insurance (BFSI) segment for growth. When the New York investment bank Lehman Brothers Holdings Inc. imploded last September, the US and European markets accounted for at least 80% of India’s IT export revenue.
The BFSI segment, traditionally the largest spender on IT, accounted for 41% of the sector’s overall revenue in India.
“While all of us realized that things wouldn’t be the same post September 15 (2008), nobody anticipated the scale and speed of developments,” said Suresh Vaswani, co-chief executive of India’s third largest software exporter Wipro Ltd. “The business landscape underwent a tectonic shift. Clients started cutting down on both discretionary and even planned budgets. Everybody was impacted.”
The Lehman collapse was felt at other financial institutions in the US and eventually across the Atlantic in Europe. With it, Indian IT companies entered a world of drastically reduced budgets by clients, weak order books and weaker deal pipelines.
Eyeing growth: A file photo of a Wipro campus. Nasscom president Som Mittal says tough times taught the IT industry to look for newer markets and enhance its domain knowledge to get additional business. Hemant Mishra/Mint
The fall in revenues that started in the October-December quarter for India’s top three software exporters—Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro—has continued into the last reported quarter.
Export revenue for the IT and business process outsourcing (BPO) sector grew at an average 26% between the financial years 2005 and 2009 to $60 billion (Rs2.9 trillion), according to the National Association of Software and Services Companies, the industry body better known as Nasscom. This year, Nasscom has projected a growth rate of 4-7%.
The Bombay Stock Exchange’s tech index BSE-IT started sliding last September from its then 4,000 level and touched a 52-week low of 1,987 points on 24 February. In early March, investors began finding IT stocks undervalued and started investing in them. With the most recent quarterly results, IT exporters signalled that the worst may be over, prompting investors to make further purchases. On Thursday, the BSE-IT touched a 52-week high of 4565.34 points.
The knee-jerk reaction of big IT firms in India was to freeze hiring, reduce staff and trim salaries. For mid-size players, it was time for counter-intuitive decision-making in a sector where skilled manpower and employee morale is critical.
“We refused to look at employees as a problem,” said Elango R., chief human resources officer at MphasiS Ltd. Instead, he said, the company made its workers a part of the solution by talking to them and getting them to agree to a pay freeze till it got out of the woods.