Hyderabad: Outsourcing of large information technology contracts in the first three months of 2009 has declined 21% from the preceding quarter, a trend that’s set to continue in the near term, US-based technology outsourcing consultancy TPI says in its latest report.
Slowdown: Genpact Ltd office in Gurgaon. Top outsourcing firms expect a drop in quarterly revenue for the next three months as well. Madhu Kapparath / Mint
The number of contracts worth at least $25 million (Rs125 crore) in value dropped to 141 in the first quarter of 2009 from 160 in the October-December period, TPI said on Thursday.
The cumulative value of all the contracts awarded during the quarter dropped to $19 billion from $24 billion earlier. Historically, this is the lowest first quarter since 2001 in terms of total contract value, the consultancy said.
“Financial services clients have not gone back to the original levels of outsourcing. Cycle times are longer with hesitation among clients for longer-term deals,” analysts Surendra Goyal and Vishal Agarwal of Citi Investment Research said in a note to clients, reacting to the TPI report.
“Reducing prices is not an incentive enough for the buyer to go ahead in this environment.”
India’s top four IT outsourcing firms—Tata Consultancy Services Ltd, Infosys Technologies Ltd, Wipro Ltd and HCL Technologies Ltd—reported declining revenues for the March quarter over the preceding three months, mainly owning to fewer new contracts and renegotiations of existing ones.
The firms have projected a drop in quarterly revenue for the next three months as well.