Bangalore: India’s $52 billion outsourcing industry, battered by a global financial crisis that is squeezing its business clients, faces more short-term challenges in the wake of attacks on Mumbai that killed more than 100 people.
Industry officials said that the prospective overseas clients were likely to put off planned visits to India because of the attacks, even though most software and back-office services firms were operating normally.
“This will surely introduce some sort of concern among clients,” said Krishnakumar Natarajan, CEO of mid-sized software and R&D services provider MindTree Ltd.
“There was some expectation clients would start visiting India from January after the end of the annual holiday season. That will now get pushed away for some more time,” he said.
The software and back-office services sector, which earns billions of dollars from exports, is reeling from a global slowdown and turmoil in the financial sector, one of its major markets.
The chief financial officer at Wipro Ltd, the software services exportersaid that he expected a pickup in growth in the first quarter as companies firm up outsourcing plans, though many businesses will likely delay decisions and tighten costs.
India’s large pool of English-speaking engineering workers and cheaper wages have helped attract outsourcing from western firms ranging from Citigroup and Goldman Sachs to Cisco Systems Inc and Nortel.
India’s outsourcers compete against larger IT services firms such as IBM and Accenture.
“We have to wait for things to settle. This is a temporary aberration,” said T.V. Mohandas Pai, a board member at Infosys Technologies, software services exporter.
“If countries issue advisories, it means some travel will be deferred. I think people will use technology or we’ll go and visit our clients. Business will go on,” he said adding: “We have seen terrorist attacks happen in different parts of the world. It’s unfortunate it has happened in Mumbai and I think business is confident the government and authorities will get to the bottom of it.”
Bruce McIndoe, a travel security expert and president of iJET Intelligent Risk Systems, a private intelligence firm, said he had already advised his corporate clients to postpone travel to Mumbai, and warned there would be ‘ripple effects’.
Som Mittal, president of the National Association of Software and Service Companies, India’s premier software industry lobby group, said that the companies were likely to be more cautious, but business would continue.
“We will not let the show stop as a result of the attacks,” he said.
In July, eight small bombs hit the city of Bangalore, which is home to more than 1,500 Indian and multinational software and back-office firms. They increased security as a result.
“I think now more and more customers will be looking at what the Indian companies are doing to manage risk. They will ask what their disaster recovery and business continuity plans are,” said Avinash Vashistha, chief executive of consultancy Tholons Inc.
“In the short-term, companies will see an impact as their clients stay away from travelling to India,” he said.