Bangalore: Is the worst over for the Indian software services industry?
The numbers would seem to suggest so; over the past weeks, global technology giants such as Microsoft Corp., Hewlett-Packard Co., Apple Inc., Google Inc., Cisco Systems Inc. and IBM Corp. have declared results that are, in most cases, better than what the market expected.
What’s more interesting is the optimism the leaders of these companies have expressed in their outlook for the next few quarters.
That should bring some cheer to Indian software services companies that were affected by the global financial crisis and the ensuing economic slowdown. The US, the worst affected by both, accounts for bulk of the business of the Indian firms.
Judging by news flowing from the US, firms have started investing in growth. Discretionary spending, which enterprises undertake when they are more confident of the long-term outlook, is beginning to come back. That augurs well for firms such as Tata Consultancy Services Ltd, Infosys Technologies Ltd and Wipro Ltd.
Accustomed to a 20% plus annual growth rate, over the last five years, Indian information technology (IT) companies had started believing that the party would last forever, and when the downturn happened, they were forced to reinvent themselves.
That they have done well by increasing utilization rates, enhancing cost efficiencies, targeting newer geographies and businesses, and becoming more nimble.
The potential room for growth is vast as, currently, Indian IT companies have less than 4% market share of the global IT spend.
With the US and economies of the large European countries showing their first green shoots of recovery, Indian IT firms are out looking for new opportunities. The banking, financial services and insurance segment, which brings in nearly half of the Indian IT industry’s export revenues, is showing a semblance of stability—another portent of the good times to come.