Bangalore: While Infosys Technologies Ltd chief executive officer S. Gopalakrishnan is optimistic, he says in an interview that a full-fledged recovery is still some time ahead. Edited excerpts:
Is this the beginning of the growth period for Indian IT (information technology) services firms?
If you look at the next two quarters, again we are seeing growth. Beyond that, we have to wait and see. The better indications will happen with next year’s budgets. The expectation is that it will be flat, but flat is actually better than this year. This year, there was a decline in budgets by 6-8%, but flat is OK.
Flexibility factor: The Infosys CEO says Indian IT has managed the transition to a new environment well and will emerge stronger. Hemant Mishra / Mint
(The) second thing is how the recovery happens. Let us say it is flat or recovery sustains again, it is positive for us. We are not completely out of the woods, we are seeing light and we know that we can manage the situation very well. About the future, we are cautious. Optimistic, but still cautious.
Is the caution because of the high unemployment situation in the US?
Yes, that is in some sense expected. If you look at all analysts’ expectations, the recovery is going to be a jobless recovery. Many of the jobs that were lost may not come back, because these are industries in transition and these were because of higher leverage, asset bubble created in real estate. That is the reason why people believe the recovery is protracted.
But tech forecasters such as Forrester say that IT spending will pick up from this quarter?
In fact the indications we are getting are that budgets will be flat. We have to wait and see.
Hardware firms are getting into services, similar to what Dell did in buying Perot Systems. Would this have an impact on Indian IT companies?
I don’t believe so. I strongly believe there is a role for companies like Infosys. Firms that play in the application and services space provide the comfort to clients of not being locked to a technology standard. They want the flexibility, the best option of either the technology or service perspective, and the reality is that you have existing investments. That is the reason why they would like to partner with an independent services company like Infosys. That is why we clearly believe that Indian IT services will not have an impact.
Has the US banking and financial services industry moved out of the downturn?
Yes, I think so. Because of the money that is put in to improve their health, stabilize them. Financial services has emerged out of this downturn first. And they are starting to invest back, and move back to normalcy. Also, they need to invest in new systems to manage risk (and) regulatory changes. When they will have an impact, clearly all of them require IT services.
Is there more confidence now in large Indian IT services firms than in the past?
Yes, I think the Indian IT services industry has weathered this better, especially the larger companies. They have been able to manage this transition to a new environment. Some people call this (the) new normal. They will emerge out of this stronger.