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Outsourcing demand may revive in early 2010: Infosys

Outsourcing demand may revive in early 2010: Infosys
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First Published: Mon, May 18 2009. 04 20 PM IST
Updated: Mon, May 18 2009. 04 20 PM IST
Bangalore: Infosys Technologies Ltd expects outsourcing demand to revive in early 2010, but the current business environment was challenging as slowing world economy crimped spending, its chief financial officer said.
India’s second-largest software services exporter is looking to spend between $200 million to $300 million to acquire firms and is sharpening its focus on newer markets such as Australia, India, and China to boost growth, V. Balakrishnan said.
Shares in India’a top outsourcers such as Tata Consultancy, Infosys and Wipro have soared in recent weeks on hopes of a revival in sluggish business momentum later this year, but Balakrishnan was cautious about such a possibility.
“At the macro level there is some confidence back, people are slightly more comfortable, but on the ground things are still the same,” he said, referring to the global economic downturn that has battered information technology spending.
“People want a clear direction that there could be an economic recovery for them to get confidence and start spending. That is some way to go,” Balakrishnan told the Reuters Global Technology Summit in Bangalore.
Last month, Infosys forecast its first decline in annual revenue as global demand for outsourcing slowed in a harsh economic climate, halting growth for India’s once burgeoning technology services sector.
India’s $60 billion IT outsourcing sector, which provides services from software coding to managing computer networks and call centres, faces weak demand and rising competition from global rivals such as IBM and Accenture.
Balakrishnan said the pricing environment remained challenging for Nasdaq-listed Infosys, which counts Goldman Sachs, Philips Electronics, and BT Group Plc among its clients.
“It will be very brave for somebody to come and say that the worst is over. Worst is not over,” he said.
Acquisition to Boost Growth
Infosys, which has cash reserves of more than $2 billion, is interested in buying overseas firms specialising in technology infrastructure management, consulting and managing call centres for $200-$300 million.
Balakrishnan said the rupee was likely to rise in the short term on surge in foreign investments after the ruling coalition won a clear election victory, but Infosys would be able to manage its impact on profit margins if the rise was not too sharp.
The rupee fell against the US dollar in the financial year that ended in March, benefiting Infosys, which gets more than half its revenue from the United States.
The rupee rose past 48 per dollar for the first time in nearly five months on Monday.
Infosys hopes its China unit would break even in one year as it boosts investments and headcounts, Balakrishnan said.
Infosys’ China subsidiary made a loss of $2.3 million in the year to 31 March, 2009 and has been a drag on its earnings.
Shares in Infosys, which have a market value of more than $18 billion, have jumped 57% in this year, outperforming a 43% rise in the sector index and a 48% jump in the main Mumbai index.
The stock rose nearly 10% on Monday in a Mumbai market up 17% before circuit breakers were triggered that halted trading for the day.
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First Published: Mon, May 18 2009. 04 20 PM IST
More Topics: Infosys | Outsourcing | IT | Technology | BPO |