Bangalore: India’s second largest software services vendor, Infosys Technologies Ltd, expects most clients to have their technology budgets in place by mid-February, but warns that customers may be cautious in spending the money as recession deepens in the US.
Traditionally, Western clients finalize their annual technology spending in January, but the financial and economic turmoil resulting from the collapse of financial firms such as Lehman Brothers Holdings Inc. have delayed budgets.
“In fact, it looks like the second wave of challenges are becoming visible at this point, with some of the financial institutions announcing their results in the last three to four days,” Infosys chief executive officer S. Gopalakrishnan said in an interview. “There is concern that now we are starting to see the impact of the economic slowdown in the real (US) economy, (with) mortgage defaults increasing, (and) credit card payments (getting) defaulted”. “They (customers) are also telling us that even if there are budgets, the decisions regarding actual spending could be slow due to concerns of the economy,” said Gopalakrishnan.
Global banks such as Citigroup Inc., Bank of America Corp. and Royal Bank of Scotland Plc., have reported or forecast losses amounting to billions of dollars. Indian software firms earn more than one-third of their revenue from banking, financial services and insurance.
Infosys has projected revenue to grow slower by 13% this fiscal from 35% growth it posted in the year ended March. Still, the company, which reported a 33% rise in net profit to Rs1,641 crore for the third quarter, has outperformed peers such as Tata Consultancy Services Ltd and Wipro Ltd.
Infosys maintains that it would sustain operating margins of 35.1% it earned for the October-December quarter. “There is a pricing pressure, but we are saying that we are able to manage that and protect our margins,” said Gopalakrishnan.