Bangalore: Infosys Technologies, India’s No. 2 outsourcer, expects slow IT services business for the foreseeable future as the global economic slump forces clients to delay technology spending, its chief executive said.
Kris Gopalakrishnan also told reporters on Friday the Nasdaq-listed Infosys would hand staff only minimum annual wage rises in April as it looks to rein in costs in the face of slowing earnings growth.
“This is going to be a prolonged downturn,” he said, referring to recessions in major markets around the world, adding India’s software sector may see some stability in 2010 on the back of a possible recovery in the global economy.
India’s large pool of English-speaking engineers and cheaper wages have helped attract outsourcing from Western firms such as Citigroup, General Electric, Qantas and Airbus.
But a recession in the United States, which accounts for more than half the sector’s revenue, and turmoil in the global financial sector have halted the sector’s scorching pace of growth and battered stocks.
Revelations of a massive accounting fraud at Satyam Computer Services Ltd, India’s fourth-ranked software services firm, further dented prospects for the export-driven sector.
“The environment continues to be challenging,” Gopalakrishnan said. “The feedback we are getting from clients are that the budgets are going to be down, in some cases significantly down,” he said of likely technology spending by the firm’s customers.
“They are also saying that when the budgets are released there will be a delay in spending.”
India’s exports of software and services in the year to March will be sharply below an earlier forecast, expanding 16-17% to about $47 billion, the National Association of Software and Service Companies said earlier this month.
On US President Barack Obama’s pledge on Tuesday to end tax break for companies that send US jobs overseas, Gopalakrishnan said the Indian IT companies would wait to see how the proposal was implemented. “My take on it is of course protectionism will only prolong the downturn,” he said. “This is a challenge which we all have to face collectively.”