IT firms concerned by US, Europe, plan China expansion

IT firms concerned by US, Europe, plan China expansion

Dalian: Asia’s major technology exporting firms are actively diversifying into emerging markets such as China, as key information technology (IT) spending regions such as the United States (US) and Europe are mired in economic uncertainty.

While the US and Europe markets are too big to ignore, Infosys Ltd and Wipro Ltd , India’s number two and number three software services exporters, were hiring hundreds more staff in China, executives said on the sidelines of the World Economic Forum in Dalian, China.

“Right now, of course, the economic situation is the biggest concern because it’s something that’s outside our control, but will have an impact on the global economy and hence our industry," Infosys executive co-chairman Kris Gopalakrishnan told the news agency.

“You have to depend on the US and Europe in the short term, but continue to invest in places such as China and India," he said. “We are diversifying our markets, but it will take a long time."

Infosys and Wipro, which compete with larger rival Tata Consultancy Services Ltd (TCS), derive more than two thirds of their revenue from the US and Europe, where debt problems are hampering IT spending.

Slowing US and European economies, volatility in the rupee, severe competition, rising wages, high staff turnover rates and management shakeups at Infosys and Wipro have been hampering growth in India’s $76 billion software services sector.

The US alone accounts for about half of the revenue of India’s IT outsourcing industry. “Macro concerns have resurfaced with the US rating downgrade and the euro zone crisis. We expect uncertainty to impact 2012 IT budgets," Surendra Goyal, an analyst with Citigroup, said in a report in September.

Infosys’ Gopalakrishman said the company planned to roughly triple its staff headcount to 10,000 in 2-3 years. Earlier in the week, Wipro said it planned to double staff levels in China over the same period from 800 now.

Although some IT companies such as Wipro and China’s Huawei Technologies, the world’s number two network gear provider, said there had been little impact from the economic woes in Europe so far, expanding their footprint in emerging markets was a key part of their strategy.

Huawei said in Dalian that it planned to triple staff numbers at its enterprise unit - which provides equipment such as hubs, routers and switches that run networks transferring data across corporations - to about 30,000 in the next three years from 10,000 expected by the end of this year.