IT firms eye Africa, Asia Pacific to offset weak tech spend in US

IT firms eye Africa, Asia Pacific to offset weak tech spend in US

Bangalore: Indian software services firms have been looking to boost revenues from Africa and the Asia-Pacific region to offset any potential decline in tech spending in the US, their main market, in the wake of the subprime crisis and a consequent credit crunch in that country.

Satyam Computer Services Ltd, the country’s fourth largest software services firm, leads its larger peers such as Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd, in terms of these regions’ contribution to its revenues (this classification of Asia excludes India).

In the past 10 quarters, revenues from Africa and the Asia Pacific region have been on the rise for Indian software firms that have sought to reduce their dependence on the US. These two regions and Europe have emerged as a hedge for such companies as fears rise over an impending slowdown in the US.

Satyam earned nearly one sixth of its revenue from these regions in the quarter ended September. In the same period, TCS earned 7.16%, Wipro Technologies 5% and Infosys 9% from the regions.

Indian companies had previously largely ignored these regions, with the exception of Japan, but began focusing on them starting 2000 in an effort to reduce dependence on the US market. Australia, for instance, has been a growth market for Satyam in particular. The company saw its revenues from the market increase 80% in the year to March, according to Virendra Agarwal, senior vice-president and head of Asia Pacific business for Satyam.

“Creation of jobs locally has helped (the company) to win contracts," he added. Satyam earned about 5% of its 2006-07 revenues of Rs6,668 crore from Australia. It hopes to earn revenues of (US) $155 million (Rs610.7 crore) in 2007-08 from the country. Infosys, which acquired Australia’s Expert Information Systems Pte Ltd in 2003, earned Rs138 crore in revenues in the quarter-to-September from Australia. This accounted for 3.3% of its total revenues. “We have doubled our revenues in Australia since (buying) Expert," said V. Balakrishnan, chief financial officer of Infosys.

Wipro Ltd has two entities —Wipro Technologies, the global IT services arm and Wipro Infotech, the unit focused on India, Asia-Pacific and West Asia markets. Japan and China, the two countries that Wipro Technologies focuses on, together contributed 5% of the global IT division’s revenue in September quarter.

TCS, which forged an alliance with Microsoft last year to enter the Chinese market, has over 1,000 employees in the country. “The whole strategy of our diversification is to offset any imbalances in any key single market, such that no issues in the region affect us," said S. Mahalingam, chief financial officer, TCS. “Apac (the Asia Pacific region) is evolving into a more mature outsourcing markets and our business here has also grown significantly," added Sanjeev Nikore, corporate vice-president and global head, sales and marketing, HCL Technologies.