TCS sees an opportunity to step up its presence in Eastern Europe where it has a moderate presence with about 5,000 employees
Listen to this article
Indian software services companies are moving their limited operations out of Russia over geopolitical tensions arising out of its invasion of Ukraine, while helping clients maintain business continuity by shifting work to other locations.
Infosys, which ran a small operation in Russia, is transitioning work to locations outside the country. “We have less than 100 employees in Russia. We do no work with any Russian clients as of today and have no plans of going ahead," said Salil Parekh, chief executive and managing director, Infosys.
Tata Consultancy Services Ltd (TCS) said it does not have operations in Russia and Ukraine and therefore, there is no direct impact. “We are, however, very engaged in the process to see how we can help our clients who have been impacted by it in their BCP (business continuity planning) operations (by the Russia-Ukraine conflict). We are also trying to help our customers who are trying to decouple their operations and supply chains," said Rajesh Gopinathan, chief executive and managing director, TCS.
TCS sees an opportunity to step up its presence in Eastern Europe where it has a moderate presence with about 5,000 employees. “A lot of people have migrated out of Ukraine to countries like Poland and Hungary. So, people are asking for jobs which gives us an opportunity to increase local hiring there," Gopinathan said.
Analysts agreed Indian IT companies may find an opportunity to tap into the displaced talent pool. “Ukrainian citizens have been displaced due to war and may not be available immediately to work for clients, hence that will work in favour of the Indian IT services firms," said Sanchit Vir Gogia, chief analyst and chief executive, Greyhound Research.
He said the war has directly impacted key industries like oil and gas, manufacturing, and semiconductors, and therefore Indian IT services companies with exposure to these industries will be impacted by the uncertainty in the supply chain and related pricing.
“Indian IT companies can also stand to gain from additional contracts trickling in from Europe and other parts of the world that have to date relied heavily on Ukraine for IT support and development work…but such events always slow down decision making and that is already being felt in many deals that are currently being negotiated or are under technical consideration. The impact of this will be seen in the results of the coming quarters," said Gogia.
Experts believe that demand for technology services will continue to be strong despite the geopolitical tensions.
“We don’t expect technology services demand to cool down in the short to medium term because of the war. Pent-up digital transformation spends by large global 2000 clients is a secular trend and continues to aid pipeline and revenue growth for most IT and digital engineering service providers. However, some deceleration in growth is expected in 2-4 quarters as recession and inflation-related fears become more prominent," said Nitish Mittal, partner, Europe Technology Practice, Everest Group.
However, the challenge for Indian software services firms will be to ensure talent acquisition and retention strategies remain effective. “The risk perception of delivery from Central and Eastern Europe (CEE) countries has increased…but Indian IT service providers are favourably placed to help clients on digital transformation as they have a lower exposure to the CEE region and have used the global delivery model effectively…I expect them to expand talent efforts in India, Asia Pacific, Latin America, UK & Ireland, and Continental Europe, through a mix of delivery centre expansion and mergers & acquisitions. Consequently, you can expect a further impact on margins as they invest in these capacity initiatives," Mittal added.