IT industry feeling slowdown heat but optimistic: Infosys

Speaking on the sidelines of the India Economic Summit, which began in New Delhi on Sunday, Infosys co-founder and co-chairman Nandan Nilekani said India's IT firms are bracing for "unprecedented" challenges and is responding to decline in outsourcing orders and fall in earnings by adopting cost optimizing measures and diversifying their clients' portfolio geographically.

Though the US market continues to fetch Indian IT firms about 50-60 percent of their revenues every year, slowdown in the US market has forced the firms to look to Latin America, Africa, Middle East, Europe, Japan and China to diversify their client base.

"Growth in the IT sector will be slower. There is a overall slowdown which is understandable given the crisis. The growth in the IT sector during the current fiscal will not be as good as witnessed for the last four years. In the current environment it is definitely not going to happen," Nilekani said.

Nilekani's warning comes at a time when companies across industries are cutting down on production, rationalizing their workforce, reducing work hours and bench strength, retrenching employees and going slow on hiring process to tide over the ongoing financial crisis.

However, Nilekani said the IT industry is "resilient enough to meet the challenges" and will bounce back.

"I am sure the companies are following the right strategies. They are waiting for the things to subside and take advantage of next cycle of growth," he said.

Agrees Infosys CEO Kris Gopalakrishnan. "The IT services industry will emerge stronger as after the crisis because the global delivery model that the industry follows, and also, the IT services industry has reached a certain scale, maturity, strength and world class practices," he said.

According to the National Association of Software and Service Companies or Nasscom, the consortium that serves as the apex body of the Indian IT software and BPO industry, India's IT-BPO industry enjoyed about 30 percent growth in previous years but this year it is projected to be at 21-24 percent due to the ongoing financial crisis.

India's software and services exports stood at nearly $40.4 billion during financial year 2008, up from $31.4 billion in the previous year, with the US as its largest market. The revenue of overall IT-BPO industry, including the domestic market, recorded 28 percent growth to touch $52 billion in financial year 2008.

Nasscom said the financial crisis that has hit global markets and the economic downturn in the US are "temporary" and the IT-BPO sector in India would remain untouched by the meltdown.

However, the IT-BPO lobby group has cut its hiring forecast for the current fiscal year, saying IT services companies and BPOs are expected to hire about 200,000 people by next March, instead of the 276,000 that it originally projected. The revised figure represents a significant decrease from the 250,000 new hires recorded for the previous fiscal year.

Nilekani refused to say whether Infosys would cut down on hiring, giving the current economic scenario, but allayed fears that the current financial crisis will drastically impact the IT job market. "Companies will continue to recruit. We are going ahead with the recruitment plan. I think it will continue," he said.

Earlier this year, Infosys said it would hire about 25,000 employees in the current financial year (FY09) across functions like IT services, BPO and consulting.

During the same period, bigger rival Tata Consultancy Services or TCS plans to hire 30,000-35,000 people while Wipro and Satyam Computer Services intend to hire about 14,000 and 18,000 people respectively.

TCS, Infosys, Wipro and Satyam are the four biggest firms in India's IT-BPO industry, having a total workforce of 372,333 employees as on September 30, 2008.