Nasscom: Short-term impact on outsourcing

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New Delhi, Sep 20: Nasscom a global trade body with over 1200 member of which over 250 are global companies for the US, UK, Japan and China. With the tentacles of Lehman Brothers fiasco unfolding on the Indian software companies, the industry body Nasscom on Thursday, on Sep 18 said there would be short term and company specific impact. Stating that the Indian IT-BPO sector is a part of the global financial system that has seen a lot of turbulence in the recent past, the apex body said 'our preliminary analysis of the current situation indicates that the impact will be short term and company specific. We will continue to keep a watch on any further downstream impacts.'

With nearly half of their revenues coming from banking and financial services segments, India's top software exporters are closely monitoring the financial crisis spreading across markets. While Infosys and TCS, the country's two largest IT firms, said they do not comment on individual clients, the third largest IT firm in the country, Wipro said it was in dialogue with failed Lehman Brothers, although revenues from it were modest.

The fourth-largest software exporter from the country Satyam also said that it was "concerned" over the developments in the US. "We are very concerned about the recent development in the BFSI segment in the US. However, the Lehman Brothers episode will not have any impact on Satyam," Satyam Computer CFO Srinivas Vadlamani said. HCL Technologies, however, said that the two US majors -Lehman and Merrill Lynch -were not its clients and therefore would not adversely affect the company.

When one puts all of this together, there is some loss but given that most of the top five companies have over 40-45 per cent exposure to BFSI space, then mood is worried and concerned right now, said an analyst.

Already finding it tough to cope with the slowdown in the US, the beleaguered Indian IT vendors are likely to see some reversal in revenues coming out of their banking practice with the recent happenings at global level.

Nasscom, which is of the view that the current crisis is a consequence of the subprime crisis which began last year, said many companies that were being directly impacted by the turmoil last year had prepared for this eventuality.
But the association is optimistic on the challenge being contained as it said "India's value proposition continues to be strong. As an industry, we have worked as partners with our customers and will continue to do so, even as the financial services sector realigns itself."

But analysts and industry watchers holding a not so optimistic view, feel India's outsourcing industry could be cut to size coupled with lower revenue, job loss and poorer salary hikes. Already reeling under a slowdown, the industry is slated to grow only by 22-24 pc from the earlier 29 pc. Although the association says the long term prospects of the sector to touch $60-billion mark this year is on track.

Indian IT-BPO industry, including domestic companies, recorded an overall growth of 28 pc, clocking revenues of $52 billion in 2007-08 up from $39.6 billion in 2006-07. The software and services exports segment grew by 29 pc to register revenues of $40.4 billion in 2007-08, up from 31.4 billion in 2006-07.

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