IT sector coming to terms with the slowdown - The Hindu

New avenues opening up; better planning will help
Nasscom has forecast a drop in orders and profits over the short term. But many IT majors feel that by early 2009, the uptrend may be discernible.
The last quarter results of most IT majors have come, and on predictable lines. The net profit margins are down, confirming the earlier indications that the slowdown in the U.S. economy and the pressures on the global economy will have its impact on India, especially in its IT-ITeS sector. Leading exporter TCS had its net profit pruned to just 4.15 per cent in 2007-08 as compared to the previous year, while Wipro was even more flat at just 2.8 per cent. In this lot, Satya m reported a 18.6 per cent growth in net profit. Earlier, Infosys almost met its target and expectations with a 20.8 per cent rise in net profit. Impact of results
The immediate impact of the flat results was felt in the stock markets and the IT companies took a beating. But behind these figures hidden is the real story. The National Association of Software and Service Companies (Nasscom), the apex body for software companies, has forecast a drop in orders and profits over the short term. How short will that short term be remains the question. Optimists put it at four to six months, but the more cautious extend it to even two years. The forecast is that things will revive in 2010, not before. But many IT majors feel that even by early 2009, the uptrend may be discernible. Some of them have even gone for acquisition of foreign firms or setting up shop in strategic countries. Good planning, for instance, helped Infosys cut down on expenditure, step up projects and revenues from the European market, and also cover up for the rupee. That only shows that proper planning and a more even spread across the global market can help companies overcome the U.S. slowdown.Outsourcing industry
According to senior industry analysts and consultants, the meltdown in the American banking and financial sector is bound to take its toll in the outsourcing industry — the Indian IT-ITeS sector was expected to feel the impact early on. Not only will there be a drop in outsourcing or front office jobs done through Indian companies, but major projects under discussion are certain to be put off or delayed for better times. “Given the credit crunch in the U.S. economy and layoffs being reported, where is the question of IT maintenance or technology upgradation taking place anytime soon?” asks consultant T. K. Pandian. But others point out that even the recession will open new avenues such as the outsourcing of debt recovery to American financial and banking institutions to Indian BPOs.
Though the IT majors were not saying this in the open, they seem to have done their internal workings on the downtrend in their major main markets. While some of them have turned the focus on Europe and East Asia, others are looking to woo a new clientele of domestic firms which may not be averse to IT applications or outsourcing. “Given today’s competitive world and the recessionary trends, investors or analysts should not expect 30 per cent growth or double digit profits. Like the markets, we too need a cooling period and time to overhaul our operations,” reasons a Chief Operating Officer of a Bangalore-based second-tier IT firm.Attrition
More than the technical, operating or finance chiefs, it is the human resource managers who seem most worried at the moment. Attrition poses a major challenge to them. “The problem is so complicated. We find it difficult to retain good talent, we continue to recruit, and most of the new recruits do not measure up to our standards and get benched,” explains Joseph Staley, a HR manager. It is something of a paradox that Nasscom estimates that the industry will need over one million jobs to be filled up this year, but there appears to be a dearth of qualified hands who can live up to expectations and stay on with the companies.
With fewer new projects and clients coming in for the short term, existing clients have become more demanding — on quality, perfection, communication, and schedules. So known performers end up doing more and the under-performers get benched. Consequently, the more competent staff needs to be “looked after better,” or they move to greener pastures. These are challenging times for the IT sector, which needs a comprehensive management policy in place to take care of clients, personnel, finances, and marketing.
V. JAYANTH
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