Infosys Technologies disappointed with its April-June 2010 quarter performance, with its profit growth declining 2.4% from a year ago. But this time, the performance of the IT bellwether did not exactly presage a trend. Its peers TCS and Wipro surprised the street while HCL Tech’s performance was in line with market expectation.
TCS saw its post-tax profits climb 24.3%, from a year ago, and Wipro reported a 31% rise in its net income from IT services, despite pressures from an appreciating currency. HCL Tech’s net income grew a modest 3.7%. But the growth in client additions, net increase in staff hiring and the 10-20 % salary increases indicate the outsourcing business is gradually returning to normal.
Of course, it has not returned to the days of heady growth experienced till the financial crisis hit the globe, and may not either anytime in the foreseeable future. For, there is increased pressure in countries such as the US to keep jobs at home and the sovereign credit crisis in the southern European countries would weigh on the performance on the outsourcing companies. These along with the currency fluctuation can spell trouble. Europe is the second-largest market for Indian software companies: it accounted for about 20% of Infosys revenues, 28% of TCS, 25% of Wipro and 26% of HCL.
The domestic market account for a small portion of the software majors’ revenues; in the instance of Infosys, income from domestic business was as low as 1.7%.
Even as the global environment remains uncertain and pricing pressures persist, seeking opportunities in the domestic market will stand the companies in good stead. E-governance in particular presents a great opportunity, and the unique ID project is only one such projects.
The government has rolled out or intends to roll out extensive IT infrastructure for the new pension scheme, a national treasury management agency, the tax information network, and goods and services tax, all of which would be software intensive. The big four should not only seek partnership with the government to roll out these projects, but should put some of their brightest people on the task. India too deserves to benefit from its software prowess.
Source:http://economictimes.indiatimes.com/opinion/editorial/ITs-a-mixed-bag/articleshow/6239712.cms
