Demand slowdown
The Indian IT vendors have been facing challenging times as a result of uncertainty in the US and Europe for well over a year now.
Six months after Bear Sterns went under and was acquired by JP Morgan, the latest series of events in the US financial sector would further slow down the demand for IT services. Expect the $1-1.5 billion that Lehman Brothers typically spends on its IT networks annually, to be cut by at least half as its bidder, Barclays, tries to rationalise and reduce overlaps.
Explains Som Mittal, president of the domestic software industry body, National Association of Software and Service Companies (Nasscom), "In IT budgets, the non-discretionary spend, which is about 70 per cent, will continue. In a downturn, discretionary spend on new projects, innovation or upgradation gets affected. The impact, if any, will be on the latter."
Unfortunately, the economic slowdown has been catching up with the other verticals as well, namely telecom, retail and manufacturing, especially the automobile segment.
According to A Balasubramaniam, CIO, Birla Sun Life Mutual Fund, who also oversees the IT-specific Millenium Fund, some of the damage control measures by the US may make matters worse for Indian IT companies.
"Mortgage companies like Freddie Mac, Fannie Mae and now AIG getting nationalised is bad news for the Indian IT companies as the outsourcing could be reduced due to political interests."
Image: The entrance to the Bombay Stock Exchange. | Photograph: Indranil Mukherjee/AFP/Getty Images
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