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Indian IT firms see glimmer of hope

Financials on the mend is a good news for India's high profile IT outsourcing industry.

Written by Agencies | Bangalore |
May 22, 2009 2:03:26 pm

Financials on the mend and signs the world economy is not falling off the cliff are good news for India’s high profile IT outsourcing industry but that’s still not enough for the sector to regain its past glory.

Many customers of India’s software services exporters,who had so far chalked up impressive rates of growth,are struggling to stay afloat,have gone bankrupt,or are tackling severe cost cuts,leaving them little room to boost technology spending.

Add the risk to earnings from the rupee trading at five-month highs,the end of a decade-old tax holiday next year on major technology facilities and pressure on bailed-out clients not to outsource jobs and the outlook becomes more messy.

“The economic downturn is so severe that people are not making decision on investments and they are cancelling new project works. It’s very tough time for these guys,” said John McCarthy,principal analyst for Forrester Research.

“The golden age of massive profits for offshore companies is over.”

Powered by an army of low-cost,English-speaking workers,India’s $60 billion IT outsourcing sector provide services ranging from managing complex computer networks and call centres to software coding to maintaining technology operations.

Indian software services firms came out of the 2000-2002 technology spending bust with sales growing up to 50 percent a year as they won over companies to contract out inefficient operations instead of managing them in-house.

But as global companies scramble to chalk out new business strategies in the post-Lehman world,cautious is the buzz word,especially for longer-term contracts worth millions of dollars.

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