The pressure to reduce costs will remain in 2010

Written by Rachana Khanzode | Surabhi Agarwal | Updated: Feb 13 2010, 04:33am hrs
The signs of recovery in technology demand are clear with most IT players expecting deals to be back in the coming fiscal and several of them announcing hiring plans. Though the countrys second largest software company Infosys Technologies shares the euphoria, it continues to maintain a cautious attitude. S Gopalakrishnan, CEO, Infosys told Rachana Khanzode & Surabhi Agarwal that expectations of clients budgets remaining flat this year is actually good news for the industry. Excerpts:

You recently said that your clients IT budgets will be up by 4% in the next fiscal. Have most of your clients finalised their spends

Industry analysts like Gartner and others are predicting that budgets may be up 4%. But, our view of our own clients is that their spends will be almost flat. In 2009, the budgets were down by 6-8%. So to say that budgets will be flat next year is a better situation than what was this fiscal. So, client budgets will be flat and they are saying that offshore allocation will be higher. Hopefully, it will translate into more work but how much we cant say.

What is driving this shift to off-shore more

The pressure to reduce costs will remain in 2010 and one of the ways is by leveraging offshore. Total IT spend in the world is about $800 billion to a trillion dollars, the offshore model is only getting around $50 billion. That is why Nasscom is saying that over the next 10 years, this industry will grow by 10% annually. In a year (fiscal 2010-11), where IT budgets are almost flat, IT industry will grow between 13-15%, which is by taking shares from traditional model to the offshore .

Is discretionary spending back

Yes, they are spending on discretionary projects. There is only so much that you can cut from costs, after sometime you have to think about how you have to spend for growth. There are some clients, who are much more aggressive in investing for the future, and there are others who are not so aggressive. Financial services companies have started moving into discretionary projects in a big way due to several reasons. But, manufacturing companies are not so much looking at discretionary spend because the sector is still lagging in some respects.

TCS announced its hiring plans, what are your targets for next year

If there is growth, clearly there will be more hiring. And in that sense, all of us are hiring. We have already made 15,000 campus offers for next year. Even though we have not said what will be the total number, we have made offers.

With everybody getting into the hiring mode again, are we again starting onto a talent shortage situation

Talent shortage is going to challenge the industry and its growth and to the economy itself. Because we are not competing with IT service providers alone, but with all sectors, and they are all growing. That means talent shortage will be a challenge to GDP growth.

Despite the euphoria, you continue to remain cautious in your outlook

You still need to be cautious. We believe that we are not completely out of the woods. There are still concerns with some European nations. There is deficit situation in many countries and some others have still not taken off. So, there are still some concerns. Nobody predicted this crisis, nobody predicted that it will recover so fast, so similarly no one can predict what lies ahead.