A hesitant smile

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As the quarter results come in, Indian IT companies look ahead with cautious optimism Rajesh Menon analyses whatcould be in store

Days after the four Indian IT majors — TCS, Infosys, Wipro and Satyam — detailed their earnings and gave a muted outlook with back-ended growth for fiscal 2009, it was the turn of global IT behemoth Accenture chairman and chief executive officer William (Bill) Green to put things in perspective and give credence to the management commentaries of the Indian software firms that outsourcing has come to stay. In a dialogue in the Silicon hub of India, Green gave a historical ring to the outsourcing theme. “If you look at the history, in the last economic downturn, outsourcing accelerated in a dramatic way. There is no question that an economic challenge brings people to focus on bringing in more business efficiency. The market is more mature now and outsourcing is a proven method in many cases to improve business outcomes,” he said.

So, as Indian companies put their foot forward with cautious optimism, there is some consolation in the form of global majors also betting on what has so far been India’s success story — outsourcing. Having already taken a hit due to the appreciating rupee against the US greenback — 11% in fiscal 2008 — Indian IT companies had to face another headwind in the form of a slowdown in the world’s largest economy and its biggest market, the US, from where it derives around 60% of its revenues. Grappling with rising costs, wage inflation and the threat of tax breaks going off by March 2009, there was trepidation among the software folks that India’s IT story may lose its charm.

But as India’s IT bellwether Infosys Technologies came out with its details — in line with the street expectations but with a better-than-expected earnings per share (EPS) guidance for fiscal 2009 — there was something to cheer about. A flat growth in the first quarter of fiscal 2009 was not the best way to kick off a new financial year, but then Infosys chief executive officer and managing director S (Kris) Gopalakrishnan admitted there were “short-term challenges, (but) we as a company see significant growth opportunities in the medium to long term”.