Meltdown and the spiral effect

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: the manufacturing industry, which largely comprises the auto, pharma, chemical and aerospace sectors. While many auto companies in the US have asked for a bailout package from the government, the aerospace industry also continues to be in the red. Pharmaceutical industry seems to be the saving grace as people are expected to continue spending on that front.

“Whatever happens as a natural outcome will continue to see spending. However, incremental spend may not happen,” says Harshad Deshpande, IT research analyst with Ambit Capital. This vertical also sees a lot of ERP spending, which is considered to be largely discretionary and may witness a decline in new SAP or Oracle licences being purchased.

Moving on to the telecom vertical, the general consensus is that software spending on telecom will witness a gradual slowdown. However, while equipment manufacturers will bear impact of the slowdown the most, telecom service providers are expected to be lesser hit. However, there is widespread belief that telecom service providers tool will not come out unscathed. Let us not forget that the likes of BT, AT&T, Alcatel Lucent and Deutsche Telecom are some of the biggest telecom outsourcers to Indian IT companies.

“The telecom vertical has been under pressure due to the client consolidation for the past 2-3 years. However, the nature of the business there is more real and won’t come to a halt because of the slowdown. At the same time, new investment and spend on value added services along with average revenue per user (ARPU) could see a drop,” says an analyst who didn’t wish to be named. On the other hand, services like maintenance and customer support are likely to remain unaffected.

Likewise, the outlook for retail is also not very good as the financial crunch is expected to have a direct impact on customer spending. Retail is the largest vertical for Indian IT companies after BFSI, manufacturing and telecom.

Among the top-5 companies, Infosys and Wipro have the largest presence in the retail vertical, which is a large consumer of supply chain management, inventory management and logistics management solutions. “The industry functions on legacy systems, and the current times could see companies deferring the switch to newer technologies,” says an IT analyst with a brokerage firm.