'The US slowdown impact will be short-term'

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: the IT companies will grow their businesses after the next three to six months. Larger companies will have to deal with the volatility in stock prices during the period. I think companies should aggressively look for new customers during the period because more companies in the US will outsource in the long-run.

How can the small and medium firms cope with these problems? Any specific measures that you think will help them mitigate the pressures? Do you think that we will see more mergers and acquisitions happening in the industry?

In any situation, whether it be in the US or in India, smaller companies will have to focus on building a strong balance sheet. It (how they cope with the challenges) depends on how strong the balance sheet is. If companies are well funded, and have a strong balance sheet, they will survive the next three to six months. If they are short of cash, it will be difficult. There will be some consolidation in the market place.

Do you think the Indian IT players need to move from the service-centric model, especially in the backdrop of the rising costs, the rupee appreciation and the wage inflation? What are the ways and means to tackle these issues?

There are some challenges in terms of the rupee appreciating. The rising costs—there will be some margin pressure, while your revenue is what it is. After the next six months, as I said, there will be more outsourcing. In the short-run, for the large players too, the challenges will affect your bottom line.

Only a good capitalisation can help companies pass through the issues. Otherwise, companies will have to raise more capital, but then there are issues of valuation and so on. Typically, there is always some lag between the stock market fluctuations and the valuation of small companies. It is over six to nine months that companies see that the stock markets are down and decide to do their valuation to make some money.

Does India still hold the same advantage it held a couple of years ago of having a trained workforce and cheaper costs? Have the rising costs and the wage inflation hurt the country’s image as an outsourcing hub?