TCS sees delay in closure of discretionary projects

Written by Shruti Ambavat | Mumbai | Updated: Jan 19 2012, 07:52am hrs
Indias largest software exporter, Tata Consultancy Services sees a delay in closure of discretionary projects from its clients who are now taking longer than usual for due diligence.

It is not that there are any cancellations in the discretionary spending projects, but clients are taking a long time to think over it, which means that if they are not doing any projects on the social networking side, they will focus on analytics projects at the back end, S Mahalingam, chief financial officer and executive director at TCS said in an interaction with FE. We have to be ready for the back-end projects now, he added. Back-end projects are the ones that are not very visible to the organisation upfront, such as upgrading the human resources operations.

Experts say clients are more cautious as the developed world slows down and the sentiment reflects on their budgetary decisions. The transformation nature projects which are beyond the usual IT budget have been put on hold and companies are cautious on them now, said Arup Roy, principal research analyst at information technology research and advisory company Gartner.

According to Deloittes analysis on the top trends for the technology industry for 2012, as data warehouses start to overflow and as the need for more relevant and timely analysis begins to put strain on traditional analytics tools, the IT industry cannot afford to get carried away with the big in big data; it needs to maintain its focus on extracting insights that help to improve decision-making and business outcomes. The year 2012 will see 90% of Fortune 500 companies kick off a data-related initiative, which will boost the industrys revenue to between 650 million and 1 billion.

CIOs will look at demonstrating projects to their management heads only where quick return on investment or ROI can be seen because the economy hasnt really shown signs of improvement, said Roy of Gartner. He expects the delay in discretionary spending to spill over in the fourth quarter of the current fiscal year as well as the first quarter of the next financial year.

Expect more smaller projects to come in the forefront and the revenue offtake for IT companies will also be slow, said Roy.

TCS also sees a flat to similar levels of pricing outlook for the next few quarters. Unless the macro-economic situation changes dramatically and there is change in demand, pricing is expected to remain the same, said Mahalingam.

Apart from flat pricing, TCS is also facing a crunch in talent hiring in the US, for specific skills. In the US, it is not easy to find the skills that we are looking for, said Ajoy Mukherjee, head for global human resources at TCS. The company is looking at hiring 450 people in the US which is part of its strategy to fend off the higher visa rejection rates. The visa rejection rate at the moment is as high as around 40%.