While there may be a dampening of sentiments because of the euro zone crisis, IT deals are still on. BG Srinivas, member of the board at Infosys and head of Europe tells FE?s Goutam Das that the firm hasn?t re-looked at its business plans in the UK and the continent as yet.
How do you access the macro issues in Europe and its spiraling impact on countries you do business with?
The challenges as we see it will continue for some more time. There are no easy solutions. Can it have a spiraling effect? Yes, if it worsens. There is quite a bit of exposure for German banks in Spain and French banks in Greece. Those inter-linkages are strong. The optimism I have is that the governments are serious about avoiding a spiraling effect. If a panic reaction sets in, there will be a bigger damage. That is why they are making painful decisions. Italy, Greece, Ireland, Portugal and Spain will continue to be in trouble. In the UK austerity measures have stemmed the crisis. But there is unemployment, and consumer spending is a little dampened. Germany and France are relatively doing better.
In case of a deeper crisis, how prepared are your customers?
We see a greater degree of stability in businesses compared to the last crisis. Organisations have been extremely circumspect. They have been holding back cash reserves; they have not made rash decisions; they have continued to invest in emerging markets to accelerate growth. There is stability, particularly in manufacturing, in energy equipment manufacturing companies. Retail, however, continues to look at alternative channels to generate demand and more investments are happening in the digital space. There are a few industries that are unfazed by the crisis. The oil and energy companies are relatively okay.
What kind of exposure do your customers have in the PIGS countries?
Not to a great degree. Most large companies have Europe as a market. To that extent, they have exposure. Large automotive companies sell into Spain and Greece. Luckily, we don?t have direct exposure to these countries. Of course, we carry out Europe-wide roll outs for clients. But we don?t do business in Greece and Portugal. In Spain, we have one or two clients and very small revenues; same for Ireland.
Have there been instances of investment pull backs from European customers?
Barring one or two clients, who have a problem not because of the macro environment, we have not seen any investments being pulled back. We will see through this financial year. We don?t have indications yet on how the next year?s budget will pan out. We will reach out to clients in late November-December to get a feel of that. We continue to invest in Europe. We still see deals happening both in the UK and the continent markets. We haven?t re-looked at the business plan we have put in place for Europe as of now.
How has the current quarter panned out for Infosys in Europe?
In the last two quarters, the pipeline has been reasonably good. While not all decisions have been taken, some decisions will happen this quarter.
Give us an update on how discretionary spending and large deals are trending in Europe.
Discretionary spending is still happening. We are winning transformational programmes. Large deals were never a trend. Billion dollar deals were very far and few. Even $300-400 million deals were few. It has nothing to do with crisis. Europe has always been cautious in their approach. To that degree, even in the good times, you will not see mega deals. For Infosys, it has been a marginally upward trend when it comes to deal sizes. We have been winning $30-40 million kind of sizes. It will be slightly bigger in banking.