Nasscom Sees Cloudy Skies for Indian IT

Exports may shrink in 2012-13 as clients hold back spending due to uncertain environment

HARSIMRAN JULKA & SHRUTI SABHARWAL 

The apex body of Indian technology companies is likely to forecast a slowdown in software exports in 2012-13, as corporations keep a wary eye on the global economic uncertainty and control expenses on information technology outsourcing. 

"As of now, two things are certain: we might not be able to beat the upper end of this year's forecast, and it's unlikely the industry will grow any faster next year," said an official at the National Association of Software and Services Companies, or Nasscom. 
The person requested anonymity because he was not authorised to share projections before Nasscom's annual summit in Mumbai in February. 
"Double-digit growth for financial year ending March 2013 would be a safe prediction," the official added. 
Nasscom's members, which include companies such as Infosys, Tata Consultancy Services and Wipro, are struggling to provide clarity about demand. In a normal year, Nasscom officials are more or less certain about the growth forecast by the end of January. But this time companies are still negotiating with customers on outsourcing budgets. 
Usually, Nasscom compiles forecasts from member companies, both Indian and multinationals, by January, and polls top analysts before giving its annual growth projection for the Indian IT industry sometime in February. 
"It doesn't look as robust. The picture is hazy this year. You can't see the goal unless the road is clear. We might revise it upwards during the year, if the picture becomes clearer," said another official. He added that companies are yet to submit revenue forecasts for the year, so an accurate prediction is not possible now. India's IT services and BPO exports were predicted by Nasscom to grow 16-18% in 2011-12 to $70 billion. The industry is likely to meet the target. 
V Balakrishnan, chief financial officer of Infosys, said clients have become cautious because of the uncertainty. Even though they have the budgets to spend, they may not do so, leading to fluctuations in forecasts by companies. 
"In such an environment, forecasting becomes a problem more than anything else because unlike earlier, growth does not come in a straight line," he said. Research firm Gartner has lowered its IT spend forecast from 4.6% to 3.7%. US, Europe still in Turmoil 
"US dollar-based IT spending in western Europe will contract in 2012 as the ongoing political uncertainty and a mild recession lead businesses and consumers in Europe to be cautious in the coming months about spending on IT products and services," said Richard Gordon of Gartner. 
Mid-sized tech company Mind-Tree is of the view that the depreciation of the rupee is hitting multinational software outsourcing firms, which contribute a significant portion of India's total IT exports. 
"If you look at most of the large Indian IT companies, they are growing at the upper end of Nasscom's guidance, so the problem is not there. What is impacting overall growth is that for multinationals and large US companies' captives, growth has been impacted because of the significant rupee depreciation," CFO Rostow Ravanan said. 
Outsourcing experts believe business started slowing down in mid-2011, and is yet to pick up momentum. 
Amneet Singh, vice-president of global sourcing at Everest Group, said total outsourcing activity in 2011 would be marginally lower than 2010, impacting the entire industry. 
"We are not seeing any positive indicators; the momentum is still weak. The US has political problems and Europe has the sovereign debt crisis which will continue to impact growth even in calendar year 2012."