 "IT spending uptick in US fuels hope of Indian IT services firms")
After last several years of ups and downs, the clients in the largest IT market are looking at increasing the pace of offshoring, something which was almost missing during the past 3-4 years.
According to industry experts, most of the clients are considering engaging with the services providers using newer models to have a better control over costs. However, decision making on large multi-year contracts is taking more time primarily because of the immigration related concerns.
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“North America is looking more positive as compared to Europe. We are seeing activity; people are talking about projects and next round of benefits from offshore. So the demand environment is much better as compared to the last 2-3 years though it is not as brighter as it was in 2006 or 2007,” said Sudin Apte, CEO & Research Director of management consultancy firm, Offshore Insights.
In its latest report, consultancy firm Forrester Research has said that the US will be at the forefront of technology spending in 2013. Technology spending by the US corporations and government is expected to grow 5.9 per cent in 2013 when the global spend is expected to grow at 2.3 per cent to reach $2.07 trillion. The growth in technology spending by the US will continue to grow at a healthy 6.9 per cent in 2014 as well, the research firm said.
Noida-based NIIT Technologies which announced its financial results for the April-June quarter on Tuesday said that company is upbeat about the current demand scenario with a strong recovery in the US in sight.
"We are seeing an uptick in the US market, there are clear signs of it based on recently released economic indicators and job created numbers," said Arvind Thakur, CEO of NIIT Technologies.
In the just-ended financial quarter, Infosys, India’s second largest IT services company posted a strong 4.9 per cent sequential growth in North America, its largest market from where it derives over 60 per cent of its revenues. The company management also said that the deal funnel from North America looks stronger.
According to Peter Bendor-Samuel, Founder and CEO of technology advisory and research firm Everest Group, even though Infosys' success can't be taken as an industry benchmark, there has been a definitely a modest uptick in demand.
"As far as the overall business environment is concerned, we can expect TCS and Wipro to also perform better than expectations as there has been a modest uptick in the demand,” he told Business Standard.
Industry experts and analysts also believe that with the uptick in demand, most of the American clients are now looking at engaging with vendors under newer business models.
In a recent report, research and analyst firm Gartner has said that clients in North America are expected to seek transitioning more IT work to annuity-managed service relationships for cost take-out and more predictability in costs. “This will keep IT outsourcing growing in the region through 2016,” it added.
According to Apte of Offshore Insights, clients are primarily trying to use new delivery models primarily to get incremental benefits using shared services or vendors’ IP.