The tremors from the Dubai World crisis are unlikely to be felt by Indian information technology (IT) service providers, since they do not have a major exposure to the market in that region.
However, the IT companies could feel the ripple effect in the long run, when financial institutions and banks which had lent money to Dubai World bear the brunt. These institutions account for nearly 25-30 per cent of the revenue of Indian IT companies.
“I don’t think there will be any material impact, as Indian IT companies are not so active in Dubai and two-three companies who are present there still derive lower, single-digit revenues from that part of the world,” said Gaurav Gupta, head (India), Everest Group. He, however, cautioned: “The ripple effect might be a cause of concern and affect the IT outsourcing by financial services institutions, which had started to pick up. But it is quite early to say that.”
Among Indian IT companies, Wipro has a presence in the region, including Dubai, through Wipro Infotech. Besides, companies like HCL and Satyam also have a small client base in Dubai; they say it has remained unaffected so far.
“The impact won’t be that significant,” an HCL spokesperson said.
Wipro’s India and West Asia business is a little over than 8 per cent of its IT services’ revenues. Wipro began its operations in the region from Dubai in 2001 and reported a growth of 170 per cent in 2008-09, owing to a smaller base there. The company has a few customers in Dubai and says the current fallout won’t affect it much, as they have already mitigated the risk by diversifying to other places.
“The problems in Dubai started happening almost a year back. We have taken adequate measures since then by spreading out to other geographies, including Saudi Arabia, to mitigate the risk,” said Anand Shankaran, senior VP and head of Wipro’s India and Middle East business. But, he declined to comment on whether the company worked for any of the projects undertaken by Dubai World.
According to industry insiders, Indian IT vendors who are present in the region work in long-term projects like ERP or SAP implementation, for which clients have already finalised the budget and are very unlikely to roll back, owing to the fact that these are very critical IT implementations for them.