Infosys Technologies, the country’s second-largest computer-services company, said some of its biggest clients may increase orders next year, betting the global economic slowdown will force companies to turn to cheaper labour.
A survey of the top 100 clients has shown that several customers may outsource more services in 2009, Kris Gopalakrishnan, chief executive officer of the Bangalore-based company, said in an interview in New Delhi today, without specifying a number.
Infosys, and larger rival Tata Consultancy Services, face concern whether they can sustain earnings growth as the economic slowdown in the US forces customers to cut technology spending. The Indian provider made about 60 per cent of its second-quarter revenue in the US.
“Even if the spending rates aren’t increasing, Infosys always garners a greater share of the offshoring,” Harit Shah, a Mumbai-based analyst at Angel Broking said in a telephone interview. Shah has an investment rating of “buy” on the stock.
Infosys rose 1.6 per cent to Rs 1,232.40 at the close of trading in Mumbai, while the Bombay Stock Exchange Sensex declined 1 per cent. The stock has dropped 30 per cent this year compared with the benchmark gauge’s 54 per cent fall.
Infosys, which cut its earnings forecast in October, is repeating a client spending-plan survey because the deterioration in the financial markets in September rendered the company’s previous poll irrelevant, Gopalakrishnan said on October 16.
“What I have found in my interactions is that some companies would increase their offshore outsourcing,” Gopalakrishnan said today on the sidelines of the World Economic Forum’s India Economic Summit. “Typically when there is a slowdown the stronger companies will continue to invest.”
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‘Mood still negative’
The reason that not all top clients have said they will increase work sent to Infosys is because the “mood is still negative”, he said.
Gopalakrishnan said while customers will decide on their budgets mostly in the beginning of next year, the computer- services provider may get a larger share of work sent offshore.
Infosys won orders this quarter including those specifically to help customers tackle the economic slowdown, Gopalakrishnan said. The orders include technology consulting and services in “multiple” industries including banking and finance clients.
“What is different in this period is that the uncertainty is definitely higher and till stability comes you are always worried that something bad could happen.”
Lehman Brothers Holdings’s bankruptcy was the trigger that led Infosys to “re-evaluate” its business outlook in October and cut its July forecast, he said. Infosys, which counts Citigroup and Bank of America Corp as customers, generated a third of its revenue from financial firms last quarter.
“There are still uncertainties of that nature, for example the whole issue of General Motors; these are companies that have a lot of network effect on the economy.”