THE mild recession in the US economy triggered by the collapse of the housing market and the resultant sub-prime crisis is unlikely to have any major impact on the Indian IT industry. Though for now there has not been any definite signs of a deep recession in the US, the initial signals are not encouraging, as Indian IT generates more than 50% of its revenues from the US.
Mr John McCarthy, VP, Forrester, says: ‘‘Given the level of budget that goes to offshore providers now, there will be an impact for Indian firms in the short term. This is especially true for firms like Cognizant, Infosys and TCS that get a larger portion of their revenues from financial services, which is the industry under the most duress.” The financial services, or the BFSI segment, is typically the highest spenders with the total IT budget in 2006 estimated at $137 billion, of which around 12% was outsourced. Analyst feel that while Indian IT firms will weather the short-term impact, any further downturn to the US economy will prove beneficial to the industry in the long run.
Mr Partha Iyengar, VP & regional research director (India), Gartner, says that there will not be any material impact on the Indian IT industry. ‘‘Global sourcing is too entrenched in most company services landscape that it is impossible to tactically change course or evaluate options based on issues like this,” he said.
This is also the time of the year when US corporates go in for formulating their yearly IT budgets. Mr McCarthy says companies are getting nervous about the economy and the 2008 budget cycle will see firms becoming more conservative.
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