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Nasscom India Leadership Forum 2012: Biz visibility a concern in FY 13, say mid-tier CEOs

Captains of smaller IT firms say they have no visibility into what their customers would do beyond two quarters as the macros, particularly the Euro crisis, have made clients cautious.

twitter-logo Goutam Das        Last Updated: February 14, 2012  | 16:04 IST

Goutam Das
Goutam Das
Nasscom summits typically begin with a dose of chest thumping - this year's India Leadership Forum had its fair share:

"In FY 12, the combined IT-BPO sector would cross $100 billion in revenues."

"We are now in 70 countries with 560 delivery centres."

"Our contribution to India's GDP has grown to 7.5 per cent from 6.4 per cent in FY 08."

"There is no visible competition for us (incorrect, at least in BPO where Philippines has stolen India's thunder)."

While there is merit in many of the facts, investors and analysts appear keen to know about the future, particularly the state of the industry in 2012. While the sector's mid and long-term drivers are in place, there are too many headwinds to ignore this year.

While Nasscom projects 200,000 hires for FY 13, most of the number, it is safe to assume, would be gobbled up by the large tier firms who can trade higher volumes for lower price. How do mid-tier firms see the business climate and the demand environment?

Captains of smaller IT firms BT spoke to said that they have no visibility into what their customers would do beyond two quarters. The macros, particularly the Euro crisis, have made clients cautious - they are hoarding cash even when their business is not sluggish.

Krishnakumar Natarajan, CEO and MD of MindTree and a speaker at this year's Nasscom Leadership Forum in Mumbai said that he is not seeing too much optimism in the marketplace. There is more caution than two-three months back and decisions on spending were being delayed. "Deals are taking longer to close and there is more scrutiny of deals. Customers may not have a visibility of more than six months into their business which is affecting our ability to plan," he noted.

The axe, as of now, appears to be falling on discretionary projects. Service lines such as package implementation are headed for a nose dive. Global chief information officers (CIO), however, are not cutting back on what they call "lights on" work - things like maintenance services that is required to keep their huge data centres running.  

"One would be lucky to see lower single digit growth in budgets in the US, where 60% of India's business comes from. The discretionary budgets in Europe could be slashed 10 to 25 per cent," Ganesh Ayyar, CEO of MphasiS said.  

Customers, nevertheless, were willing to engage in a new way, he added. "IT firms who are able to offer solutions that help in acquiring or retaining their client's customers or solutions that can lower the cost of doing business are finding traction. Here, they are willing to try out innovative models," he said.

BFSI is one area where customers are looking for innovative solutions. Banks have to spend on regulatory processes and if Indian IT providers can help them variablize costs, more business could be in the offing.

Arvind Thakur, CEO of NIIT Technologies expects investments in business platforms that make companies more competitive or platforms that enable transformation to pick up. "If you look at the macro indicators, they are all sluggish. However, there are some signs of improvement now. In the US, there is a jobs recovery," Thakur says, sounding a bit hopeful of the future.

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