Slowdown in Indian Tech Services

Posted by: Steve Hamm on January 13

The slowdown in demand for off-shore tech services is starting to show up in earnings reports. Infosys reported this morning, meeting revenue forecasts and beating on the earnings side, but the evidence of slackening demand was unmistakable. Revenue rose just 14% year over year, and just 1% from the previous quarter. “After the Lehman failure on Sept. 15 we saw a dramatic change in sentiment. The whole world changed. The sentiment turned very negative,” Infosys CEO Kris Gopalakrishnan told me on the phone today.

Customers are delaying decisions, delaying the start of new projects, and changing the mix of work they want done. There are fewer new custom software development projects and hardware engineering projects, and more maintenance-type work—such as tech infrastructure management. “Some customers aren’t even spending their budgets right now,” he says.

Still, Infosys plans to go ahead with the hiring of about 15,000 “freshers” it recruited from this year’s college graduates. It will extend their training period from 16 to 24 weeks. Gopalakrishnan expects the recession to go on for 12 to 18 months, so, if that happens, the new employees will be ready for deployment when demand starts to rebound. “We’re well prepared,” he says. “When the recovery happens, the comopany is in a very strong position to take advantage of it.”

Unlike some of the other tech services outfits, Infosys isn’t making strong moves to pick up Satyam customers. It’s not actively trying to pick off Satyam customers, though it accommodates them if they approach Infosys looking for help. When the company gets resumes from Satyam employees, it doesn’t act on them. “There’s a responsibility not to take advantage of the situation. The new board is trying to decide what they want to do. We don’t want to precipitate anything,” he says. That admirable restraint.

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