India Prepares for the (Eventual) Turnaround

Posted by: Steve Hamm on July 10

Just a bit of good news out of India today. Infosys, which is the first of the large Indian tech services outfits to report earnings each quarter, came in with better-than-expect results. In dollars, the company had revenues of $1.12 billion and net income of $313 million. The company had forecast a revenue decline of 4% to 6%, in constant currencies, but revenues declined just 1%. Operating margins actually improved. That’s partly because Infosys fired more people during the quarter for poor performance. Normally, it gives people who get poor evaluations six months to improve, but now, in the midst of the recession, it cut some people loose immediately.

Infosys CEO Kris Gopalakrishnan says the results validate the company’s strategy for the downturn. Infosys has continued to invest in developing intellectual property, expanding its sales force, and, overall, hiring and training 18,000 additional staffers this fiscal year. The company is establishing a new global delivery center in Brazil, too. The idea is to be ready when demand picks up again. “If you’re well prepared, you’ll benefit and grow disproportionally,” he says.

It’s still a gamble, though. An informal survey by Infosys of its customers showed increasing concern about the tenacity of the recession. At the end of the last quarter, 46% said they don’t expect an economic turnaround until after March of 2010; in the most recent survey, 54% gave that answer. If the recession drags on longer, Gopalakrishnan and his colleagues may have to rethink their aggressive investment and hiring strategy.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/