Infosys: IT Budgets to Increase Slightly in ’07

Global IT budgets are likely to increase between 2 percent and 6 percent this year, the chief operating officer of India’s second-largest outsourcer, Infosys Technologies, said on Thursday.

“Budgets for this year are being firmed up even as we speak, and we expect that the growth in IT budgets will be only slight,” S. Gopalakrishnan told reporters Thursday. Gopalakrishnan based his forecast on budget discussions with customers.

The slowdown, however, will not impact Infosys’ business, according to Nandan Nilekani, chief executive officer of the company. A larger proportion of the IT budget will move offshore to India, he said.

Clients are beginning to look at larger offshore teams of about 2,000 working on their projects, Gopalakrishnan said.

Infosys had 488 clients as of Dec. 31.

Slower growth in IT budgets is not new, as IT departments are having to do more with less, said Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International (TPI) in Houston, Texas. To get more out of their budgets, IT departments are looking at higher automation and third-party applications that require minimal customization, and are also exploring outsourcing both locally and offshore, he said.

In addition to Indian companies, multinational services companies such as IBM and Accenture are well positioned to take advantage of the growth in offshore outsourcing, as they have set up operations to deliver services from India and other low-cost locations, Pai said.

Infosys of Bangalore revised on Thursday its guidance for its fiscal year ending March 31. The company expects full-year revenue to be US$3.09 billion, up by 43.6 percent from revenue in the previous fiscal year. The company is seeing strong growth in Europe, as customers in Continental Europe have started looking favorably at offshore outsourcing, Gopalakrishnan said.

But to maintain growth, Infosys and other outsourcing companies in India will have to handle the problem of finding qualified people and retaining them. Infosys’ overall attrition rate rose marginally to 12.2 percent in the quarter that ended Dec. 31 from 12 percent a quarter earlier. “The situation is under control,” said T.V. Mohandas Pai, Infosys’ director of human resources, education and research.

The attrition rate at Infosys’ business process outsourcing (BPO) business, however, is down to 26 percent in the quarter that ended Dec. 31 from 38.2 percent in the previous quarter.

The problem is staffing at the entry level. Younger people want to go up the corporate ladder quickly without building a sound knowledge and experience base, according to Pai. “It is symptomatic of what is happening in Indian society at large,” he said.

Infosys is now focusing on training university graduates and is urging them to stay in a job long enough to pick up deep expertise, Pai said.

-John Ribeiro, IDG News Service (Bangalore Bureau)

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