by Beth Bacheldor

The Indian IT Outsourcing Industry – Down?

Jan 18, 2011
Enterprise Applications

Infosys third quarter results did not meet analysts’ estimates. But…

For the most part, India’s leading IT outsourcing firms have managed to resist the heavy downward tug of the recent recession and ongoing economic sluggishness with fairly consistent upticks in financial health. But cracks have appeared of late, however tiny.

India’s second-largest software exporter and outsourcing services provider, Infosys, reported in its third quarter results for fiscal year 2011 a 14.2 percent rise in net profit compared to the same quarter a year earlier. But that profit – 17.8 billion rupees – was a bit lower than the 18.2 billion rupees estimate in a Reuters poll (this is according to this article).

But in U.S. dollars, the company boosted its net profit to $397 million, up by 18.9 percent, and its revenue in the quarter was $ 1.6 billion, up by 28.7 percent from the same quarter in the previous year. Infosys reports in accordance with International Financial Reporting Standards (IFRS).

Not shabby, of course. But according to the Seeking Alpha article, the major Indian IT outsourcing companies were expected to show more robust growth, and Infosys’ results were a little deflating.

The company itself checked enthusiasm for current and future upticks. “The weaker economic recovery in developed markets coupled with high unemployment and risk of sovereign default could impact industry growth,” S. Gopalakrishnan, Infosys’ CEO and managing director, said in a prepared statement. “We are closely working with our clients as they fine tune their strategies for the future.”

In addition, the company’s CFO, V. Balakrishnan, said in the statement that “uncertainties related to sustainability of the global economic recovery could create greater currency volatility in the near future.”

But in this PC World India article, there is optimism. Company execs report that U.S. customers are finalizing their budgets on time, and while growth in spending isn’t great there is a focus on doing more work offshore. Infosys is forecasting that revenue for its fiscal year ending March 31 will be about $6 billion, or an approximate 26 percent growth year over year.

With Infosys having reported its earnings, all eyes are on the other big Indian IT outsourcing firms, Tata Consultancy Services (TCS) and Wipro. I’ll put up another blog in a bit on TCS, which just reported (big hint: up). Wipro reports Jan. 21st.