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V. Rishi Kumar

Hyderabad, April 13 There is no impact of slowdown as yet on the technology sector as the lag effect is yet to catch up, according to Mr Rajesh Jain, Executive Director for ICE sector of consultancy services provider, KPMG.

The lag effect pertains to ongoing businesses and most of the deals getting executed now by Tier I and Tier II technology companies are not affected as of now. However, there may be some delays in deal making over the next couple of quarters, Mr Jain told Business Line.

Providing an overview of the sector and some trend pointers, Mr Jain said “This is one phase to watch out for as the consolidation in the sector is set to accelerate. Tier I players will step up cross-border merger and acquisition activity.”

The M&A activity is likely to range from $10 milion to $200 million for large firms and for tier II firms they will have no way out but to take to consolidation as they find it tougher compared to their peers, he explained.

“The performance of domestic IT companies during the fourth quarter will be as projected with impact on dollar-rupee fluctuation on predictable lines. But going forward, while the tier II players would be under margin pressures, tier I companies would be in better position to bargain for better deals,” he said.

“While perception of slowdown persists, this will have positive impact on outsourcing as more US enterprises will seek to leverage the advantages of outsourcing,” he said.

Recent deals reflect there is no impact of slowdown on a company like TCS, which has had several large deals coming its way recently. While most services have been commoditised, with IT services providers bundling consultancy and offering transformational services, the deal making too is undergoing changes, Mr Jain observed.

Referring to hiring, he said that interaction with companies shows there has been no direct impact on their hiring plans as yet. Unfortunately, some isolated incidents get played up. This does not reflect the industry trend.

The impact of the slowdown, if any, as some analysts are making it out to be, will only be felt over the next 6-12 months as new deals come up for renewal.

Contrary to general perception, business process outsourcing companies continue to do well and even the domestic BPOs are profitable.

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