The Hindu Business Line : ‘Too early to talk of a recovery’

Bangalore, April 15 Infosys Technologies, which saw the global financial crisis put on hold its growth run, said it is too early to talk of a recovery and expects the uncertainty to continue.

“We are waiting to see if this is really a recovery, whether it is going to be sustained,” said Mr S. Gopalakrishnan, CEO and MD of Infosys, commenting on positive indicators such as bank profits and improved housing statistics in the US. “Unfortunately, at this point that data is not very clear and our clients are not saying that,” he added.

Infosys’ clients still believe that there will be a decline in IT budgets. “We will have to wait, till we get a signal,” said Mr Gopalakrishnan. “Today the signals are coming from analysts and economists, not from our clients, yet,” he added.

He said there is the possibility of this downturn impacting other industries such as manufacturing. Infosys earns 64.6 per cent of its revenue from North America and 24.3 per cent from Europe.

In a survey done, in mid-March, of 135 clients who contribute to about 83 per cent of the company’s revenue, 89 per cent indicated that budgets would be down, while 69 per cent said the reduction would be in low double digits, Mr Gopalakrishnan said. Twenty-two per cent said there would be increase in offshoring while 5 per cent said that increase would be more than 10 per cent.

Mr Gopalakrishnan said the biggest problem for the company is that it needs to get the growth going.

“With growth, all the problems will be solved,” he added. The company has not seen any project cancellations, but the velocity of business has come down. “Typically when a project ends, a new project starts. That re-start is getting delayed,” he added.

Decision-making is also being delayed. A deal that closes in six months is now taking 9-10 months, he said. Also, when new clients are added, there is a certain amount of growth: now that growth is much slower. Infosys has a good pipeline of deals, he added.

Asked if Infosys will engage with Satyam’s clients, Mr Gopalakrishnan said the company had earlier said it would not proactively go after Satyam’s clients. “That philosophy might not be that relevant now. The situation has changed,” he said. “However, our approach to sales has been that we do not take undue advantage of our competitor or a situation,” he added.

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