outsourcers delaying decisions on technology spends

First quarter is usually a period of strong growth for info-tech companies. But not this year, as IT firms continue to see slowdown in growth and hiring with outsourcers delaying decisions on technology spends. Infosys, along with TCS, will be the first to report the numbers for the first quarter, and the signs are not very encouraging.

Revenue guidance

Analysts expect Infosys to pare the revenue guidance further for the FY13 in the range of 7-9 per cent compared to the 8-10 per cent it had forecast at the end of FY12 due to continued slowdown in outsourcing decisions from its clients. Similarly, Wipro had given guidance of a flat growth for the first quarter of FY13 and analysts expect it grow one per cent over the previous quarter. “We expect 2012 revenue growth to be in the mid-to-high teens compared with the 20 per cent plus growth in 2011,” said Mr Sreenivasa Prasanna, Senior Director, at ratings’ firm Fitch. “In what has generally been a strong growth quarter, we expect Infosys and Wipro to report muted revenue growth,” said Mr Pankaj Kapoor and Mr Apoorva Oza, analysts at Standard Chartered. The macroeconomic conditions in both the US and Europe would continue to dog Indian IT companies in the period going ahead, according to analysts. “With continued elongation in decision cycles and no signs of macro recovery on the horizon, there is little to suggest that companies could surprise positively,” said Mr Ashish Chopra, Analyst, Motilal Oswal. This uncertainty is delaying the joining of IT engineers, which will be something that other companies are looking to do, according to analysts.

Hiring activity

“After Infosys deferred campus joiners by a couple of quarters, hiring activity and guidance across players will be keenly watched,” said Mr Chopra. TCS and HCL Technologies are expected to grow four per cent over the previous quarter, said analysts. “TCS and HCL are likely to be the outliers, helped by ramp-ups in large projects they have bagged,” said Standard Chartered analysts. TCS bagged a $2.2-billion deal for 15 years with Friends Life and HCL has won a few billion dollar deals.