Infy raises concerns on negative sentiment about outsourcing

Country's second-largest software exporter Infosys has raised concerns that negative sentiment about outsourcing in various countries, including the US and the UK, could hurt its business prospects.

In recent times, there has been increasing criticism about outsourcing in many developed markets, especially in the wake of huge job losses due to sluggish economic activities.

"Recently, some countries and organisations have expressed concerns about a perceived association between offshore outsourcing and the loss of jobs," Infosys said in a recent filing to the US Securities and Exchange Commission.

"Legislation in certain countries in which we operate, including the US and the UK, may restrict companies in those countries from outsourcing work to us or may limit our ability to send our employees to our client sites," it noted.

This comes close on the heels of Infosys announcing less than expected financial performance last month, with a consolidated net profit of Rs 1,818 crore for the fourth quarter ended March 31, 2011.

For the year ended March 31, the IT bellwether posted a consolidated net profit of Rs 6,823 crore, up nearly 10% over the year-ago period.

Infosys expects revenue in the range of Rs 7,311-7,382 crore for the quarter ending June 30, 2011, and in the range of Rs 31,727 crore to Rs 32,270 crore for the financial year FY12.

Voicing concerns, the software exporter in the filing cautioned that there could be a change in existing laws or enactment of new legislation restricting offshore outsourcing.

The Governor of the State of Ohio had recently prohibited governmental entities from using public funds for offshore services.

According to Infosys, it is possible that private sector firms working with these governmental entities may be restricted from outsourcing projects or may even face disincentives if they outsource certain operations.

"If either the US federal government or another governmental entity acquires an equity position in any of our clients, any resulting changes in management or reorganisations may result in deferrals or cancellations of projects or delays in purchase decisions...," the filing said.