Industry Update

There is still hope

The sharp decline in revenue growth guidance by Infosys has ended the debate on the adverse impact of slowdown in North America on the domestic IT industry.

Though the annual growth numbers reported by frontline companies like Wipro, Infosys, Satyam Computer and HCL Technologies does not suggest any sharp reversal in the fortunes of Indian IT industry, the declining quarterly sequential growth is a clear indicator of things to come.

The double digit sequential growth of most of the leading domestic companies dropped down to single digit levels or even negative in some cases.

In the past few years, IT spending across the world has been growing at an annual rate of about 10.5 per cent. This was primarily due to a bundling of opportunities such as Y2K, euro money conversion, need for migration and adopting new applications which was later followed by the dotcom boom and mushrooming of start-ups in the telecom industry. This scenario is not likely to be repeated again.

With the world's largest economy on the verge of a full blown recession, IT spending is expected to remain sluggish in the near future.

The recent survey of 225 chief investment officers (CIOs) conducted by Morgan Stanley indicate that more companies plan to cut back their IT spending in the current year.

International Data Corporation (IDC) has revised its growth estimates for the IT industry to 20-25 per cent, while our own apex body for software exports and promotion