IT budgets to be flat in 2016: Infosys

Spending by global enterprises on information technology (IT) in 2016 would be same as in 2015 or less due to global uncertainty, a senior Infosys executive said on Thursday.

"IT budgets for this year (2016) are yet to be finalised. As global uncertainty continues, we expect budgets to be flat or less than in last year," Infosys chief operating officer U.B. Pravin Rao told IANS here.

Though non-discretionary spend, required to man and run IT operations will continue across verticals, especially in the financial and other services, discretionary spending on new projects, new services and new products will depend on growth and business needs.

"As clients want more for less, we are cutting their costs through automation and artificial intelligence to drive their growth by other means," Rao said after the global software major reported robust performance in a weak and tough third quarter of 2015-16.

As enterprises reduce cost of their IT operations and use smart technologies like cloud, mobility and data analytics to minimise overheads, vendors like Infosys are made to add value to their services to retain clients and sustain growth.

With crude oil prices plummeting to a record 12-year low (below $30 per barrel), the IT major's clients in the energy sector, especially oil and gas are unlikely to have discretionary spending till they recover from the present slump.

"As energy sector is under pressure, we do not foresee discretionary spending by its customers till oil prices recover substantially," Rao admitted.

With global economy on downslide and IT users wary of investing more than required in the short and medium term, the outsourcing major is doing its best to retain clients through volume growth despite billing pressure.

"We have done well in a quarter considered tough due to furloughs, holidays or less working days and headwinds in a few verticals such as energy, manufacturing and telecom while retail was soft," Infosys chief executive Vishal Sikka told IANS.

Nothing that visibility was less as it was traditionally a weak quarter being year-end for most of its global clients who operate on calendar year (January-December), he said sequential growth and new multi-million dollar deals demonstrated that the company was resilient to ward off headwinds and stay on course in line with the revenue guidance revised for this fiscal.

"Our revised guidance, however marginal, shows we will be back to the industry growth in double digits by end of this fiscal (March 31) by sustaining our growth momentum seen in second quarter (July-September)," Sikka added.

Admitting that volatility in foreign exchange and a depreciating rupee had impacted operating margins, chief financial officer M.D. Ranganath said operating profit was negative sequentially and annually.

"Though we benefited from a weak rupee as non-operating income, it was offset by offshore costs and cross currency volatility," he pointed out.