Is It Bad?

The past quarter has been a nightmare for Indian software companies

The third quarter results of domestic software services companies were watched more closely by the markets than ever before, and not surprisingly so. Post September 11, the Indian IT sector, which was already fighting dwindling demand for software services, faced its toughest quarter yet.

As expected, hopes of an early rebound in 2002 were quickly dashed by the desolate performance of the domestic IT majors. While the top-tier companies managed to report modest growth in both revenues and earnings, fundamentals have deteriorated sharply for second-rung companies, barring isolated cases like Digital GlobalSoft (it enjoys the benefits of being linked to a strong parent).

 

Due to their inability to convert existing relationships into offshore business, smaller companies have shown not just a declining trend in margins and business volumes, but are also finding it increasingly difficult to acquire new business.