IT remains buoyant

In an even more dramatic development, pack leader TCS has reported a flat fourth quarter. As the subdued Infosys forecast and news of IBM missing its guidance have come together, the question is: has the global technology recovery of the 18 months begun to lose steam, and will this be a dampener for Indian IT companies?

There is a clear divergence in perception between Wall Street and Dalal Street, on the one hand, and Silicon Valley and Silicon Plateau (Bangalore), on the other. The streets or markets believe that technology stocks had become over-valued and are in for a correction, one that has already started.

The technology firms, on the other hand, see no let-up in what matters to them, tech spending, and remain confident about their fundamentals in the current business cycle. If valuations need to be corrected, such a correction will not shrink the R&D dollar that is going into the development of new technology, translating into orders for the technology services of the better Indian firms. Nor will it affect the IT spend of global business, which is being carefully weighed.

The latter see no problems in their fundamentals and their attitude is best symbolised by N R Narayana Murthy's comment on last week's price correction. He didn't understand the markets, he said, and suggested that analysts who study them could explain.

On Silicon Plateau there are variations in the degree of optimism. Those who are optimistic but not overmuch, say that after the revival of tech spending the pace has simply been frenetic. That exuberance, 50 per cent growth year on year, may not continue indefinitely and the leaders may settle down to a slightly less breathless pace.

The other optimistic view is that the Indian IT business model remains a winner. It is able to upscale while maintaining quality, keep ahead of rising costs by improving productivity and take on more end-to-end work, which earns higher value. This view holds that since Indian software services account for less than 3 per cent of the global cake, the best companies will continue to grow at the present pace until such time as India's global share approaches 15 per cent.

Only then will clients start to think of de-risking their business by not relying overmuch on one major geography. But as that is quite far away, Indian IT remains at all systems go and it is likely to remain that way for some time.