IT budgets will increase slightly in 2007, says Infosys

IT budgets will increase slightly in 2007, says Infosys

Indian outsourcer Infosys says IT budgets of customers worldwide will grow only slightly this year, but will benefit offshore providers

Global IT budgets are likely to increase between 2-6 per cent this year, S. Gopalakrishnan, the chief operating officer of India's second largest outsourcer, Infosys Technologies, said last week.

"Budgets for this year are being firmed up even as we speak, and we expect that the growth in IT budgets will be only slight," S. Gopalakrishnan said. He based his forecast on budget discussions with customers.

The slowdown, however, will not impact Infosys' business, according to CEO, Nandan Nilekani.

A larger proportion of the IT budget would move offshore to India, he said.

Clients were beginning to look at larger offshore teams of about 2000 working on their projects, Gopalakrishnan said.

Infosys had 488 clients as of December 31.

Slower growth in IT budgets is not new, as IT departments were having to do more with less, a partner at sourcing consultancy firm Technology Partners International (TPI), Siddharth Pai, said.

To get more out of their budgets, IT departments were looking at higher automation and third-party applications that required minimal customisation, and were also exploring outsourcing both locally and offshore, he said.

In addition to Indian companies, multinational services companies such as IBM and Accenture were also well positioned to take advantage of the growth in offshore outsourcing, as they had set up operations to deliver services from India and other low-cost locations, Pai said.

Infosys of Bangalore revised on Thursday its guidance for its fiscal year ending March 31. The company expects full year revenue to be $US3.09 billion, up by 43.6 per cent from revenue in the previous fiscal year.

The company was seeing strong growth in Europe, as customers in Continental Europe had started looking favorably at offshore outsourcing, Gopalakrishnan said.

But to maintain growth, Infosys and other outsourcing companies in India will have to handle the problem of finding qualified people and retaining them. Infosys' overall attrition rate rose marginally to 12.2 per cent in the quarter ended December 31 from 12 per cent a quarter earlier.

"The situation is under control," Infosys' director of human resources, education and research, T.V. Mohandas Pai, said.

The attrition rate at Infosys' business process outsourcing (BPO) business, however, is down to 26 per cent in the quarter to Dec. 31 from 38.2 percent in the previous quarter.

The problem is staffing at the entry level. Younger people want to go up the corporate ladder quickly without building a sound knowledge and experience base, according to Pai.

"It is symptomatic of what is happening in Indian society at large," he said.

Infosys was now focusing on training university graduates and was urging them to stay in a job long enough to pick up deep expertise, Pai said.

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