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Indian IT firms brace up for European slowdown

K Giriprakash

If you thought that the slowdown in the US was bad enough for Indian software companies, you might as well brace up for even more bad news with slowdown in Europe just round the corner.

Increasingly, Indian IT companies have been looking at the European market to tide over the US slowdown.

"In addition to the difficult environment that US firms are facing at domestic front, we believe a European slowdown is not far away. We believe that the US slowdown will spill over into Europe over the next two quarters," says a report from Robertson Stephens Inc, a US-based tech stock analyst firm.

With most of the Indian software companies increasing their exposure to Europe and reducing it in the US market, the latest news can turn out to be extremely depressing.

According to another market analyst report, the slowdown in IT spending is spreading to Europe and its growth rate is likely to be flat compared to 12 per cent growth last year.

The poor IT spending could be due to soft economy instead of an outcome of high IT spending during the last few years, the analyst said.

However, major software firms, like Infosys and Wipro, are understood to have factored into their 30 per cent top-line growth rate for 2002, a slowdown from their European operations, which usually lags the US marketplace by around two quarters.

Wipro also said that it is aware of such a situation and is working to counter the problem. Both Wipro and Infosys have increased their exposure to the European market while reducing their exposure in the US.

Like Infosys and Wipro, quite a few Indian companies seem to be bracing up for such a challenging environment. For example, MobiApps, an Arthur D Little company, believes that trends in the US will take a while to affect Europe.

"I believe that trends in the US will take a while to affect Europe and given that European companies are behind in their usage of outsourced services till date, the slowdown curve will be longer," MobiApps president and CEO Sanjay Chakrabarty told Business Standard.

But Planetasia's co-CEO Anand Sudarshan said that there is no cause for fear as European and other countries will continue to spend on technologies which may improve business effectiveness.

"Such spending acquires an added urgency in such times as it is imperative for organisations to run their businesses in a more cost-effective manner. This throws open opportunities for a company like ours," Sudarshan said.

I-flex Solutions Ltd is of the opinion that there could be opportunities as well in case of a slowdown in Europe. "The impact of a European slowdown on Indian companies will depend on their market strategy and the industry they enter," I-flex solutions' head of corporate marketing V Senthil Kumar said.

"Europe has the world's largest installed base for banking and finance products. Since most of these were installed in the late 80s and early 90s, they are due for replacement. We specialise in software products for the banking and finance industry and we see a great opportunity here," Senthil Kumar said.

While some see an opportunity, all software firms have started factoring such downturns into their business projections and are tailoring their plans accordingly.

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