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Infosys to ride US slowdown

Nasdaq-listed blue-chip software services company Infosys Technologies is better placed to weather the downturn in the American economy than its US competitors, its chief executive said on Friday.

"Our global delivery model allows us to have lower utilisation and yet be very profitable," Nandan Nilekani, managing director of the country's second-largest software company by market value, told Reuters in an interview.

Infosys' global delivery model involves executing a project from several different locations around the world, effectively providing 24-hour service.

India's software service industry has grown strongly in recent years, its revenue growing at a compound annual growth rate of 56.5 per cent over the past five year, due to the quality and low cost of its work.

Within that industry, Infosys has been cited in a number of recent research reports issued by global investment houses as standing a good chance of competing for clients looking to cut costs because it has a strong brand name among Fortune 1000 companies.

Indian software services firms are poised to benefit from US technology spending cutbacks, Merrill Lynch analyst Matei Michalca said in a report issued last month.

Indian software services firms combine US consulting with low-cost software programming operations based in India to offer rates that are less than 50 per cent of what US and European-based service providers typically charge, he said.

Still, Infosys last month sent jitters throughout the Indian software industry when it announced it expected revenue to grow just 30 per cent this year, down from an average of 90 per cent the past four years.

"We expect to grow at 30 per cent, have a net margin of 30 per cent, a capital expenditure of $80 million and we expect to hire 1,500-2,000 people," Nilekani said, repeating the forecast Infosys issued last month.

"So clearly we expect to be growing, except that the growth may not be as much as earlier years," Nilekani said, adding that Infosys' situation was quite different from US competitors whose profits were shrinking and who were pruning staff.

He said employee morale at Infosys was not down despite the projections of sharply lower growth rates.

"Our people are quite enthusiastic because we believe that we are in a much stronger position today in this competitive market compared to other companies in the world," he said.

Bangalore-based Infosys, with an army of about 9,000 software engineers, counts among its clients such global giants of infotech industry as Cisco Systems Inc and Nortel Networks Corp.

America accounts for more than 70 per cent of its earnings.

In a filing with the US Securities and Exchange Commission last week, Infosys said raising billing rates would "be a challenge in the current environment" and thus growth this year would come primarily from "increasing business volumes."

SALARY HIKES TO BE LOWER

Nilekani said salary increases would be lower this year because of the slowdown in revenue growth.

"The industry in the last several years has had compounded salary growth of about 30 per cent. This year we estimate that our salaries will grow by about 15 per cent," he said.

"Moreover we are linking some of the salary increases to overall company performance," he said.

The $80 million earmarked for capital expenditure this year will be spent expanding infrastructure at the company's eight facilities in India -- to get the latest technologies for its systems and to set up research and development laboratories, he said.

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