Indian software profits to stay strong: IDC

MUMBAI: International Data Corp (IDC) expects Indian software companies to

post higher profits despite tougher market conditions caused by the US slowdown,

a senior official said on Friday. Earlier last week, a report by the leading

market intelligence firm lowered its forecast for Indian software export growth

in 2001/02 (April-March) to 20-25 per cent from an earlier estimate of 50 per

cent. The growth was expressed in US dollars.

"A lot of work is shifting from onsite to offshore. This results in

lower top-line growth," IDC (India) president Ravi Sanghal, who penned the

report, told Reuters. "But overall, bottom-lines are going to be stronger

as the margins for offshore business are much higher," he said.

Indian providers of software services execute projects either on client sites

overseas or from India. Software firms have reported that the slowdown is

affecting business, but Sanghal said US clients seeking to cut costs were

increasingly trying to get software projects executed offshore where billing

rates were lower. "While realizations may be lower offshore, the margins

are higher because of the cheap labor," he said.

He, however, gave no indication of IDC's projection for profit growth. Top

Indian software companies have been doubling their profit growth every quarter

over the year-ago in recent quarters, but some have now issued profit warnings.

Sanghal said IDC's projection for exports growth was 25-30 per cent when

expressed in Indian currency terms, taking into account the depreciation in the

Rupee against the Dollar.

IDC's export growth estimate is sharply lower than that made by the National

Association of Software and Service Companies (Nasscom), which recently scaled

down its projections of software export growth to 40-45 per cent from 52

percent. IDC, however, expects that the impact of the slowdown on Indian

software exports will be temporary.

(C) Reuters Limited 2001.