Pessimism on Indian IT growth overdone

DAVOS, SWITZERLAND: Worries over the impact of a U.S. slowdown on India's software services sector are exaggerated and Wipro's clients are showing no signs of reducing outsourcing, it's top official said.

"I don't think it's a situation of gloom for the industry. I think it's a situation of cautiousness for the industry," Azim Premji, chairman of India's third-largest software services exporter told Reuters in an interview.

"Don't get carried away. Run a tight ship. Have realistic expectations," Premji said during the annual meeting of the World Economic Forum in the Swiss resort of Davos.

Earlier this month, New York-listed Wipro reported a lower-than-expected 11 per cent rise in quarterly profit, it's slowest growth in four years and said higher billing rates should help offset rising costs from wage hikes and a firm local currency.

Bangalore-based Wipro counts Cisco, Nortel and Credit Suisse among its clients.

Premji said Wipro's customers in the banking and financial services industry, hit by the subprime worries and wobbly markets, were likely to drive global outsourcing even more aggressively in an uncertain economic environment.

"Trying to do drive more offshore work on IT is one fairly effective methodology of cost takeouts without much risk because they are used to it, they are used to their partners, they are familiar with the system."

"We are sitting pretty. I think global delivery companies such as ours will be the last affected," Premji said, echoing similar comments made by other leading Indian software firms.

The banking and financial services industry accounts for about 25 per cent of Wipro's total IT revenue. Wipro, a diversified firm with interests in computer hardware and consumer goods, is majority-owned by Premji.

Shares in Indian IT firms were among the worst performers in a booming local market last year, hurt by concerns over the impact of a slowdown in the U.S., rising local wages and an appreciating currency.

"I think there is undue pessimism vis-à-vis the IT sector and I think it'll correct itself sooner than later," Premji said.

© Reuters