India’s software revival still a distant dream

new delhi: for the indian software services, the bit of blue sky it was searching for still seems distant. despite the american economy showing initial signs of recovery, us tech spending may not take root until most us corporations are sure that the recovery is here to stay. with the us being the single largest market for indian software services exports, the tightening of american tech spending may still stifle growth of indian software firms.the good news, however, is that the imf has predicted a 2.3 per cent expansion in the us economy, which is almost double the 1.2 per cent that it had clocked in 2001. activity is expected to accelerate in the second half of 2002, but no one really bets on it following concerns that the us economy may dip once again before it rebounds. as the picture remains hazy, wipro has decided not to give a full year earning guidance, shaking investor confidence more than its lower-than expected q4 results did. however, offshoring has clearly gained momentum in the last few months, with the top-tier companies showing offshore revenues increasing, which means better profit margins, but clearly lower revenues. tcs, for example has won the largest-ever contract by an indian company from ge. the contract is estimated to be around $ 100 million. according to sources, 2-3 more similar multi-million dollar rfps (request for proposals) are already in the indian market with tier-i companies vying for them. like tcs, these contracts can be a shot in the arm for other companies like infosys and wipro among others. the other success story has been the business process outsourcing, which is expected to end the year with a growth rate of 65-70 per cent. cost-cutting being the mantra, us companies have aggressively farmed out their back-end jobs to low-cost india. this has opened a significant opportunity for indian software companies, that have forayed into this segment, to offset the decline in growth of the software services area. with the us economy in the expansion mode, the global economy is expected to follow suit resulting in some more gains for indian software companies that have moved into different geographies. volume growth is also expected to be driven by top indian software companies aggressive push into new verticals. however, with the revenue base of tier-i companies broadening, mega-growth rates witnessed before the slowdown started in mid-2000 may be referred only with happy nostalgia.