Monday, June 16, 2008

Wipro sees revival in outsourcing business

Source : click

software-services exporter, is seeing a revival in the flow of outsourcing deals as the turmoil in the global financial industry eases a bit, two senior executives said yesterday.
Still, Wipro was cautious about the next two quarters, expecting business to accelerate towards the end of 2008/09 year in March, Girish Paranjpe and Suresh Vaswani, the joint chief executives of Wipro’s IT business, said in an interview.
“Relative to how it was in the first quarter of this (calendar) year, there was a feeling that things are almost frozen, I think things are beginning to come back to normal,” Paranjpe said.
“The good news is that there have been no casualties after Bear Stearns. Whatever management changes had to happen has taken place in many of the big companies.”
India’s export-driven outsourcing firms get the bulk of their revenue from the banking and financial sectors, which have been battered by the turmoil in global financial markets.
Low-cost outsourcers such as Wipro and its bigger rivals Tata Consultancy Services and Infosys Technologies have thrived on winning deals from overseas clients.
But their profit growth has slowed as the impact of the subprime crisis has spread through the US economy, where the Indian firms earn the majority of their income, and beyond.
In April, Wipro, whose services include software application development and back-office services, reported its slowest quarterly earnings growth in about five years.
However, Paranjpe said that New York-listed Wipro had not faced any pressure from its customers to lower prices. Instead, it had been able to get increases of 3 to 5% above the average billing rate on new deals.
“In fact, in January this year, when many of the contracts came up for renewals, we were able to get price increases on many of those contracts,” he said.
Shares in Wipro, majority owned by its billionaire chairman, Azim Premji, ended down 1.1% in a Mumbai market that fell 0.4%. The stock is down 9% in 2008, as against a drop of 25% in the benchmark index
Wipro expects India and the Middle East would account for a “significantly bigger” part of its IT business revenue this fiscal year as it sharpens its focus on the emerging markets to boost growth, Vaswani said.
The Bangalore-based company, which counts Cisco, Nortel and Credit Suisse among its clients, earned 20% of its more than $4bn of IT business revenue from India and the Middle East in the year to March 2008.
“The new action is in emerging markets. Now, whether that’s in Africa or whether that’s in Latin America, we will find ways of addressing that,” Vaswani said. “But in terms of thrust, it is India and the Middle East.”
In January, Wipro’s joint venture in Saudi Arabia won a $100mn five-year contract from Saudi Arabian Airlines. The following month, Wipro bagged a $50mn five-year outsourcing deal from an Indian retailer.
Spending on information technology in Asia-Pacific, Latin America, the Middle East, Africa and Eastern Europe is forecast to hit $1.1tn this year, up from $964bn in 2007, according to research and advisory firm Gartner. – Reuters