Trouble looming over Indian IT industry

Accenture has given below-market-estimate revenue guidance due to reduced IT spending bought on by macroeconomic headwinds and prevailing uncertainty. This is a probable indication that Indian IT firms may face headwinds and see the growth momentum slowing down, according to analysts.

Accenture forecasted second-quarter revenue in the range of $15.20 billion to $15.75 billion, the median of which is below the analyst estimates, according to reports. The company, however, in its first quarter (following September-August financial year), has reported revenues of $15.7 billion, an increase of 5% in dollar terms and 15% in local currency over the same period last year, beating market estimates.

The guidance given by the IT major is frequently viewed as a gauge for the Indian IT sector. Analysts believe the revenue growth momentum of Indian IT firms, if not in the immediate next quarter, would see a slowdown in the coming quarters as the global economic scenario evolves.

Experts say, “The revenue growth momentum has already been moderated for Indian IT firms. Although the next quarter wouldn’t see much difference, depending on how the challenges emerge in the future, the momentum may take a hit in the following quarters.”

At the same time, Research Analyst from Axis Securities said, “Accenture’s guidance indicates pressure from the macroeconomic conditions being faced. However, its results prove the resilience of the IT sector as demand remains stable.” Hence, the IT firms may be expected to perform at par in the next quarter but would see the growth momentum slow down if pressures mount.

Having said that, the Indian IT firms still have a strong labour cost advantage when it comes to large-scale enterprise software. The locus of demand, however, is moving away from implementing technologies from SAP SE or Oracle Corp. at clients’ premises. Demand for cloud-based workflow automation.

Salesforce has become the latest technology company to lay off its employees and focus on profitability. The workforce strength of the Company had grown 36% over the last one year, in keeping with the surging demands of customers.

While there is no exact number of employees that are out of the job, the US cloud-based software company says that the number is less than a thousand. The company joins the club of tech giants that have been cutting costs primarily due to global economic uncertainty.

Tech is now a big part of what consulting firms do. Which is why they are getting into the nuts and bolts of their clients’ operations — or at least boosting their capability to do so.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA