Impact of Recession on It Industry

Export-oriented small and mid-tier IT companies were able to weather the storm of rapid appreciation in the rupee against the in 2007 and early 2008, but now they are faced with the stark reality of dwindling orders as the global financial crisis continues to cause a meltdown across countries and industries, the IT & ITeS sector in India is beginning to feel the heat. Amid fears of a global recession, companies, especially banks, worst-hit by the credit crisis have already started to cut or delay spending on information technology services such as consulting and software development but in the long term the impact will be minimal as the industry’s fundamentals are strong and the value proposition continues to hold good meanwhile it may be the time to prune down the and ensure cost-efficiency in organization operations. First have a look at sectors will be affected and how much The sectors most severely affected are Banks, Financial Services, Real Estate, Infrastructure and Information Technology, Automobiles Those which will feel a moderate impact of the global crises are Power, Retail, Hospitality and Tourism The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil & Gas, FMCG, Media & Entertainment Tata Consultancy Services is likely to be worse off than its peers because of its significant exposure to Merrill Lynch. Merrill is also a significant client for Satyam Computer Services and is evident from the July-September 2008 results which recorded a net profit of Rs 1,271 crore (Rs 1271 crore) up only 1.5 per cent as compared to corresponding period a year ago. Infosys also accounts for almost 35.7% share from BFSI and 62% share from America while Wipro accounts for 25% and 63% respectively and will be severely hit. HCL Technologies could possibly be the least hit because of its lower exposure to financial services clients compared to its peers. Traditionally, the company has been strong in