IT TODAY

The market mood  was aptly summed up by the fund manager who declared that Narayan Murthy had done in one day what Saddam Hussein could not achieve in three months. While a tad unfair to the chairman and chief mentor of infosys, thst comment did convey the impact of the company's disappointing results and earnings guidance. The company's stock price dropped 27 percent to an eight month low, while the sensex plunged to its worst close since last November. The sombre mood continued the next day as well. On the face of it, this may seem like an over-reaction. After all, the company did post an 18.6 percent increase in net profit for 2002-03. Unfortunately, this followed net profit growth of 28.5 percent in 2001-02, and 114 percent the year before that. In short, the pace of growth has decelerated noticeably. To make matters worse, infosys is projecting earnings growth in the current fiscal year at between 11.3 and 12.7 percent, with the global economic slowdown, political uncertainity in West Asia and the SARS crisis all likely to dampen prospects. While others may continue to come in, there is acute pressure on margins, with clients demanding ever-lower rates.

Since infosys is, in many ways, the benchmark for other Indian IT companies, its travails have dampened investor sentiment on the sector as a whole. after years of soaring growth, maybe it's time for IT firms and investors alike to start adjusting their expectations downwards, to more conservative levels. Apart from purely business issues, there are other factors to worry about. Overseas markets are becoming more hostile, with a backlash against the Indian IT community gaining momentum. Campaigns are underway in some countries to ban outsourcing. Visa restrictions and delays may also put off many prospective clients from retaining the services of Indian firms. With their heavy dependence on exports,Indian IT companies can no longer afford to go about their own business and ignore the macro environment. If they are to thrive in these trying times, they must look both within and without internally, each firm must focus on constantly moving up the value chain, from body shopping to services and then on to products. But even as they do so, they must also get together to analyse the threats facing the sector as a whole, and put together a program to jointly tackle these issues.

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