October 27, 2009

Recession hurts Indian outsourcing

Wipro, Tata report revenue drops

By John Ribeiro

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Wipro, India's third largest outsourcer, said Tuesday that its IT services revenue in US dollar terms had declined by 4 percent to US$1.1 billion in the last quarter, against the same quarter last year.

The company's IT services revenue in Rupees for the quarter was higher by 5 percent from revenue in the same quarter a year ago, because of exchange rate gains. The company's results for the quarter are in accordance with International Financial Reporting Standards (IFRS).

Alongside its IT services business, which accounted for 72 percent of revenue in the quarter, Wipro also has an IT products business, and consumer care and lighting businesses. The company does not report net profit separately for each of its businesses.

The company's peers have also been affected by the recession and slower IT spending by customers. Tata Consultancy Services, India's largest outsourcer reported earlier this month a fall in revenue, but growth in profits in dollar terms for the quarter.

Infosys Technologies, India's second largest outsourcer, also reported earlier this month a decline in revenue and profit for the quarter, but the results were better than was forecast by the company in July.

Wipro said in a statement that it is seeing more stability in volumes and pricing as well as an improving demand environment. It has forecast revenue for the current quarter to be about the same as in the quarter that ended 30 September.

There is pent up demand in the global outsourcing market that has been deferring decisions in an economic recession, Technology Partners International (TPI), an outsourcing consultancy, said earlier this month. TPI expects that the market will begin to improve over the next six to nine months.

TPI's Global Index reported that the third quarter had been the highest quarter by total contract values, since the fourth quarter of last year, but warned but that results would have been substantially muted without a handful of large network operation contracts from telecommunications companies.

Wipro has meanwhile cut its staff working on IT services by 630 during the quarter taking the total number of staff at the end of the quarter to 97,891 employees. It added 37 new clients in the quarter.

The company said last month that it is considering exiting its business of creation and licensing of intellectual property (IP) in the area of connectivity. The move will be in effect a reversal of Wipro's acquisition in 2005 of NewLogic Technologies, a privately held Austrian semiconductor IP and design services company. The company was focused on offering IP and design services in the areas of Bluetooth, and wireless LAN networks.

The company has started consultations with employee representatives regarding its proposed exit from this portfolio, and the potential closure of a centre in Sophia Antipolis in France that came with the NewLogic acquisition.

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