IT budgets on the rise in 2007 but companies face skill shortage

Global IT budgets are likely to increase between two to six per cent this year, the COO of India’s second largest outsourcer, Infosys Technologies, said yesterday.


Global IT budgets are likely to increase between two to six per cent this year, the COO of India’s second largest outsourcer, Infosys Technologies, said yesterday.

“Budgets for this year are being firmed up even as we speak and we expect that the growth in IT budgets will be only slight,” S. Gopalakrishnan told reporters yesterday. Gopalakrishnan based his forecast on budget discussions with customers.

The slowdown, however, will not impact Infosys’ business, according to Nandan Nilekani, CEO of the company. A larger proportion of the IT budget will move offshore to India, he said.

Clients are beginning to look at larger offshore teams of about 2,000 working on their projects, Gopalakrishnan said.

Infosys had 488 clients as of 31 December 2006.

Slower growth in IT budgets is not new, as IT departments are having to do more with less, said Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International. To get more out of their budgets, IT departments are looking at higher automation and third-party applications that require minimal customisation, and are also exploring outsourcing both locally and offshore, he said.

In addition to Indian companies, multinational services companies such as IBM and Accenture are also well positioned to take advantage of the growth in offshore outsourcing, as they have set up operations to deliver services from India and other low-cost locations, Pai said.

Infosys of Bangalore revised yesterday its guidance for its fiscal year ending 31 March. The company expects full year revenue to be $3.09 billion (£159bn), up by 43.6 per cent from revenue in the previous fiscal year. The company is seeing strong growth in Europe, as customers in Continental Europe have started looking favourably at offshore outsourcing, Gopalakrishnan said.

But to maintain growth, Infosys and other outsourcing companies in India will have to handle the problem of finding qualified people and retaining them. Infosys’ overall attrition rate rose marginally to 12.2 per cent in the quarter ended 31 December 2006 from 12 per cent a quarter earlier. “The situation is under control,” said T.V. Mohandas Pai, Infosys’ director of HR, education and research.

Nandan Nilekani, CEO of Infosytems said that the biggest problem facing India today was education reforms to address the lack of skilled IT workers. “ We have an enormous pool of young people but what’s missing is the pipe in between which connects people to the opportunity,” he said in an interview with the Financial Times “That’s where we need a wholesale revitalisation of the education system.”

The attrition rate at Infosys’ business process outsourcing business, however, is down to 26 per cent in the quarter to 31 December 2006 from 38.2 per cent in the previous quarter.

The problem is staffing at the entry level. Younger people want to go up the corporate ladder quickly without building a sound knowledge and experience base, according to Pai. “It is symptomatic of what is happening in Indian society at large,” he said.

Infosys is now focusing on training university graduates and is urging them to stay in a job long enough to pick up deep expertise, Pai said.

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