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Caution is the watchword in SMEs

By SiliconIndia | Monday, 22 December 2008, 03:40 Hrs | 1 Comments

New Delhi:Exercising restraint seems to be the operating policy of most small and medium (SME) IT companies operating in India in the wake of he economic downturn, with budgets becoming limited and specific, new launches being deferred and expansion plans being relegated to the background. As a last resort, some companies have even tweaked with their billing models to tide over the crisis. "The impact on smaller IT firms is even more pronounced than on their larger peers, as new projects in the US have practically dried up and clients are re-negotiating rates on existing ones," said Nishant Verma, Vice-President, Tholons Capital.

"With vendor consolidation, clients who had so far given out projects to multiple suppliers are now looking for a single supplier for volume discounts," Verma added. He forecast a gloomy picture for SMEs by predicting a flat or negative growth rate in 2009. Even the National Association of Software and Services of Companies (NASSCOM), has been forced to rethink on its predictions for the forthcoming year (FY 09) due to the recession.

Clients who were close to signing contracts have started to hold back on decisions due to the liquidity crunch according to Ramachandran J, CEO, Birlasoft. "Decision cycles are becoming longer and discretionary spending is reducing. We are leveraging the slowdown to identify potential areas of growth in the future, thereby creating areas of competency. We are looking at a collaboration to serve our customers in China," he outlined Birlasofts strategy for the future in a nutshell.

Vishesh Infotechnics, a Delhi based enterprise, has postponed its plans for an acquisition and launch of an SME ERP product in the US. In another such instance, Noida based Netcomm Labs focusing on Web applications and is allowing its customers to stagger payment schedules. "We find that upfront payment is proving to be a deterrent, despite a bulk of our engagements being present in India," Sonali Chowdary, director, Netcomm Labs, told the Business Line.

"However in IT services, SMEs who have small clients will face a challenge as those clients themselves will be under tremendous pressure," said Mukul Jain, COO, GlobalLogic, whose company is a product development oriented organization.

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Reader's comments(1)

1: Thats correctly mentioned in the article that Caution is the watchword. Long term growth rates substantially above five percent appear unlikely to materialize in the immediate future and will require investment flows of an exceptional order of magnitude, which can only be realized if reforms succeed in reversing capital outflows. The key areas of reform are thus measures to improve the investment environment and to allow for the return of Indian capital

Posted by:Larry - 28 Dec, 2008