Gartner warns about shrinking contracts of Govt ITs
By siliconindia   |   Monday, 27 December 2010, 23:54 IST   |    2 Comments
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Gartner warns about shrinking contracts of Govt ITs
Bangalore: Although the optimism of the technology industry is quite high about the demand environment, public sector contracts from the U.S. and Europe are due to shrivel in the coming year. Companies like Tata Consultancy Services (TCS) and Wipro Technologies, or firms like Infosys Technologies, would face the impact to a large extent as they have public sector exposure in these geographies that recently started focusing on these geographies for government contracts, as reported by Rachna Khanzode of Financial Express. Gartner Vice President Stephen Prentice pointed out towards the pressure in the U.S. and Europe to create jobs and cut costs. "The European governments are still negotiating on competitive austerity, which means there is competition among the governments as to who can cut most. Therefore, public sector spending is going to shrink because we have not seen the end of cuts," he said. This is also because large scale public sector technology projects in the UK have had bad history, he added. "The government has spent billions and yet they have not delivered, because these projects were mismanaged and were not conceived and executed properly. So many of these contracts are half way through. They have to cut and it is inevitable. Also, governments have to spend on technology without borrowing as it has become unacceptable. This is going to bring much more scrutiny before contracts are given," Prentice adds. This approach by various governments is just expected In order to push the time line for top Indian IT firms to make through the public sector contracts, this approach has been adopted by various governments. For instance, Infosys has been trying to focus on the US government contracts and earlier this year, had appointed Eric Paternoster as CEO for Infosys Public Services, US. However, Infosys CEO S Gopalkrishnan said, "We are not going to be impacted by any such moves by governments of these countries." Similar sentiments are seen in Wipro that already has a nine-year $407 million outsourcing contract from the State of Missouri for delivering health care services to US citizens. Suresh Senapaty, CFO & ED at Wipro, said, "We are going to be insulated to these developments because we hardly have any exposure to these contracts." Although TCS totally declined to comment on the story, BPO providers such as Firstsource and WNS too are looking forward for bagging government contracts in the healthcare space, which is expected to start over the next two years in the U.S. Multinational rivals, such as Fujitsu and EDS and CSC, have also had their share of troubles while dealing with government contracts.

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