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U.S. automobile crisis to hit Indian IT firms
By siliconindia
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Wednesday, 10 December 2008, 23:02 IST |
9 Comments
Bangalore: Indian IT companies likely to face yet another setback, as most of the auto majors in U.S. are forced to delay payments and freeze contracts due to the crisis in U.S. automobile industry and many of them are facing the threat of bankruptcy. Indian IT majors such as TCS, Infosys, Wipro and Satyam Computers would be the most affected companies, reported The Economic Times.
In a worst economic condition, top three U.S. automakers such as General Motors (GM), Ford Motor and Chrysler are seeking a bailout from the U.S. government. According to analysts, even these companies succeed in getting the bailout; their IT expenditure could drop more than $1.5 billion a year. Moreover, IT companies will be pressurized to cut price for future contacts.
Thilo Koslowski, Vice President, Advisory Service Manufacturing Group, Gartner said, "To cut costs, auto companies would shrink in size to trim their operations. Some of them will shut down a few plants. This means reduction in operational IT spends." The companies are expected to reduce expenditure on new IT initiatives often referred as discretionary spends.
"In case of a bailout, the U.S. auto companies would cut their discretionary spend to stay afloat. As of now, about a third of their IT spends are of discretionary nature. This portion could get impacted going ahead," opined Viju George, IT analyst, Edelweiss Capital.