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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

May - 2001 - issue > Cover Feature

The Race to Add Value

Monday, November 17, 2008
The IT services and consulting industry will obviously be affected by the slowdown in the U.S. economy. The only question is how. Some have suggested that Indian IT services firms will go unscathed and even find new prosperity as companies in the U.S. scramble to outsource and cut costs. But the obvious answer is that the vast majority of IT services companies, Indian and non-Indian alike, will be hurt as tech spending and growth decline.

It all seems pretty clear. Consultants are ending up on the bench due to extensive layoffs at companies ranging from Silicon Valley’s tech bellwethers (Oracle, Sun, Cisco) to American corporate mainstays like Proctor and Gamble. Suddenly dozens of contracted knowledge workers aren’t billable, and so they aren’t generating revenues. Do the quick math, and everything points to tough times for those IT services firms that rely heavily on consulting — which, truth be told, is just about everybody.

In India, many low-end staffing companies that fed the ravenous global demand for Indian tech talent are being forced to close up shop. At the other end of the spectrum, even the revenue streams of marquee U.S. consulting firms like Accenture and KPMG that have profited richly, like Indian services companies, from the global growth of corporate IT, will be adversely affected.

So what will be the fate of IT services companies in the near term? And what will it all mean for India’s big IT hopes? Will corporate clients turn away from US-based consulting and embrace offshore outsourcing? Will we have to wait several years before IT services emerge from this dark patch? And how many companies will still be left standing?

The Market Despite the gloomy economic climate, Azim Premji and Narayan Murthy can be relatively optimistic about life as they go to work each morning. After all, the companies they founded, and took public in the US — Wipro and Infosys, respectively — have evolved into recognized global name brands, with stock prices that have held their market capitalization in the billions of dollars. The two companies, as well as companies like Satyam, and private competitor TCS, boast massive client lists that read like a who’s who of corporate America. Their core strength lies in these client lists.

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