Global companies' IT spend may rise marginally

By SiliconIndia   |   Friday, 29 February 2008, 14:38 Hrs
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Bangalore: Indications on global companies' IT spending suggest that growth in offshore or outsourcing budgets may be either flat or marginally up. However, according to analysts, there has been a cut in BFSI spending, reported The Economic Times.

For the Indian IT services industry, the clients? annual IT budgets set the tone for the rest of the year's operation. This is the case especially for large players like TCS, Infosys and Wipro.

IT budgets are generally finalized by the end of December or early January. But due to uncertainty in the U.S. economy, it was delayed this time. The dependence of the Indian IT industry on the U.S. economy is well above 50 percent.

According to Forrester's Global IT 2008 Market Outlook, IT services spending by the U.S. is expected to register a growth of 4 percent in 2008. It was 6 percent in 2007.

As said above, the cut in BFSI spending has been largely by U.S. banks, which have been hit hard by the subprime crisis and are under pressure to cut costs.

Analysts say that, there are two things to look for in the IT budgets of large corporations. One, they are not fixed and not comparable to state budgets. And second, the mix of discretionary versus non-discretionary spend.

Discretionary spending would be defined as unputdownable expenditure and is critical to the running of a bank, while non-discretionary spending would be something that could lead to changing the way a bank functions.

However, this moderate outlook on IT budgets is said to be unlikely to have any major impact on the Indian IT services industry as these clients have indicated that they will be increasing the offshoring component.

"Under these circumstances it would be better for the Indian companies to invest in hiring and training of IT professionals," said Arjun Malhotra, CEO, Headstrong.

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