IT companies' BFSI segment weathers U.S. subprime crisis

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Bangalore: The turmoil in the U.S. financial services sector has not affected the fortunes of the Indian IT services companies, reported the Economic Times. The companies in the banking, financial services and insurance (BFSI) sector spend huge amount of money on technology and the major portion of the revenue for Indian IT services providers comes from these sectors, added the sources.

In the BFSI segment, Indian IT services firms like TCS, Infosys, Wipro, Satyam, HCL and Cognizant have recorded a very positive growth rate on a sequential basis during the last quarter.

According to industry analysts the companies would be able to maintain the growth rate in the current quarter also. Infosys, recorded a seven percent growth in the BFSI sector while for Wipro Technologies, it was 9.8 percent. In case of Cognizant, the BFSI segment accounted for 47 percent of its revenue and it grew seven percent sequentially.

"BFSI continues to be strong and it has grown above the company rate sequentially," said S Ramadorai, CEO, TCS. The BFSI segment accounted for 44 percent of TCS revenues during the third quarter.

Slowdown of the U.S. economy and with large financial services companies cutting down their IT budgets to cut costs raises a question whether, Indian companies would be able to maintain this growth rate in the next quarter.

The worst of subprime crisis is over for the Indian IT services majors and they are likely to maintain the current growth rate, if not higher, from the BFSI segment, said a survey conducted by Tholons, an offshore advisory firm.

According to the survey among its BFSI segment on the IT budget growth in 2008, 90 percent did not expect their outsourcing budgets to decline. The IT biggies felt that BFSI segment under pressure to cut costs will actually look forward towards increased spending on technology to deliver the benefits.

"Challenges that the U.S. financial services firms are facing are creating more opportunities and this will actually see an increase in the overall spend," said Ashok Vemuri, senior VP and head, BCM, Infosys.

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