Software firms back to hiring mode

By SiliconIndia   |   Wednesday, 19 February 2003, 08:00 Hrs
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MUMBAI: India's software firms are boosting their staff numbers by a quarter at a time when companies worldwide are scrambling to cut costs, reflecting their confidence that they can keep growing despite tough market conditions, although a conflict in Iraq could temporarily disrupt business, reports Dow Jones.

The NASSCOM said in estimates given last week that India's software and services industry would have increased its staffing levels by nearly 25% to 650,000 employees in the fiscal year ending March, 2003.

NIIT Ltd., the country's biggest computer education firm, which had in the fiscal year to March 2002 seen a sharp fall in its number of students, expects single digit revenue growth this year.

"Hirings are coming back and this shows the software industry expects good growth over the next few years," said NIIT Chairman Rajendra Pawar.

"Volumes will be coming in big time but profit margins will go down to around 15 to 20%," said Gurunath Mudlapur of Khandwala Securities, considering it a disappointment for an industry which until last year had earnings margins of over 30%.

"Software stocks aren't a huge buy at the moment," Mudlapur said, though another fund manager said he would still put his money on the big firms like Infosys Technologies Ltd. , Wipro Ltd. , Satyam Computers Ltd. and i-flex Solutions Ltd. .

"There is still some upside left in IT, but I'd stick to the big ones because scale is paying. Also, these are trusted names," said R. Balakrishnan, chief executive at First India Asset Management Ltd.

The world's troubles and tough global business conditions have in fact helped India as firms under pressure to contain expenses have outsourced more and more jobs to India's low-cost software firms.

The outsourcing trend is expected to continue. A recent study by IDC said spending on IT outsourcing worldwide is expected to rise to $41 billion by 2006, up 7% from 2001.

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