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'Budget spending by IT firms to be lower in 2008'
By siliconindia
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Friday, 18 July 2008, 19:30 IST
Bangalore: The IT industry is going through a tough time. The cutbacks and cancellations on projects and wariness in budget releases are contributing to the dullness of the sector.
Taking clue from the situation, Phaneesh Murthy, CEO of iGate Global Solutions, part of iGate, said that the IT spending by firms in 2008 will be lower than budgeted in 2008 and will also be lower than that in 2007. "Some IT companies may end up meeting their guidance numbers and some will not, depending on what happens with their customer sets rather than the broader market," he said.
The statement shows a change in Phaneesh's stance as he said in February this year that the technology spending is likely to go up slightly rather than coming down. As a person based U.S., who keeps a close tab on the market, his predictions were counted by the analysts. He had said, "I am getting hints that companies in the financial sector will now spend more dollars on technology to enhance governance, process and systems. The priority now is to plug the loop-holes so that subprime-like crisis is not repeated."
At the beginning of this year, major IT companies like Infosys, Wipro, Satyam and Mindtree Consulting, had clearly stated that there was no sign of a slowdown in IT spending.
In January 2008, Satyam Computer's, CFO, Srinivas Vadlamani said that the company had got a visibility of the new IT budget from its clients which showed a 4-5 percent increase in IT spending. The company's interactions with clients did not suggest any cost cutting measures or reduction of work at that time. He had clearly said as of then the company saw no impact and was keenly observing the situation."
But research firm Forrester in its updated IT spending predictions, predicted in February this year that a four percent increase in U.S. IT spending in 2008. This is a higher number than the 2.8 percent figure cited by the Wall Street Journal's Biz-Tech blog during the same time.
Forrester projected that 2008 U.S. IT spending will be lower than spending in other countries: Nine percent in Latin America and Canada; Eight percent (in U.S. dollars) in Western and Central Europe; 17 percent in Eastern Europe, the Middle East, and Africa; and 12 percent in the Asia/Pacific region.
May be that the industry is facing a tougher time, it makes sense for iGate Head to flip-flop and say that IT spend will come down. But he is one of the first guys to recant their earlier positive statements on IT spend.
