Jan 27, 2008

What next in IT Services?

The blog post here by Basab in 6ampacific captures well what is going on (wrong) with the Indian IT Services industry. The stock prices of Indian IT biggies have taken a massive drubbing while the Sensex in general has been going from strength to strength in 2007. The recent market meltdown impacted IT stocks the least, partly because they were already beaten up black and blue.

With the rupee appreciation, larger volumes and the expected recession in the US the future is certainly not so rosy. What could turn around the futures of these companies? One or more of the following:
  • Some bold and aggressive acquisitions in the global market place taking their reach to new markets. Indian companies in general (not just IT ones) have a huge potential to acquire inefficient operations overseas and use their low cost models to deliver significant improvements in gross margins.
  • The rupee reaching a level of Rs 40 again on the back of a potentially deeper stock market correction, could mark a psychological threshold. With elections in India round the corner and the global recession there will be enough volatility around to make that possibe if not probable.
  • Launch of some bold IT products may still take some time, but that could kick in big time non linear revenue streams and not on mere head counts. TCS is already more than 100k heads, a humongous number and I clearly don't see them replacing the Indian Railways as the world's largest employer.

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