Outsourcing recovery later in 2009 - Wipro

Courtesy: http://in.reuters.com/

Wipro Ltd sees a revival in demand for outsourcing services in the second half of this year as global firms look to cut costs, the joint-CEO of its IT business said on Monday.

Some clients of Wipro were postponing outsourcing contracts due to the tough economic environment, but India's third-largest software-services exporter had not seen major cancellations, Girish Paranjpe told Reuters in an interview.

"At least based on what we have seen, I would say that there is lot more stability at this point of time," he said. "

"Hopefully there will be some improvement post summer... second half of this year."

Some customers of the New York-listed firm were seeking price cuts, and Wipro was dealing with this by measures such as moving more work to low-cost centres in India, he said.

"They look at the overall package. As long as they get the cost reduction they are ok because that's what their internal goal is... some price reduction is part of that package," Paranjpe said.

A large pool of English-speaking engineers and cheaper wages drove an outsourcing boom in India, but turmoil in global markets and a recession in the United States, which accounts for more than half the sector's revenue, have halted the scorching pace of growth.

Revelations of a massive accounting fraud at Satyam Computer Services further dented prospects for the export-driven sector that generates more than 5 percent of the country's gross domestic product and employs more than 2 million people.

Morgan Stanley said in a research note last week it expected coming quarters to bring further erosion of demand for Indian IT firms, and that the impact of budget cuts, mergers and bankrupt clients had not yet been fully reflected in share prices.

"Budgets have come down as compared to what they were in 2008," Paranjpe said of clients' spending on information technology services. "(There are) delays in starting new projects."

Despite the downturn, Wipro was seeing "fairly decent" demand for outsourcing services in India and the Middle East. Last week, the firm announced it had won a contract worth $228 million from an Indian government agency.

Paranjpe said Wipro, which had more than 95,000 staff at the end of 2008, was not planning any layoffs. The company was focused on cutting expenses in areas such as travel and marketing to cope with the slowing revenue growth.

Shares in Wipro, which counts Citigroup, Credit Suisse and Cisco among its more than 850 clients, rose 1.65 percent on Monday to 228.25 rupees in a broader Mumbai market that ended up 2.1 percent.