A bang in the US, a whisper in India?

The rumble of the US slowdown is coursing through business sinews of world. In the US, the situation is grim. Company stocks are doing the devil-dance on the Nasdaq, workforce is being cut drastically, spending is slashed and expansion plans shelved. 

Micorsoft made history at Nasdaq when in December 2001, the IT major's forecast of lower sales saw 157 million shares changing hands in one day. This was followed by AMD and Intel both reporting slower sales which caused Meryll Lynch, an analyst at Thomas Kraemer to say, "We think IT spending is slowing," and added that HP and IBM are especially vulnerable. 

The New Year failed to ring in luck for the industry. While steep drop in chip orders and prices (November-December 2000) caused the semiconductor industry to miss its 37 percent growth rate and barely manage a 31 percent, we heard VA Linux blame the slowing economy for second quarter loss in 2001.

By February, reports of massive layoffs began to pour in. HP, Cisco, Intel, Xerox, Lucent, Motorola, 3Com, Oracle were among those at the higher end of the lay-off scale. 

The editors at the DQ Week kept pace with the economic scenario and over the past five months (December 2000 to April 2001), the publication featured four editorials on the US slowdown and it's impact on the Indian IT industry. 

It was when the usually "optimistic" MAIT recorded a 26 percent growth of PCs as against a 45 percent for the last HI, in its half-year issue in January 2001, that the industry sat up and took stock. When news of reduction in the issue of H1B visas was reported and it's ramifications analyzed, the Indian IT industry came to acknowledged that the US slowdown "is beginning to hurt." However, the little remaining feel-good attitude was demolished when Nasscom recently scaled down its prediction from $ 9.5 billion to $ 8.5-9.0 billion and announced that if the US economy picks up in Q3 and Q4, then the original projection of $ 9.5 billion is a possibility. Meanwhile, the Nasscom has projected the expected growth rate for software exports to stand at 40-45 percent.

Despite the toll of danger bells, the domestic software industry is smug. The fact that the US slowdown is being overestimated is a view shared by many.

"The US slowdown has been overtly hyped. With the dotcom boom there was excess capacity. Today, there is no such requirement. Yes, the US slowdown has percolated to various levels. The dotcom people are the worst hit as they find themselves with no alternative arrangements," said S Premkumar, Founder and CEO, Fugen Information Technology Ltd

R Manickavasagam, Senior Vice President-Projects, Indus Software Pvt Ltd, however feels that despite the hype, "the US slowdown does have an impact on India. The emerging technologies segment in particular is vulnerable to the slowdown."

Sharing a similar view point is C Bernard, Managing Director, Ibhar Software Pvt Ltd, who said, "The US slowdown has been in the horizon for a while. Reasons being the dotcom bust followed by over-staffed organizations, and overestimated growth possibilities. Certain Indian companies will be affected by the slowdown, particularly in
companies dealing with Java based skills."

More forthcoming was Wg Cdr (Rtd) K Krishnan, Head-IT Enabled Services, Accel Software Solutions Ltd, who said, "The US slowdown has impacted IT enabled services and hardcore development. As a company dealing with both, we have been slightly affected by the slowdown. With regards of hardcore development, there has been a reduction of the number of the projects coming in. But we can tide over it. We're looking at Europe and other countries at the moment."

The US slowdown has goaded Indian companies to look at other markets, as in the case of Systech. N Ravikumar, Sales Manager, Asia-Pacific, Systech said, "We have plans of focusing on the Middle East and Far East and ofcourse in India.

We're planning to expand into the ERP space."

While most companies refuted being impacted by the US slowdown, and some refused to comment, a few did admit to being "slightly" affected by it. However, all companies in unison, vehemently vowed not to layoff workers. "No way are we going to cut on our workforce. In fact we've just increased our strength," said Fareed Ahmed.

Most see an opportunity in the US slowdown. "Now with the US slowdown, we're looking more toward it as we see great opportunities out there. Now that they're low on money, they'll look for ways to outsource it," said Fareed Ahmed. 

Adithya Praveen CS, said "The US slowdown would benefit India. You can't stop onsite projects. And the next option is to take it offshore. The margins however would be pretty less." This is in keeping with an IDC observation that the Indian IT industry would not be impacted by a slowdown in the US economy. Infact IDC said that despite the slowdown, the domestic industry is witnessing "exhilarating growth."

So when does the industry see these `seemingly' small puffs of uncertainty clear from the economic horizon? Most feel that it would be clear skies once again within the next five to six months. Until then, the domestic IT industry would keep its fingers crossed and hope for the best--as it always does!