As part of the first quarter earnings, Infy lowered their outlook for the rest of the year.
Reason cited as the double whammy of increasing wages and a stronger rupee.
Here’s a glimpse of earnings report from some of the other software services companies:
- Polaris Q1 net falls to Rs 14.42 crores
- MindTree Q1 net profit dips 16%
- Satyam profit dips 3.8% as compared to the last quarter
- Wipro has slowest profit growth in two years
To be precise, during the June 2007 quarter, the top four software services companies have posted the slowest YoY growth in five quarters (28.73 %). A strong rupee and wage inflation – both are eating up into the profit margin of Indian software companies.
I was discussing this issue with a friend, who’s currently in the US on an outsourcing project. As per him, the USP for Indian software services companies is not only cost arbitrage but also quality. I tried to make my point that the biggest USP for Indian software services companies is the cost arbitrage – if and when they lose it, US companies (which makes up 60% of the outsourcing market) will look for alternatives.
Yes – I know – very few other countries have the English speaking, skilled workforce that India has.
But if the rupee keeps appreciating at this pace (6% in June), the IT and BPO companies will have to minimize their operational costs to maintain their profit margins. Else risk the threat from other emerging countries like Philippines and Eastern Europe.
What do you think ?
