Outsourcing clients may delay IT spend

Finalisation of IT Budget Only By February-March
PP Thimmaya BANGALORE
FOR the second year in a row, outsourcing customers in the US and Europe are expected to delay decision on their information technology budgets. They are likely to decide on their annual IT spend only by February-March next year. Usually outsourcing customers have been finalising their budgets by December-January. However, such decisions are being deferred now as more firms seek to cope with economic recession. “Clients have delayed their budget cycles as they are trying to figure out the impact on their businesses,” says Cognizant Technologies’ CFO Gordon Coburn during a recently held technology conference with Credit Suisse. Meanwhile, Forrester Research has revised its 2009 US IT spending forecast and is now forecasting 1.6% annual growth in the spending for the next year. “The US IT market outlook is down but not as bad as the 2001-02 technology depression.” Even Infosys is expecting a delay in finalisation of IT budgets of its clients. Sandeep Mahindroo, senior manager, investor relations at the Credit Suisse event, said it is very likely to be delayed and they are not sure when it is going to finalised. While tech spend may be dropping, but Forrester has said IT outsourcing will remain moderate in 2009 and 2010. “IT outsourcing will get a small lift from an economic slowdown in 2008 as companies turn to vendors that can help cut IT costs.” However, there seems to be a silver lining. Mr Coburn added that the IT spend might be down, but it does not necessarily indicate any dip in offshoring of IT services. He further added that the concern for now is not about adding new clients but on the ramp ups and projections of the existing IT contracts. Industry observers believe that the recovery may happen only during the third or fourth quarter of 2009. Avinash Vashistha, CEO, Tholons also felt that there would be six to nine months delay in deciding on IT outsourcing projects. PROS & CONS THE DOWNTURN FALLOUT Outsourcing decisions, usually finalised by December-January, are being deferred as more firms seek to cope with economic recession Forrester Research has revised its 2009 US IT spending forecast and is now forecasting 1.6% annual growth in the spending for the next year THE SILVER LINING IT outsourcing will get a small lift from an economic slowdown in 2008 as companies turn to vendors that can help cut IT costs IT spend might be down, but it does not necessarily indicate any dip in offshoring of IT services