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S.Mahalingam executive director and CFO of TCS said the company is seeing the first signs of a revival of the global economy. He, however, declined to say whether this was the end of the global recession.

Like the most IT companies, TCS has also been severely hit by the global recession. It has experienced a number of project cancellations since September 2008. “As the recession spread across the globe and sunk deeper, a number of customers were canceling their projects with us but lately we see an arrest in this,” said Mahalingam.

But customers remain cautious and are showing discretion in their spending, he said.

Mahalingam said TCS followed a policy of diversification in revenues that has helped in these rough times. Besides the company has also followed the same policy in terms of geography and has been focusing on emerging markets like the BRIC countries for growth.

“India has been a strong market for us besides the other BRIC countries and that has payed off,” said Mahalingam.

On the employee front, he said even though there is a freeze on hiring fresh staff, the company has honored the offer made to 24,500 people earlier.

TCS has seen a strong growth in retail, pharma, utilities verticals over the last few months.

New Delhi: The impact of the global economic downturn has begun to thrive and India’s chances to successfully glide over the tide remain positive. The country has been ranked third by a study, among the most promising country to survive the economic crisis.

The rankings are based on the Servcorp International Business Confidence Survey, which was conducted to understand the business morale and impact of the economic downturn. Australia has been voted as the best place to be during these recessionary times by international business people, followed by China. The third position is held jointly by India and Singapore while Hong Kong and Canada are in the fifth and sixth place respectively. As per international businessmen the other most promising countries include Japan, Qatar, New Zealand, Malaysia, Sweden, Vietnam, Netherlands, U.S., Indonesia, South America, France, Belgium, England, Korea, South Africa, Austria, Taiwan, Czech Republic, Germany, Ireland, Lebanon, Russia, UAE, Brazil, Morocco, Philippines, Scotland, Sri Lanka, Syria and Thailand.

The survey pinpointed that developing nations have emerged favorites among international businessmen as places which are best placed to tide over the recession. The rankings enlisted 36 countries and 21 countries among the 36 are emerging economies.

Bangalore: The recession has turned India a luring valley for job-seekers, with the country being the second fastest growing market and the companies here being bullish on hiring, unlike the other developed economies. A recent survey by Hewitt Associates (HEW) shows that more than 60 percent of companies in India are still hiring.

Despite the huge amounts of stimulus spending, many of the companies abroad are rescheduling the job structure by either removing it or by trying to adjust more work with less employees. The trillions of dollars that are being used in prime economies are mostly for projects that make no sense for a vast majority of white-collar workers, like what can a laid-off Wall Street banker do to rebuild roads and bridges? However, in India the scene differ as while the anxiety level remains high, 1 in 3 Indians is not worried about the economy at all. Many multi-national firms here are also bullish in the market, with PepsiCo (PEP) planning to spend $500 million. Universal Success Enterprises, a Singapore-based company, is injecting $17.5 billion in infrastructure projects while Norway’s Telenor (TEL.BE) is investing $3.2 billion in Indian telecom. Over the next four years, Marriott International (MAR) also plans to build 24 new hotels in India and Panasonic (PC) is growing from 48 company-owned stores to 100.

The trend of growth is witnessed in Indian firms too. Firms like Reliance ADA Group, Bharti Airtel (BRTI.BO), the biggest wireless player in the country are expanding their presence. In terms of hiring, Indian Overseas Bank will be recruiting 1,200 people. Bartronics India, a technology firm, is setting up kiosks in New Delhi and has 6,000 positions. Insurance company LIC is planning to hire 45,000. South Indian Bank is opening 40 new branches and looking to hire 3,000.

The economic slowdown has resulted in increasing number of US-based companies now outsourcing their offshore R&D related work to third-party service providers in China, who charge lower billing rates. This has impacted the Indian outsourcing market adversely.

While the Indian R&D offshore outsourcing market is projected to grow at 14-16% in 2009, the Chinese market is expected to outshine India with a 30-35% during the recession period.

Even though China is only about 1/3rd of the total Indian R&D offshore outsourcing market in size, it has a relatively faster growth ratio than India. This is basically due to the capabilities of China in the manufacturing R&D and also lower billing rates.

In fact, India’s R&D offshore outsourcing market, which is estimated at $43.5 billion, experienced a 21% growth in 2008, while the China market, estimated at $9.5 billion, grew at a phenomenal 46% during the same period. It is primarily due the rupee fluctuations; the appreciation, followed by the depreciation, has largely impacted this market.

Talking to CXOtoday, Praveen Bhadada, engagement manager at Zinnov Management Consultancy, said, “The upswing in the number of US-based companies trying to offshore their R&D related work to third party service providers in China, among other factors, has resulted in this trend.”

The billing rates of the service providers in China are relatively lower compared to India. While Indian IT firms charge $24 per hour for new product development, Chinese firms charge $21 per hour for the same work. The billing rates for Indian IT firms are higher owing to factors such as better quality, IP protection and timely delivery. “But in the present economic recession scenario, both vendors and customers are looking to optimize on the billing rates,” said Bhadada.

In 2005, outsourced work to China amounted to $408 million, of which US had a 52% share. In 2008, China outsourcing R&D related work amounted to $1,287 million and US share amounted to 64%.  Similarly, Europe and Japan have also contributed to the major share of outsourcing work to China.
Another reason is Indian service providers do not offer a broad array of R&D services as opposed to their Chinese competitors and their focus is primarily on IT services. In fact, the total Indian service providers R&D headcount numbers to 110,000 with about 130 pure Indian players while the number in China is estimated at 39,000 to 45,000 with about 250-plus local service provider companies.

As per a Zinnov report, Indian service providers in China have not been able to scale up their R&D operations in spite of having ambitious ramp-up plans since inception. Also, all the major Indian IT players like TCS, Infosys, Satyam and Wipro have failed to reach the targets and also failed to make any inroads in China. Indian firms were to grow their headcount by 25% annually, but none have managed to do so.

The economic downturn has increased the reliance on IT, and various companies are showing retroflexion, NaviSite, a provider of managed hosting and application services to retail, manufacturing, financial services and the public sector as well as the software industry, believes it’s a favorable time.
In a conversation with CXOtoday, Sumeet Sabharwal, managing director of NaviSite India, said that the economic climate is favorable to companies like theirs as they would be able to help most SMBs cut their costs, and become more efficient and help them in focusing on core revenue-generating aspects of their business.

“We have adopted a very aggressive approach to reach out to SMBs, and help educate them on the buying decision. We have also put a more concerted effort on simple tools that help businesses understand the savings associated with our model, and the associated tactical benefits that help them manage through the uncertainty using our scalable IT platform,” said he.

According to Sabharwal- various key factors work in their favor, including an increasing role of the Internet and the necessity of robust IT infrastructure for business accomplishment. “With the increasing capital constraints, most businesses are finding it hard to fund large up-front technology purchases and opt for a recurring cost model instead,” he said.

The increasing regulation and compliance needs have actively propelled most businesses to make very conscious decisions about their infrastructure, and the outsourced model stands out to its advantages around cost savings, minimal capital expenditure, and flexible IT infrastructure, said Sabharwal.
On asking about the key elements responsible for growth, he says that the key factors that impact the growth in hosting infrastructure business is the growing realization that SMBs are no longer interested, capable or rewarded by having their servers, databases, and applications running locally in their offices.
“With the growing impact of the Internet business model for the companies both revenue growth and business process execution have come to depend upon a robust IT infrastructure,” said he. As a result, Sabharwal believes more SMBs are moving their applications and infrastructure to professionally-managed hosting and data centers.

“NaviSite has responded by putting a concerted effort in launching relevant hosting solutions to address current SMB needs. These dedicated hosting solutions have been carefully crafted to address the financial and capital constraints of an SMB, and delivered in an easy to customize and buy model using an online portal,” he said.  This has allowed SMBs to harness enterprise infrastructure in a cost-effective fashion with flexible month-to-month contractual commitments.