Switzerland-based financial services company Credit Suisse in its report has said that it is seeing some ‘positive signs’ in the global outsourcing scenario.
Corporate tech spending could be a potential area of positive surprise later this year, it said in its report, adding that companies in the US and Europe have underinvested in tech in recent years due to the deteriorating economic conditions.
However, worries over global economic growth have started reducing as economies are starting to rebound from its lows in the second half of 2012, according to the Credit Suisse report.
Rising capex
Industry watchers opine that this can be largely due to the fact that capex on the fourth quarter of 2012 amongst US companies have been on the rise compared to previous quarters.
Further, the outlook for companies increased spending on capex is on the rise, as per Philadelphia Federal Index, a Federal Reserve bank index that measures changes in business growth. This is reflected in the numbers.
According to Gartner, worldwide spending for IT outsourcing services will reach $251.7 billion in 2012, a mere 2.1 per cent increase from 2011 spending of $246.6 billion.
Global spending for IT outsourcing services was $315.8 billion in 2011, a growth of 7.7 per cent over 2010, indicating considerable slowdown in outsourcing spends. Further, post the 2008 slowdown, quantum of outsourcing work has reduced and the top four IT companies, on an average bagged about 40 clients in excess of $500 million in FY 12. Compared to that in 2007, the top four bagged about 100 deals in excess of $500 million.
Phaneesh Murthy, CEO of iGATE, agrees. “IT spends this year are better than the last year with clients showing signs of spending and see discretionary spend in mobility, social apps and an increasing demand for an outcome-based model.”
The note also pointed out that while Infosys which posted good third quarter profits, analysts were still unsure if specific issues have been sorted out. Credit Suisse said that it was bullish on the valuations of TCS and HCL Technologies.
venkatesh.ganesh@thehindu.co.in