The IT-ITES industry fears demands from clients for a cut in billing rates.
With the global economy stressed again and the rupee sliding, clients are likely to put pressure on information technology service providers to cut prices. Industry experts anticipate a drop of 5-10 per cent in the rates for the year.
“As of now, we (the industry) have not experienced this. But there are concerns that customers knowing about the rupee fall will come back to us. Volatility is not good for the IT industry,” Mr B.V.R. Mohan Reddy, Chairman and Managing Director of Infotech Enterprises, said.
“HCL Tech's pricing was down 1.4 per cent over the previous quarter, TCS saw pricing declines of 1.6 per cent and Infosys' pricing reduced by one per cent,” Mr Shashi Bhusan, Senior Research Analyst (Institutional Equities) of Prabhudas Lilladher, said.
Mr Ashish Chopra, analyst with Motilal Oswal, said that Wipro saw pricing increases of 1.1 per cent quarter-on-quarter. “With costs rising in India, companies have to look beyond labour arbitrage,” said Mr Sanjoy Sen, senior director at Deloitte. The industry is facing a strange situation. It is not just the clients from the West that are likely to demand reduced rates, clients from the Asia-Pacific region too have begun asking for a cut in rates.
“Like the rupee, other currencies in the region too are weakening. Pressure is on them too to reduce expenditure. They are looking at resources in their own countries. There is a definite possibility of drop in rates,” Mr Ravi Rao, Managing Director of ValueMomentum Software Services, said.
It is the smaller firms, which depend on a handful of customers, that are going to be hit hard. “Big firms have deep pockets to absorb the shock. It is not the same with the small companies,” Mr Rao said.
“There is no pricing pressure in the market on billing. We have not seen any downward pressure on billing rates. In our experience, rates have stayed more or less static for the last several years,” said Mr Siddharth A Pai, Partner (Global Resourcing and India Operations) at Information Services Group.
ITsAP (the IT and ITES industry association of AP), however, felt that rates may not be impacted because of the rupee appreciation or depreciation. “Contracts depend on so many other factors,” Brig Harikumar, Executive Director of ITsAP, said.