Impact Of Economic Slowdown On Existing IT Projects

In my last post I discussed the impact of US economical crises on Indian IT firms. In this post, I will discuss the impact of slowdown on the existing projects. Existing projects that are going on since long time or that has been awarded but not started will also have negative impacts of the US slowdown. And not only US slowdown, the world wide economic crises will result in the financial cut down and increased number of firings.

To summarize my thoughts on current developments, I should say that:

1. Fresh negotiations on the payout will take place on downward side. In the view of financial crises, companies will start fresh negotiations on the payout and expenses of existing projects.

2. Kick off dates for the new projects will be delayed.

3. Contracts may takes more time to be awarded as companies will wait for the market to be stable.

4. Start dates will get deferred. Those projects, whose contracts has already been finalized, will face delay in the starting date. These will go on hold as the priorities of the companies has got changed now.

5. Consolidations and mergers of banks like the Bank of America’s buyout of Merill Lynch would lead to the reduced budget for IT spending. Merger will result in the duplication of outsourced deals to domestic IT firms, and consequently truncation of some deals, which will result in loss of revenue.

6. Reduction in on site jobs. Since calling people on site from India costs more to companies, these will prefer to get their work done from offshore.

Manmohan Singh, the Prime Minister of India, yesterday said that India will not remain un-touched with the world wide economic crises. According to him, Indian economy will be badly affected in the long run.

Related Link:

• Indian IT Companies and US Crises – Will They Survive?
• Predicting Market Direction Using Put Call Ratio (PCR)
• Financial Calculators
• Rule of 72
• Money Manager EX – The Personal Money Manager

Indian IT Companies and US Crises – Will They Survive?

Everyone has one question in mind – what is the impact of US economical crises on Indian IT companies and Jobs. Though there will be reduction in the jobs and people may get fired, companies will be able to cop the problem and get strengthened over the time.

Most Indian IT companies gets a major portion of their revenue from US market. The BFSI (Banking, Finance, Service and Investment) sector is the major source of revenue for these IT companies like Infosys, Satyam, Wipro and TCS.

The sinking US economy will definitely have adverse effect on these companies. But this effect will take around one month to come into effect. Presently, companies have orders in hand and they are executing projects. But after one month, when payments will be due and there will be delay in payments, Indian IT cos. will come into crises.

US BFSI cos. which are not in a position to make payments for IT department, will start reducing the manpower from their projects. In this situation, Indian cos. will have burns on both sides. They will suffer shortage of funds and there were non-billable people sitting on the bench.

This will be an unhealthy situation. Companies will start firing people as they have to survive. There will be jobless people everywhere. I can see that the situation will be very much the same as that was in 2001-02.

But this will be a second lesson to Indian companies. In the last set-back most companies diversified their clients to Europe and Asia. This time these companies will find new markets. In the long run, this will reduce dependency on one geographical market making the companies more stable and recession-proof.

Related Link:

• Impact Of Economic Slowdown On Existing IT Projects
  
• Predicting Market Direction Using Put Call Ratio (PCR)
• Financial Calculators
• Rule of 72
• Money Manager EX – The Personal Money Manager