B&E: Your guidance is much lower than NASSCOM’s industry guidance. What is your view?
V. Balakrishnan (VB): The NASSCOM growth rate is ambitious. It’s not going to happen. If you look at the IT-BPO model in India, around $70 billion is exports. Around 30-35% of it is captives and captives are not growing. Secondly, two large companies – both Infosys and Wipro – have said that growth will be muted at around 5%. So, I don’t see how the industry will grow at 13%. It’s too ambitious.
B&E: Why is it getting difficult to predict client budgets?
VB: Before the financial crisis in 2008, whenever there was any change in the environment, it took at least 2-3 quarters for it to get reflected in client spending. But after the crisis, which was a wake up call for most corporates across the world, the change is very quick. When they see the environment moving in this manner, they immediately go and cut down all expenses. So the reaction time has come down. Also there is a lot of time taken for signing a contract.
B&E: You predicted the Bear Stearns debacle. Do you see any other major corporate crises coming up?
VB: Now creditworthiness is not a problem, because most of the problem has moved to the government. Now the creditworthiness of governments is being questioned, not the companies. I don’t think you will see any blow ups in the corporates. You will see blow ups in the government! Breaking up of Europe is a reality, the question is when.
V. Balakrishnan (VB): The NASSCOM growth rate is ambitious. It’s not going to happen. If you look at the IT-BPO model in India, around $70 billion is exports. Around 30-35% of it is captives and captives are not growing. Secondly, two large companies – both Infosys and Wipro – have said that growth will be muted at around 5%. So, I don’t see how the industry will grow at 13%. It’s too ambitious.
B&E: Why is it getting difficult to predict client budgets?
VB: Before the financial crisis in 2008, whenever there was any change in the environment, it took at least 2-3 quarters for it to get reflected in client spending. But after the crisis, which was a wake up call for most corporates across the world, the change is very quick. When they see the environment moving in this manner, they immediately go and cut down all expenses. So the reaction time has come down. Also there is a lot of time taken for signing a contract.
B&E: You predicted the Bear Stearns debacle. Do you see any other major corporate crises coming up?
VB: Now creditworthiness is not a problem, because most of the problem has moved to the government. Now the creditworthiness of governments is being questioned, not the companies. I don’t think you will see any blow ups in the corporates. You will see blow ups in the government! Breaking up of Europe is a reality, the question is when.
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