IT cos look at global services delivery model to fight rising Re
Migrating to a global services delivery model for IT companies has become inevitable now, since the rupee is appreciating at a rate of 3% every four weeks.
By Harsimran Singh, TNN |
NEW DELHI: Migrating to a global services delivery model for IT companies has become inevitable now - especially since the rupee is appreciating at a rate of 3% every four weeks for the last two months.
While IT exporters cry foul, importers of PC products are making merry. Hopefully, the latter will transfer the benefits to consumers.
However, the rupee appreciation has left the exporters of IT and BPO services quite worried. While they don’t see the quantum of work coming to India declining, a strengthening rupee will definitely erode margins.
They are looking at moving work to places where currency fluctuations against the dollar are not that significant.
The dollar was trading at 41.06 against the rupee on August 21, which further fell to 39.90 on Thursday, a drop of 2.82%. The dollar was trading at 41.50 on August 17 against Rs 40.30 a month earlier (in July), a drop of 2.8%. The nearly 3% drop in four week was seen during April 20-May 20, as well.
To cope with the strengthening rupee and to maintain margins IT and BPO companies are now trying to sign more contracts in euro or the British pound, besides evaluating new destinations in Asia, Latin America and East Europe.
“Philippines, Vietnam, Czech Republic and China are good locations for IT companies to set up global delivery centres. Vietnam has had an IT industry for the last 12 years. Dollar depreciation will decrease valuations of Indian BPO and IT companies as it will erode their operating profit margins. We may also see a drop in salary hikes to be given this year,” says Tholons CEO Avinash Vashishtha, an outsourcing advisory firm.
Most IT services companies are a worried lot. “This was not expected. The appreciation in rupee is not on basis of strong fundamentals. If tomorrow FIIs decide to pull out, which they will in December to book profits, the rupee will see a depreciation. Strangely, I have not seen RBI act on it today. The RBI should buy more dollars to save exporters from this melee,” says Birlasoft CFO KS Ananthanarayanan.
While IT exporters cry foul, importers of PC products are making merry. Hopefully, the latter will transfer the benefits to consumers.
However, the rupee appreciation has left the exporters of IT and BPO services quite worried. While they don’t see the quantum of work coming to India declining, a strengthening rupee will definitely erode margins.
They are looking at moving work to places where currency fluctuations against the dollar are not that significant.
The dollar was trading at 41.06 against the rupee on August 21, which further fell to 39.90 on Thursday, a drop of 2.82%. The dollar was trading at 41.50 on August 17 against Rs 40.30 a month earlier (in July), a drop of 2.8%. The nearly 3% drop in four week was seen during April 20-May 20, as well.
To cope with the strengthening rupee and to maintain margins IT and BPO companies are now trying to sign more contracts in euro or the British pound, besides evaluating new destinations in Asia, Latin America and East Europe.
ADVERTISEMENT
“Philippines, Vietnam, Czech Republic and China are good locations for IT companies to set up global delivery centres. Vietnam has had an IT industry for the last 12 years. Dollar depreciation will decrease valuations of Indian BPO and IT companies as it will erode their operating profit margins. We may also see a drop in salary hikes to be given this year,” says Tholons CEO Avinash Vashishtha, an outsourcing advisory firm.
Most IT services companies are a worried lot. “This was not expected. The appreciation in rupee is not on basis of strong fundamentals. If tomorrow FIIs decide to pull out, which they will in December to book profits, the rupee will see a depreciation. Strangely, I have not seen RBI act on it today. The RBI should buy more dollars to save exporters from this melee,” says Birlasoft CFO KS Ananthanarayanan.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
