Infosys Signals End Of Recession

According to Infosys Technologies, the outsourcing mega firm has posted strong earnings amid the start of a recovery. Along with that, India’s second biggest outsourcing firm has announced that net profit is also higher for the quarter (ending in September). Infosys is claiming that clients are placing orders again, signaling what could be the end of a recessionary era.

Infosys’ earnings were posted at $1.5 billion for the September quarter. That figure is 29.6 percent higher than its numbers for 2009. Infosys reported an increase in net growth of 18 percent to a massive $374 million for the quarter.

Industry analysts are quick to maintain that the figures released by Infosys are similar to what other outsourcers like Tata and Wipro will be posting later in October, reports PC World..

The increase in profits is also affecting the Indian outsourcing industry. Hiring has not increased to levels that were similar to those ahead of the recession. However, analysts also say that very big margins of profit are unlikely going forward for firms outsourcing to India. The major factor that remains a stumbling block to Indian outsourcers is that multinational service companies are planning to set up companies and units in offshore destinations like India. This would have a negative impact on outsourcing giants like Infosys. In addition to this, firm in India will have to meet the rapid changes that are happening in the U.S. due to protectionism. One of these factors will be accommodating rising costs for Indian offices abroad.  With Americans feeling that Indians are taking away their white collar jobs, it will be difficult to sell the platform for outsourcing in the U.S.

Jimit Arora, Everest Group’s research director, said clients are looking to interact with fewer suppliers since these results in better contract relationships. However, that would translate to fewer suppliers getting contracts. Moreover, those that are offered the coveted bids would be given a large chunk of the work. These changes are likely to take place as the industry transitions from the recession to the recovery. . Another problem affecting Indian outsourcers is price. More and more firms in the West are going to be looking for cheaper costs for outsourcing. This again means that it will eat into profit margins for outsourcing vendors.