US slowdown offers opportunity to Indian IT industry

March 3rd, 2008 - 11:47 am ICT by admin  

By Arun Kumar
Washington, March 3 (IANS) The economic slowdown in the US offers both a challenge and an opportunity to the Indian IT industry though a weakening dollar is already hurting their bottomlines, according to an industry leader. “We have been through this once before in 2000-2001,” said Arvind Thakur, CEO of NIIT Technologies Ltd - a global IT services organisation -in a telephonic interview with IANS from New York.

Certain sectors do benefit from a slowdown and it would help the IT industry for one as businesses turn to it for more cost effective solutions, said Thakur, whose company earns around $140 million, or about 30 percent of its global revenue, from North America.

“But the weakening dollar poses a bigger challenge,” he said. With the Indian rupee appreciating 14 percent against the dollar, the margins are under pressure for global Indian companies like NIIT Technologies.

In the short term, his company for one is dealing with the problem by increasing the efficiencies of its business with productivity improvement, re-pricing and more offshoring - doing more work at its offices in India than on site in the US.

In the long term though, “in a situation where currency (dollar) is weakening, what we need to do is to move from a linear to a non-linear business model,” said Thakur. The IT service business is essentially linear in which increase in revenue comes with an increase in headcount.

In the new model, NIIT Technologies is focusing more on intellectual property-based solutions that is creating some frameworks that are more productive.

These are either self-built or built through acquisition of companies with such intellection property.

NIIT Technologies, for instance, with global operations spanning across North America, Europe, Asia and Australia, has in the last five years acquired four companies in the IT service industry sector and a couple more in the education sector, said Thakur.

Last year it acquired Britain-based Room Solutions specialising in insurance business. Its latest acquisition, German-based SofTec GmbH, is a specialist in providing IT solutions and services in the airline revenue accounting and operations space, said Thakur.

“The individual strengths of NIIT Technologies and SofTec are complementary. The acquisition will strengthen our domain leadership to reinforce our position in the travel, transportation and logistics (TTL) space.”

NIIT Technologies has a strong presence in the TTL domain through its association with industry leaders like British Airways, Sabre, DB Systel, Emirates and SATS.

Thakur sees good potential for growth in North America where NIIT Technologies’ three focus segments encompass financial services, insurance and travel and transportation.

“We want to be the best in the areas we focus on, not just good,” said Thakur, an Indian Institute of Technology, Kharagpur, graduate who became CEO of NIIT Technologies in July 2004 when NIIT Technologies’ software business was de-merged.

“The US is still the land of opportunity, the ultimate Mecca of professionals,” he said even as many an Indian is going back to his roots with the quality of life getting better back home in a booming economy. “It’s wonderful, wanting to get back.”

Thakur was also not too worried about the effect of the US slowdown on the Indian economy in general. The Indian economy has somewhat decoupled from the US economy and was capable of sustaining good growth independently.

A downturn in a major economy like that of the US is bound to have repercussions on the rest of the globe, but it would have a relatively less impact on a country like India, he said.

Besides North America, NIIT Technologies’ operations span Europe, Japan, Asia and Australia. It offers services in application development and maintenance, enterprise solutions including managed services and business process management to organisations in the logistics, retail, manufacturing and government sectors.

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