Demand for IT services holding out in US

Demand for IT services in the US is persisting although the mood in terms of economic and employment growth remains muted, Wipro chairman Azim Premji said Friday.

"What is distinct from the overall economy in the US is that the IT demand is still holding out, though not a bumper demand we have seen two-three years ago," Premji told reporters here after his IT bellwether projected higher revenue outlook for third quarter (Oct-Dec) of this fiscal (2012-13) on signs of good growth.

Recalling his interaction with about 40 chief executives of Fortune 500 firms at a business council meeting in the US last week, Premji said though the general mood was more muted than it was a quarter ago, the quality of demand and the quality of business the company was trying to get had to be created to sustain growth.

"It is less business as usual and much less in our (IT) industry. But as far as sales and top management act right and get domain right, it is possible to sit down with CXOs (executives) to suggest solutions, which can result in more profits for their firms, more lead time and more cycles per year," Premji asserted.

On the upcoming US presidential election, Premji said he was cautiously optimistic of seeing little more demand for IT services pick up though not immediately but two-months after the outcome, irrespective of whichever party comes to power.

"One has to be much more proactive and in the quality of selling, one has to be a co-partner in the client's business and in bearing some of the variability of their demand," Premji observed.

Echoing Premji, Wipro executive director and chief financial officer Suresh Senapaty said the US presidential election would have some kind of impact on decision-making of its clients.

"We expect definitely some kind of impact of the US presidential elections, especially after the results on decision-making hastening. That is our expectation," Senapaty clarified.

Noting that second half (Oct-March) of the fiscal (FY 2013) would be better as reflected in the higher sequential revenue guidance of 2.2 percent from IT services business, Senapaty said decision-making was happening in Europe too.

"And so also in India, after the new finance minister (P. Chidambaram) took over (in Sep) and some reforms were announced."

"We expect the second half to be better, as evident from our revenue guidance of 1.2-3.2 percent (or average of 2.2 percent) increase in third quarter (Oct-Dec). We are seeing a soft momentum at least from guidance point of view," Senapaty pointed out.

With growth in financial services, especially in retail banking and insurance reviving, the global software major is upbeat on demand coming back across verticals and geographies in light of improved deal decision-making taking place in second quarter.

"We have been in the investing mode so far as mining new accounts are concerned and putting global client-partners and hunting engine in place, which reflect in terms of a very good pipeline," Senapaty affirmed.

On the demerger of non-IT businesses, the topmost executive said operating margins of IT services business would improve on account of higher margin in the outsourcing projects.

"As a pure player of IT business, margins will be better in terms of financial performance. The demerger will reflect positively on the margins in our IT services business," Senapaty added.

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