Restructuring in US industries may benefit IT cos here

Industry:    April, 2016

The ongoing restructuring activities in industries such as financial services or automotives in the US could result in deals for the Indian IT services players in the latter part of the fiscal.

“As a result of the restructuring in financial services or automotive industries, they are going to increase their outsourcing and some percentage of that is going to come to places like India,” said Mr John McCarthy, Vice-President and Principal Analyst, Forrester Research.

Such deals are potentially going to get finalised next year, and the present year would still see a lot of confusion and uncertainty, he added.

He said the situation would gradually improve towards the end of this year and into the next year, and there is a feeling that it has started to get pretty close to the bottom. “Over the next six months we are going to get a sense of how the industry is going to change.”

Mr McCarthy said there is a possibility that the financial services sector could recover before industries such as automotive or real estate do. He said some companies might initiate specific projects that help would cut costs.

However, the big deals are likely to be broken down and phased over a period of years. Though the healthcare sector has not been negatively affected by the downturn, if the authorities go ahead with the healthcare reforms, it might inject some uncertainty into the system, he said.

He said there would clearly be some pricing pressure till the end of next year. However, some of the conversations this year are going to move towards how the companies can save more by sending higher percentage of work offshore.

On being asked about the implication of the proposed tax reforms in the US, Mr McCarthy said they are nothing more than rhetoric at this moment.

Also, the final legislation that might get enacted would be very different from what has now been proposed. Many a time, what gets proposed does not get acted upon and it dies, he added.