Rebound, technically speaking

The Indian giant Infosys Technologies exemplifies the country's struggle against the effects of the global economic downturn - and the resilience of its tech sector.

Last year Infosys declared 12 months of near-zero growth for the first time since it was founded nearly two decades ago.

The ebbing growth of India's second-largest software exporter by sales, long hailed as a bellwether for the country's US$60 billion (Dh220.38bn) information technology (IT) and outsourcing sector, was a stark indicator of the global slowdown, one of the worst since the dotcom crash in 2000.

Tepid demand for outsourcing in recession-racked western markets, rising costs and attrition levels led to rapidly shrinking revenues for Indian IT companies.

That prompted many to scale back hiring and curb the expansion plans drawn up when the sector's growth was surging at 30 per cent.

At the time, Infosys counted among its clients giants such as the Bank of America and Merrill Lynch, companies that were battered by the financial services-led meltdown.

But the days of double-digit growth are returning on the heels of a buoyant demand for technology services.

Global technology spending rose by 3 per cent this year, the research company Gartner says.

On Friday, Infosys reported 27 new clients for the September quarter.

It declared a surprise second-quarter net profit of 17.37bn rupees (Dh1.44bn), up 16.7 per cent from the previous quarter and 13.2 per cent from the same quarter last year.

"Though the economic environment continues to be challenging, we have leveraged our client relationships, solutions and investments to grow faster in this quarter," says S Gopalakrishnan, the chief executive and managing director of Infosys.

Infosys is the first major IT company to declare its second-quarter results. Analysts predict other major companies, including Wipro and Tata Consultancy Services, will also post upbeat results.

But "this is not an era of the new normal for the IT sector", warns Sangeeta Gupta, the vice president of the National Association of Software and Services Companies.

"Yes, growth is back, but it's not the same as the old heydays of 30 per cent growth. We're hitting a lower double-digit growth rate this year."

But Ms Gupta says the slowdown has led many IT companies to reinvent themselves.

She says they used the slowdown to venture beyond their core business in application development and maintenance to higher-value businesses such as research and development outsourcing.

Many entered new markets and diversified their customer base beyond purely IT-related applications to areas such as banking and financial services, manufacturing, retail and telecommunications.

"Post-downturn, IT companies are increasingly adopting a 'do more with less' business model while still turning a profit," Ms Gupta says.

The export-driven sector is also increasingly tapping into the domestic market.

Gartner says India's impressive "economic growth coupled with government-led core infrastructure projects" are opening new opportunities for companies.

The Indian domestic market is valued at $23bn and Gartner projects India's enterprise spending on IT will rise to $40bn by 2013.

"Near-term growth will be driven by companies' need to optimise cost and focus on core business while externalising the management of commodity infrastructure services," says Arup Roy, a senior research analyst with Gartner.

But many small and mid-capitalised IT companies have still not recovered from the effects of the slowdown.

A recent Reuters poll of brokerages estimated profits would drop 3.7 per cent at HCL Technologies in the second quarter, 28.6 per cent at Patni Computer Systems and 44.5 per cent at Mindtree.

At many other companies, a round of pay rises in the June quarter and robust hiring are expected to affect profit margins, analysts say.

The human resources consultancy Manpower India says industry-wide attrition levels have risen by 20 per cent this year.

At Infosys, attrition in the past year has gone up by 15.8 per cent, the highest in the past five years.

And a strong rupee, which is gaining as domestic interest rates climb and foreign investors pump money into the stock market, is crimping profits for this export-driven sector.

Credit Suisse estimates that for every percentage point rise in the rupee against the dollar, earnings at the top three IT companies decline by between 1.2 and 1.5 per cent.

Since early last month the rupee has shown an upward trend, rising by nearly 7 per cent so far.

The IT industry, which generates almost 70 per cent of its revenue from the US, is also concerned about protectionist measures proposed by the Obama administration in recent months.

To try to bring down a persistently high unemployment level of nearly 10 per cent and boost a sluggish economy ahead of congressional elections next month, the US President Barack Obama proposed to end tax breaks for companies that create jobs and profits outside of the US.

Last month, the state of Ohio placed a ban on outsourcing government contracts funded by state money.

And in August, it ordered a steep rise in some categories of H-1B and L-1 visas, which act as work permits for Indian engineers operating in the US, to fund the enhanced security at the US-Mexico border.

The move will cost Indian IT companies an extra $200 million each year, says Anand Sharma, the minister for commerce and industry who describes it as "regressive".

Ms Gupta says the additional cost burden is unlikely to significantly dent profit margins of Indian companies.

"Our main concern is the discrimination," she says.

"For Indian companies to continue in a global market, we need open borders and fair play. The negative impact of protectionism should not defeat the benefits of globalisation."

Three tips from La Perle's performers

1 The kind of water athletes drink is important. Gwilym Hooson, a 28-year-old British performer who is currently recovering from knee surgery, found that out when the company was still in Studio City, training for 12 hours a day. “The physio team was like: ‘Why is everyone getting cramps?’ And then they realised we had to add salt and sugar to the water,” he says.

2 A little chocolate is a good thing. “It’s emergency energy,” says Craig Paul Smith, La Perle’s head coach and former Cirque du Soleil performer, gesturing to an almost-empty open box of mini chocolate bars on his desk backstage.

3 Take chances, says Young, who has worked all over the world, including most recently at Dragone’s show in China. “Every time we go out of our comfort zone, we learn a lot about ourselves,” she says.

UAE athletes heading to Paris 2024

Abdullah Humaid Al Muhairi, Abdullah Al Marri, Omar Al Marzooqi, Salem Al Suwaidi, and Ali Al Karbi (four to be selected).
Men: Narmandakh Bayanmunkh (66kg), Nugzari Tatalashvili (81kg), Aram Grigorian (90kg), Dzhafar Kostoev (100kg), Magomedomar Magomedomarov (+100kg); women's Khorloodoi Bishrelt (52kg).

Safia Al Sayegh (women's road race).

Men: Yousef Rashid Al Matroushi (100m freestyle); women: Maha Abdullah Al Shehi (200m freestyle).

Maryam Mohammed Al Farsi (women's 100 metres).

Confirmed bouts (more to be added)

Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez

Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through and

if you go

The flights

Etihad and Emirates fly direct from the UAE to Seoul from Dh3,775 return, including taxes

The package

Ski Safari offers a seven-night ski package to Korea, including five nights at the Dragon Valley Hotel in Yongpyong and two nights at Seoul CenterMark hotel, from £720 (Dh3,488) per person, including transfers, based on two travelling in January

The info



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The five pillars of Islam

1. Fasting

2. Prayer

3. Hajj

4. Shahada

5. Zakat


Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others


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Masters of the Air

Directors: Cary Joji Fukunaga, Dee Rees, Anna Boden, Ryan Fleck, Tim Van Patten

Starring: Austin Butler, Callum Turner, Anthony Boyle, Barry Keoghan, Sawyer Spielberg

Rating: 2/5