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."

One in nine do not have enough to eat

Created in 1961, the World Food Programme is pledged to fight hunger worldwide as well as providing emergency food assistance in a crisis.

One of the organisation’s goals is the Zero Hunger Pledge, adopted by the international community in 2015 as one of the 17 Sustainable Goals for Sustainable Development, to end world hunger by 2030.

The WFP, a branch of the United Nations, is funded by voluntary donations from governments, businesses and private donations.

Almost two thirds of its operations currently take place in conflict zones, where it is calculated that people are more than three times likely to suffer from malnutrition than in peaceful countries.

It is currently estimated that one in nine people globally do not have enough to eat.

On any one day, the WFP estimates that it has 5,000 lorries, 20 ships and 70 aircraft on the move.

Outside emergencies, the WFP provides school meals to up to 25 million children in 63 countries, while working with communities to improve nutrition. Where possible, it buys supplies from developing countries to cut down transport cost and boost local economies.

 

TEAMS

US Team
Dustin Johnson, Jordan Spieth
Justin Thomas, Daniel Berger
Brooks Koepka, Rickie Fowler
Kevin Kisner, Patrick Reed
Matt Kuchar, Kevin Chappell
Charley Hoffman*, Phil Mickelson*

International Team
Hideki Matsuyama, Jason Day 
Adam Scott, Louis Oosthuizen
Marc Leishman, Charl Schwartzel
Branden Grace, Si Woo Kim
Jhonattan Vegas, Adam Hadwin
Emiliano Grillo*, Anirban Lahiri*

denotes captain's picks

 

 

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ACL Elite (West) - fixtures

Monday, Sept 30

Al Sadd v Esteghlal (8pm)
Persepolis v Pakhtakor (8pm)
Al Wasl v Al Ahli (8pm)
Al Nassr v Al Rayyan (10pm)

Tuesday, Oct 1
Al Hilal v Al Shorta (10pm)
Al Gharafa v Al Ain (10pm)

THE%20STRANGERS'%20CASE
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Company%20Profile
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Company%20Profile
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ADCC AFC Women’s Champions League Group A fixtures

October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA

match info

Athletic Bilbao 1 (Muniain 37')

Atletico Madrid 1 (Costa 39')

Man of the match  Iker Muniain (Athletic Bilbao)

COMPANY PROFILE
Name: Airev
Started: September 2023
Founder: Muhammad Khalid
Based: Abu Dhabi
Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 

Test squad: Azhar Ali (captain), Abid Ali, Asad Shafiq, Babar Azam, Haris Sohail, Imam-ul-Haq, Imran Khan, Iftikhar Ahmed, Kashif Bhatti, Mohammad Abbas, Mohammad Rizwan(wicketkeeper), Musa Khan, Naseem Shah, Shaheen Afridi, Shan Masood, Yasir Shah

Twenty20 squad: Babar Azam (captain), Asif Ali, Fakhar Zaman, Haris Sohail, Iftikhar Ahmed, Imad Wasim, Imam-ul-Haq, Khushdil Shah, Mohammad Amir, Mohammad Hasnain, Mohammad Irfan, Mohammad Rizwan (wicketkeeper), Musa Khan, Shadab Khan, Usman Qadir, Wahab Riaz 

MATCH INFO

Manchester United 1 (Rashford 36')

Liverpool 1 (Lallana 84')

Man of the match: Marcus Rashford (Manchester United)

The years Ramadan fell in May

1987

1954

1921

1888

Specs%20
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