MaSSSoftech

A better operating performance and favourable currency movements help fetch the tech major better margins.
Infosys posted a 50 basis points increase in operating margins in the September 2009 quarter to 34.6 per cent, surprising the Street which had pencilled in a drop in margins, anticipating higher investments in sales and marketing. A better utilisation rate, up 300 basis points, together with a more favourable offshore:onsite ratio helped push up margins.

The Infosys management, however, remains cautious on margins, indicating it’s possible the 8 per cent increase in wages and salaries for offshore employees and the 2 per cent hike for onsite employees could hurt margins by about 200 basis points over the next couple of quarters. That is, however, not something to be concerned about, because with volumes recovering — up 2.3 per cent sequentially — compared with a fall in the June 2009 quarter, the outlook for the top tier technology firms now appears distinctly brighter.

Better volumes and favourable currency movements helped Infosys post an increase in dollar revenues of just under 3 per cent in the September 2009 quarter. Pricing, which came off by about one per cent, is still a bit of a concern, with the management indicating an upside could be some time away though right now pricing was stable. Nevertheless, the fact that Information Technology (IT) budgets aren’t coming off and are either flat or seeing a slight increase, has perhaps prompted the Infosys management to up its revenue guidance for 2009-10 by about 3 per cent to between $4.6-4.62 billion.

Even if budgets aren’t upped, it’s possible, say industry watchers, that Indian IT firms will gain as customers consolidate vendors. The good news is that the BFSI vertical, to which the bigger IT firms have a fairly large exposure, seems to have seen off the worst. Moreover, there’s traction in some other spaces, like telecom.

That was evident in the fact that Infosys managed to add 35 new clients during the quarter; at the same time the firm was also able to mine its top clients better. At Rs 2,178, the stock trades at 18.8 times estimated 2010-11 earnings and unless the rupee strengthens significantly or is very volatile, does hold at least a 15 per cent upside from current levels.

SAN FRANCISCO, October 10 (AFP) – Information technology (IT) will generate 5.8 million new jobs in the coming four years, according to research released Sunday by International Data Corporation, or IDC.

IDC predicts that the IT industry will help economies out of economic doldrums, creating more that 75,000 new businesses in the next four years and adding jobs at a rate of 3% annually.

"Countries that foster innovation and invest in infrastructure, education and skills development for their citizens will have a major competitive advantage in the global marketplace," said Microsoft Corp. (MSFT) chief executive Steve Ballmer.

"In this fundamental economic reset, innovative technologies will play a vital role in driving productivity gains and enabling the creation of new local businesses and highly skilled jobs that fuel economic recovery and support sustainable economic growth."

US software giant Microsoft sponsored the IDC research into the impact of IT in 52 countries that represent 98% of the global IT-spending.

"IT spending growth is a good sign as we come out of the recession," Microsoft Corporate Affairs communications manager Scott Selby said.

Employment growth in IT related jobs will be three times that of overall job growth in what Selby said is a "good driver of economic growth."

While the world has been in the grip of a recession, it has also been in the midst of a "technology renaissance," flush with advances in software, devices, and Internet-based services, according to IDC.

IDC expects IT spending in the countries studied to grow at slightly more than 3% annually, three times as fast as gross domestic product between now and 2013.

In good news for Microsoft, spending on software is predicted to grow faster than overall IT spending, rising 4.8% annually.

"Software is a driving force behind this IT growth," Selby said. "IT allows us to do more with less."

New technologies are also ushering in a new "cloud computing" paradigm, in which applications are provided online as services instead of as software bought and installed on home or office machines, according to IDC.

Money saved by using software as needed "in the cloud" instead of buying, maintaining, and updating applications will likely be devoted to bringing new products or services to market faster and cheaper, according to Selby.

IDC estimates that cloud services could add $800 billion in net new business revenues between the end of 2009 and the end of 2013.

"Over the past 20 years, we've seen transformative power in how investments in IT innovations foster economic growth," said Robert D. Atkinson, founder of the Information Technology and Innovation Foundation in Washington, D.C.

"Continued innovation and investment in information technology will help jump-start recovery from the current recession and will significantly contribute to the growth of employment and new businesses."