Rising Rupee will effect Technology Companies: Infosys CEO
The challenge for Infosys Technologies is coping with a fast appreciation of the Indian currency (rupee) versus the U.S. dollar.
While addressing the media persons, S. Gopalakrishnan, Chief Executive Officer (CEO) and Managing Director, stated, “Actually, it is not a new phenomenon. From 2003, the rupee has been appreciating but in the first quarter of the current year, it appreciated by seven per cent.”
The company’s yearly agreements arise for discussion every January and according to him, “when the billing rates come up for renewal, we can ask for a rate hike. We expect new contracts to come in at 3-4 per cent higher rates and existing contracts to be renewed at 2-3 per cent higher rates. The environment is positive for higher rates.”
On the affect of the climbing rupee on the company’s business, he said, the 7% increase in the first three months and 9% appreciation in the twelve months take time to absorb.
“Typically, we use levers like utilisation, onsite-offshore ratios, services mix, customer group and regions, rate increases and internal efficiencies,” he added.
As well, it is looking for increasing revenue share from non-dollar geographies like Europe that’s where the current acquirements like that of Philips' BPO fir in.
Over a time period, Infosys wants to cut down US revenue share to 50 per cent from the existing 60 per cent and augment Europian share to 30 per cent from the present 26 per cent. And rest of the geographies contributing almost 20 per cent including Latin America and China.
Infosys administration says that previously the IT services companies have eventually gained from the economic decompresses in the western countries like the US.
On the other hand, there is an intermediary phase before the outsourcing cycle kicks in all again, clearly the upcoming quarterly numbers of the company will be under a lot of pressure