Top Indian IT Firm Tata Says Client Cuts Have Hit Bottom - InformationWeek

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Commentary
7/20/2009
09:02 AM
Bob Evans
Bob Evans
Commentary
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Top Indian IT Firm Tata Says Client Cuts Have Hit Bottom

Many large corporations have stopped cutting back on IT spending, according to Tata Consultancy Services' CFO. "The decline has been arrested," said the Tata executive.

Many large corporations have stopped cutting back on IT spending, according to Tata Consultancy Services' CFO. "The decline has been arrested," said the Tata executive.Tata's clients "are in a stage where they have been able to justify the minimum program," said Tata CFO Seturaman Mahalingham in an interview with Bloomberg News. "As the economic climate improves, their intention may be to demand a higher budget." It was in that context that Mahalingham said that for Tata's large clients in the U.S. and elsewhere, "the decline has been arrested" in terms of their IT spending.

Mahalingham also said "the earlier downcast feeling, that is gone," as he cited a multimillion-dollar order from a specialty retailer in the U.S., which is the source of half of Tata's revenue.

However, in the same article, Bloomberg also said that Tata CEO Subramanian Ramadorai offered this strongly cautionary note: "The global economy across countries continues to be weak. We are certainly watchful of the situation and we don't rule out the fact that more surprises can be expected."

So the real picture seems to lie somewhere in the middle between CFO Mahalingham's "the decline has been arrested" and CEO Ramadorai's "the global economy across countries to be weak." And the key point appears to be this line from the Bloomberg story: "An unexpected stability in the volume of billed hours among financial clients also helped Tata Consultancy beat earnings expectations yesterday…."

Tata's quarterly figures were also helped by landing eight large deals around the world, including five in the U.S., including the specialty retailer noted above.

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