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While Infosys expects the US sub-prime crisis to hurt revenue at its backoffice services unit by a maximum of US dollar1 million in the current fiscal year, the company is optimistic that in the medium term such a situation could work to its advantage.The impact due to the subprime crisis in U.S. mortgage market should not exceed US dollar1 million in revenue for the business process outsourcing business, Amitabh Chaudhry, CEO, Infosys BPO, said.
S. Gopalakrishnan, CEO and MD, Infosys Tech, said the company expects to moderate the impact of a strong rupee against the U.S. dollar on its revenue through a mix of higher billing rates, better manpower utilization and by driving more work to its low cost centers in India.
He further added that in the medium term, Infosys Technologies could win more business from U.S. clients if the subprime crisis reduces spending there. Even when companies are looking to cut costs the offshoring model makes sense, he said.
We are not witnessing any slowdown in terms of number of deals, Gopalakrishnan said.
The contracts come up for negotiation once a year. There is an annual cycle for taking a relook at the contract. Therefore, we cannot respond every quarter to the changing environment and make rapid changes. We are seeing 3 to 4 percent increase possible in new contracts and 2 to 3 percent increase in existing contracts when they come up for renewal. The environment is positive. Customers are willing to accept that costs are going up. They realize it is not just the rupee but also compensation costs and inflation have been moving higher, Gopalkrishnan added.
From a geography perspective, Europe seems to be positive, Australia is also positive, S. Gopalakrishnan said.
This is partly because Infosys is investing in those markets and also because these regions are catching up with the United States in outsourcing work.
They have suddenly woken up to the fact they need to become more aggressive in leveraging this globalization phenomena, Gopalakrishnan said.
Gopalakrishnan added that although the business environment is currently more positive in Europe than the United States, U.S. clients are saying they will increase their offshoring if the U.S. economy slows down.
We are not seeing any slowdown in terms of deals from the U.S. yet, but we have to wait and see, he said.
About 60 percent of the companys revenue comes from the United States, while Europes contribution is 26 percent and growing rapidly. Nasdaq-listed Infosys would like to see 50 percent of its revenue coming from the United States, 30 percent from Europe and 20 percent from the rest of the world, although this is not a time-bound target.
We are close to that, but not there yet. There are no target dates, Gopalakrishnan said.
Infosys, Indias second-largest software services exporter, could raise billing rates by 3 to 4 percent for new contracts and 2 to 3 percent for existing contracts, Gopalakrishnan added.
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